UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
1940 Act File No. 811-4421
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
CO-OPERATIVE BANK INVESTMENT FUND
d/b/a Bank Investment Fund
(Exact Name of Registrant as Specified in Charter)
75 Park Plaza
Boston, Massachusetts 02116-3934
(Address of Principal Executive Offices)
(617) 695-0415
(Registrant's Telephone Number)
WILLIAM F.CASEY, JR.
President
Bank Investment Fund
75 Park Plaza
Boston, Massachusetts 02116-3934
(Name and Address of Agent for Service)
Date of fiscal year end: 12/31/2003
Date of reporting period: 12/31/2003
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the
transmission to stockholders of any report that is required to be
transmitted to stockholders under Rule 30e-1 under the Investment
Company Act of 1940 (17 CFR270.30e-1). The Commission may use
the information provided on Form N-CSR in its regulatory, disclosure
review, inspection and policymaking roles.
A registrant is required to disclose the information specified by
Form N-CSR, and the Commission will make this information public.
A registrant is not required to respond to the collection of
information contained in Form N-CSR unless the Form displays a
currently valid Office of Management and Budget (OMB) control
number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for
reducing the burden to Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.
The OMB has reviewed this collection of information under the
clearance requirements of 44 U.S.C. 3507.
Item 1. Reports to Stockholders.
BANK INVESTMENT FUND FUND ONE
(Series 1)
BANK INVESTMENT FUND LIQUIDITY FUND
(Series 2)
ANNUAL REPORTS
December 31, 2003
OFFERING CIRCULAR
- -----------------
[LOGO] Bank Investment Fund
Fund One
75 Park Plaza
Boston, Massachusetts 02116-3934
617-695-0415
--------------------
The Bank Investment Fund (the "Corporation") is an investment company
which currently invests and manages two mutual funds derived from voluntary
subscriptions made by eligible investors.
Fund One (the "Fund") is a no-load, diversified, open-end investment
fund whose objective is maximum current income consistent with liquidity
and the maintenance of a portfolio of high quality investments in short and
intermediate term marketable securities issued by the United States
Government and its agencies, repurchase agreements and certain money market
instruments. The Fund is designed solely for use by eligible investors as
an economical and convenient way to make liquid investments. Fund shares
are currently offered to the following eligible investors: Massachusetts
Co-operative Banks, Massachusetts Savings Banks, Massachusetts Trust
Companies, Federally Chartered Savings Banks and Savings and Loan
Associations with their principal place of business in Massachusetts, The
Co-operative Central Bank Reserve Fund, The Savings Bank Life Insurance
Company of Massachusetts, the National Cooperative Bank, and directly or
indirectly wholly-owned subsidiaries of such institutions (sometimes
hereinafter called "Banks").
Investors should read this Offering Circular and retain it for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-
TIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCU-
RACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF BANKS OF THE COMMONWEALTH OF MASSACHUSETTS (the
"Commissioner of Banks"), NOR HAS THE COMMISSIONER OF BANKS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED OR GUARANTEED. SUCH SHARES ARE BEING OFFERED PURSUANT TO AN
EXEMPTION FROM THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES
ACTS AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER SUCH ACTS.
--------------------
The date of this Offering Circular is February 27, 2004
TABLE OF CONTENTS
Page
----
Risk Return Summary 1
Investment Objectives 1
Principal Investment Strategies 1
Principal Investment Risk 1
Bar Chart and Performance Table 2
Management Discussion 4
Fee Table 4
Investment Objectives and Restrictions 5
Statutory Limitation on Investments 6
Dividends and Capital Gains 7
Net Asset Value 7
Investors' Accounts 7
Investors' Privacy 7
Taxes 7
Auditors and Legal 8
Yield 8
How Shares of Fund are Purchased 8
How Shares of Fund are Redeemed 9
Transfer Restrictions 10
Organization 10
Description of Fund Shares 11
Supervision and Regulation 11
Investment Advisor 12
Transfer Agent 12
Operating and Distribution Expenses 12
Exchange Privilege 13
Custodian 13
Management of the Fund 14
Financial Highlights 18
Independent Auditor's Report 20
Financial Statements 21
Investments 24
Notes to Financial Statements 26
Account Application Forms 30
Additional Information Back Cover
BANK INVESTMENT FUND
FUND ONE
75 Park Plaza
Boston, Massachusetts 02116-3934
RISK RETURN SUMMARY
Investment Objectives
The investment objective of Fund One is to maximize current income
consistent with liquidity of assets and safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified, high-quality investment vehicle designed to assist
liquidity management.
Principal Investment Strategies
In addition to maintaining cash on hand and in checking accounts due
from banks, the Fund invests principally in short and intermediate term
marketable debt securities issued by the United States Government or by
agencies of the United States, repurchase agreements, reverse repurchase
agreements and money market instruments.
The categories of those securities include, but may not be limited to
a) certificates of deposit due from any trust company, national banking
association or banking company, b) bonds and other direct obligations of
the United States or such obligations as are unconditionally guaranteed as
to principal and interest by the United States, c) federal agency
obligations which have unexpired terms of five years or less, d) repurchase
agreements, and e) certain common money market instruments.
The Fund may enter into reverse repurchase agreements to meet short-
term liquidity needs of the Fund. These agreements may not be in excess of
three business days.
Principal Investment Risk
The main risk factor in the Fund's performance is interest rates. The
yield and share price of the Fund change daily based on changes in interest
rates and market conditions, and in response to other economic, political
or financial events. The Fund's total return includes both income and price
gains or losses. While income is the most important component of returns
over time, the Fund's emphasis on income does not mean the Fund invests
only in the highest-yielding bonds and notes available, or that it can
avoid losses of principal. In general, bond and note prices rise when
interest rates fall and fall when interest rates rise. Longer-term bonds
and notes are usually more sensitive to interest rate changes. In other
words, the longer the maturity of a bond or note, the greater the impact a
change in interest rates is likely to have on the price.
Debt securities are also subject to credit risk. Credit risk is the
risk that the issuer of a debt security might not make interest and
principal payments on the security as they become due. Securities directly
issued by the U.S.
1
Treasury and certain U.S. government agencies that are backed by the full
faith and credit of the U.S. government have little credit risk. Securities
issued by other agencies of the U.S. government generally have low credit
risks.
An additional risk factor in the Fund's performance is pre-payment
risk. Many types of debt securities, including mortgage backed securities
and callable bonds and notes may be subject to a prepayment risk.
Prepayment risk occurs when the issuer of a security can prepay principal
prior to the security's maturity. Securities subject to prepayment risk
generally offer less potential for gains during a declining interest rate
environment, and similar or greater potential for loss in a rising interest
rate environment. The risk of lower interest rates on reinvestments of
prepayment amounts will also result.
These risk factors may adversely effect the Fund's net asset value,
yield, total return and loss of money in an investment in the Fund may
result.
Bar Chart and Performance Table
The bar chart shows the changes of the Fund's total return
performance from year to year over a ten year period ended December 31,
2003.
An investor bank may judge the Fund's portfolio performance by
comparing it to that of similar mutual funds or to market indices.
Performance may also be gauged by the total return of the portfolio over
time.
BANK INVESTMENT - FUND ONE
ANNUAL TOTAL RETURN
1994 1995 1996 1997 1998 1999 2000 2001
2002 2003
---- ---- ---- ---- ---- ---- ---- ---- -
- --- ----
<s> <c> <c> <c> <c> <c> <c> <c> <c>
<c> <c>
Percent -2.26 12.78 4.1 7.12 6.32 2.4 8.59 6.91
4.2 1.58
<FN>
- --------------------
During the ten-year period shown in the bar chart, the highest quarterly
return was 18.1% (for the quarter ended June 30, 1995) and the lowest
quarterly return was - 5.3% (for the quarter ended March 31, 1994).
</FN>
2
The table shows how the Fund's average annual return for one, five
and ten years for the periods ended December 31, 2003 compares to the
Merrill Lynch Government/Agency 1-3 year index; a widely recognized, index
of fixed income securities. The index is representative of the securities
in which the Fund invests.
One Five Ten
Year Year Year
---- ---- ----
<s> <c> <c> <c>
Bank Investment Fund - Fund One 1.58% 4.70% 5.10%
Merrill Lynch Government/Agency
1-3 year index 2.00% 5.48% 5.73%
<FN>
- --------------------
Total returns are based on past results and are not a prediction of future
performance.
</FN>
BANK INVESTMENT FUND-FUND ONE
Investment Comparison
1993 1994 1995 1996 1997 1998
1999 2000 2001
2002 2003
---- ---- ---- ---- ---- ----
- ---- ---- ---- --
- -- ----
<s> <c> <c> <c> <c> <c> <c>
<c> <c> <c> <c>
<c>
Merrill Lynch 1-3
Yr. Gov't Index 10,000 10,056 11,161 11,721 12,502 13,375
13,792 14,913 16,167
17,118 17,460
Fund One 10,000 9,774 11,023 11,475 12,292 13,069
13,383 14,533 15,537
16,190 16,446
<FN>
- --------------------
The line graph assumes an initial investment of $10,000, in Fund One and
the Merrill Lynch Government/Agency 1-3 year index at the beginning of the
first year. The line graph compares this initial and subsequent account
values at the end of the most recently completed ten years.
</FN>
3
Management Discussion
Fund One reflected a total return of 1.58% for the year ended
December 31, 2003. During the same period, the Merrill Lynch Government
Agency 1-3 Year Index, which consists of government and agency securities
of comparable maturities to the majority of the portfolio, had a total
return of 2.00%. Our portfolio strategy to divest of $8.3 million in GNMA
securities with longer maturities at mid year 2001 and our current
portfolio strategy limiting investments to callable securities with
maturities not exceeding June 2007, in order that a 3 year maturity ladder
will be in place by June 2004, has caused some lower yields and returns to
be realized in the near term. In our opinion, this strategy will better
position the Fund in the latter part of 2004 should interest rates begin to
increase thereafter.
Since January 2, 2001, the Federal Open Market Committee (FOMC) of
The Federal Reserve Bank has reduced its Federal Funds target rate thirteen
times for a total of 550 basis points: eleven reductions for a total of 475
basis points in 2001, one reduction on November 5, 2002 for 50 basis
points, and one further reduction on June 25, 2003 for 25 basis points. The
target rate for Federal Funds has remained at 1.00% since June 25th. On
January 9, 2003, the Federal Reserve discount rate, previously .75% was
replaced with the primary credit rate, which was initially set at 100 basis
points above the target Federal Funds rate, or 2.25%. The new primary
credit rate was also reduced on June 25, 2003 by 25 basis points. The
primary credit rate has remained at 2.00% since June 25th.
Fund One's portfolio turnover ratio was 102.2% for 2003 compared to
its portfolio turnover ratio of 80.3% for 2002. As the aforementioned short
term interest rates declined since January, 2001, the securities in the
portfolio were called at an accelerated rate, resulting in the larger than
normal turnover ratio in the portfolio for years 2001, 2002 and 2003. The
turnover ratio in 2002 and 2003 however, were less than the 2001 turnover
ratio of 120.1% due to the Fund's strategy of investing in securities with
one-time call protection of longer duration and avoidance of securities
with continuous or quarterly call provisions.
Fee Table
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
Year Ended
December 31,
2003
----------------
- -
<s> <c> <c>
Shareholder Transaction Expenses* 0%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0%
12b-1 Fees .03%
Other Expenses
Compensation, Payroll, Taxes, & Benefits .07%
Occupancy .02%
Remainder .06%
---
.15%
---
TOTAL FUND OPERATING EXPENSES .18%
===
<FN>
- --------------------
* The Fund charges no sales load or deferred sales load on any
purchase, reinvested dividend, exchange, or redemption transactions.
</FN>
4
Example
You would pay the following expenses on a $10,000 investment,
assuming (1) 5% annual return and (2) with or without redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<s> <c> <c> <c> <c>
December 31, 2003 $18.42 $58.13 $102.01 $232.92
The purpose of the foregoing table, which is based upon the Fund's
fiscal year ended December 31, 2003, is to assist you in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Example provided is intended to show the dollar amount
of expenses that would be incurred over the indicated periods on a
hypothetical $10,000 investment in the Fund, assuming a 5% annual return
and assuming that the Fund's expenses continue at the rates shown in the
table. However, the actual return on an investment in the Fund may be
greater or less than 5%. Furthermore, the Example should not be considered
a representation of past or future expenses; actual expenses may be greater
or less than those shown.
INVESTMENT OBJECTIVES AND RESTRICTIONS
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified, high-quality in-vestment vehicle designed to assist
liquidity management. By pooling the money of its investors, it is able to
offer the economies of size and diversification of maturities normally
available to large corporate and institutional investors.
Shares of the Bank Investment Fund are eligible investments to be
included in legal liquidity under Massachusetts General Laws, Chapter 170,
Section 22.
The Board of Directors of the Corporation has investment discretion
with regard to Fund One assets.
The Corporation is authorized by statute to invest its assets in a
variety of debt and equity securities. No more than 5% of the Corporation's
assets, at the time of purchase, may be invested in the securities of any
one issuer except for direct obligations of the United States or
obligations guaranteed by the United States, and other obligations issued
under certain Federal programs or by certain federal agencies or
instrumentalities.
The Fund is further restricted through the investment policy
maintained by the Corporation's Officers and Directors. The investment
policy for the Fund restricts the Corporation from a) making any investment
in equity securities for the Fund, b) making any intermediate or long-term
investment in corporate (non-governmental) debt securities for the Fund and
c) investing more than 25% of the Fund's total assets in the securities of
a particular industry other than U.S. Government or Federal agency
securities.
5
STATUTORY LIMITATION ON INVESTMENTS IN THE FUND
BY PARTICIPATING BANKS
Under Massachusetts General Laws, Chapter 167F, Section 3(2) as
amended, a participating or eligible savings bank or co-operative bank may
invest an amount in excess of 100% of its capital and surplus in any
distinct non-equity investment fund of the Corporation except to the extent
that the Commissioner of Banks for the Commonwealth of Massachusetts may by
regulation set limits and conditions. The participating bank will be
responsible for monitoring and compliance with this limitation.
Under Massachusetts General Laws, Acts of 1932, Chapter 45, Section
7, as amended, The Co-operative Central Bank Reserve Fund may not invest or
hold at any one time more than 20% of its assets with the Corporation.
Investments in the Fund are affected by Section 303 of the FDIC
Improvement Act of 1991 which limits investments by FDIC-insured state
banks (including Massachusetts co-operative banks, savings banks and trust
companies) in common or preferred stock or shares of mutual funds to the
extent that such investments are permissible for national banks.
Permissible national bank investments, as described in section 24(7) of the
National Bank Act and 12 C.F.R. Part 1, include mutual funds which invest
in securities and financial investments eligible for direct investment by
national banks. Because the underlying investment portfolio composition of
Fund One is comprised of U.S. Government and Federal Agency Securities,
Fund One balances may be excluded (on a pass through basis with shares of
beneficial interest) from an FDIC-insured state-chartered bank's
computation of equity securities in measuring compliance with 12 C.F.R.
Part 362 limits (usually 100% of Tier 1 capital).
Federally chartered savings banks and savings and loan associations
(with their principal place of business in Massachusetts) may invest in an
open-end mutual fund, such as Fund One, which invests in securities and
financial instruments in which such institutions may invest directly. For
purposes of determining compliance with quantitative investment limitations
under the Home Owners Loan Act ("HOLA"), an investing bank's or
association's proportionate share of a mutual fund's individual investments
will, under 12 C.F.R., [SECTION]560.32, be aggregated with such investments
held directly. (The investments held by Fund One may also be held without
limitation by federally chartered savings banks and savings and loan
associations.) Apart from compliance with applicable investment
limitations, a bank or association may invest, without prior notice to the
Office of Thrift Supervision, an amount up to 15% of its total capital in
any one mutual fund, or up to 50% of total capital in all such pass-through
investment vehicles. Investments in excess of the 15% and 50% limits may
only be made when thirty days' advance notice has been provided to the
Office of Thrift Supervision.
Certain federally chartered savings banks who converted from a
Massachusetts savings bank charter may, under certain grandfather
provisions of HOLA, retain broader investment authority than that described
in the preceding paragraph. For example, section 5(i) of HOLA grandfathers
state authorized investment powers of certain Federal savings banks in
existence as of the date of enactment of Federal statutes (e.g., the
Financial Institution Reform, Recovery, and Enforcement Act of 1989) which
may have otherwise limited such investments.
6
DIVIDENDS AND CAPITAL GAINS
The Fund distributes all of its net income on a daily basis.
Dividends are declared on each day that the Fund is open for business.
Investors receive dividends in additional shares unless they elect to
receive cash. Payment is made in additional shares at the net asset value
on the payable date or in cash, on a monthly basis.
Investors wishing to change the method of receiving dividends must
notify the Fund in writing at least one week before payment is to be made.
Net income of the Fund consists of all interest income accrued and
earned, less estimated expenses of the Fund. Distributions of realized net
capital gains, if any, are declared and paid once each year and are
reinvested in additional shares at net asset value or, at each
shareholder's option, paid in cash.
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
the New York Stock Exchange. The net asset value per share is determined by
adding the appraised value of all securities and all other assets,
deducting liabilities and dividing by the number of shares outstanding.
U.S. debt securities are normally valued on the basis of valuations
provided by market makers. Such prices are believed to reflect the fair
value of such securities and to take into account appropriate factors such
as institutional size trading in similar groups of securities, yield
quality, coupon rate, maturity, type of issue, and other market data.
Securities for which market quotations are not readily available will be
valued at fair value using methods determined in good faith by or at the
direction of the Board of Directors.
INVESTORS' ACCOUNTS
The Fund maintains an account for each investor in full and
fractional shares. All purchase and sale transactions are confirmed to the
investor. Statements of account showing all transactions for the month,
including dividends paid, are sent to participating banks on a monthly
basis. In addition, statements of account showing all transactions for the
calendar year, including dividends paid, are sent to participating banks on
an annual basis.
INVESTORS' PRIVACY
Protecting the privacy and confidentiality of investor's account
information is important to the Fund. We value your business and the trust
you placed with us. The Fund does not share any non-public information
concerning our investor banks with any other party; except as necessary, to
process transactions or service accounts. In addition, we maintain physical
and electronic control procedures to safeguard our business records
relative to investor accounts.
TAXES
The Fund has qualified as a regulated investment company under the
Internal Revenue Code and will not be liable for federal income taxes to
the extent its earnings are distributed. Dividends derived from interest,
together
7
with distributions of any short-term capital gains, are taxable as ordinary
income, whether or not reinvested. Dividends of the Fund do not qualify for
the dividends received exclusion for corporations.
Distributions of net long-term capital gains, if any, realized by the
Fund are made at least annually and are taxable to shareholders. In
addition, an investing Bank may realize a capital gain or loss in any year
in which it redeems shares. It should be noted that long-term capital gain
distributions and/or capital gains or losses realized from redemptions are
taxed at the same rates as ordinary income under the provisions of the Tax
Reform Act of 1986.
A statement setting forth the federal income tax status of all
distributions made during each calendar year is sent to each shareholder
promptly after the end of such year.
AUDITORS AND LEGAL
Parent, McLaughlin and Nangle, Certified Public Accountants, Inc.,
are the auditors of the Fund. The law firm of Steptoe and Johnson has
passed upon certain legal matters of the Fund in connection with the shares
offered by this offering circular.
YIELD
The yield for the 30-day period ended December 31, 2003 was 2.14%.
Yield is calculated based on the 30 days ending on the date of the most
recent statement of Assets and Liabilities, (as presented elsewhere
within). A standard formula as required by the Securities and Exchange
Commission is utilized for the computation of this yield amount. Net
Investment Income in the formula differs from actual Net Investment Income
as included in the Statement of Operations (included elsewhere within). Net
Investment Income as reflected in the formula includes yield based upon
market valuation of the portfolio at the commencement of the 30 day period.
This yield amount may differ from the ratio of Net Investment Income to
Average Net Assets reflected in selected financial information (as
presented elsewhere within). The Fund yield fluctuates as a result of
numerous factors. Therefore, the yield stated here is not necessarily
representative of the Fund's future yield. The 30 day yield, for the most
recent calender month end, may be obtained by directly calling the Rate
Line 617-695-0419 or by calling our main office telephone number 617-695-
0415 collect.
HOW THE SHARES OF THE FUND ARE PURCHASED-
TELEPHONE INVESTMENT PROCEDURE
Shares of the Fund are offered for sale on days on which the New York
Stock Exchange is open for business. The Fund and its custodian bank
observe the following holidays during the calendar year: New Year's Day,
Martin Luther King Day, President's Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
There is no sales charge. The minimum initial investment is $50,000.00.
Additional investments may be made in any amount in excess of the minimum.
8
Bank Wire Transfers
Call your correspondent bank and speak to your account officer. Tell
him that you want to transfer funds to State Street Bank and Trust Company.
Instruct him to wire transfer the money before 4:00 P.M., Eastern Standard
Time, to:
State Street Bank and Trust Company
Boston, Massachusetts
Routing number: 0110-0002-8
For account of the Bank Investment Fund, Fund One
Account number: 9006-930-3
Internal Money Transfers
If your correspondent bank account is with the State Street Bank and
Trust Company, contact your account officer and instruct him to transfer
funds from your account to the account of the Bank Investment Fund, Fund
One, Account number: 9006-930-3.
AFTER INSTRUCTING YOUR BANK TO TRANSFER FUNDS, PLEASE CALL THE FUND
AND TELL US THE AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK SENDING THE
TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. REMEMBER, IT IS
IMPORTANT TO DO THIS BEFORE 4:00 P.M. EASTERN STANDARD TIME.
The securities market, in which the Fund buys and sells securities,
usually requires immediate settlement in Federal funds for all security
transactions; therefore, payment for the purchase of Fund shares must be
made by Federal funds or bank wire, which can be converted immediately into
Federal funds. Orders received prior to 4:00 P.M., Eastern Standard Time,
will be invested in shares of the Fund at the next determined net asset
value.
HOW SHARES OF THE FUND ARE REDEEMED-
TELEPHONE REDEMPTION PROCEDURE
An investor may withdraw all or any portion of his investment by
redeeming shares on any day that the Fund is open for business at the next
determined net asset value. The proceeds of redemptions will be wired
directly to the investor's bank account within one business day.
The right of redemption can be suspended and the payment of the
redemption proceeds deferred during any period in which a) the New York
Stock Exchange is closed or trading on such Exchange is restricted or b)
the Securities and Exchange Commission deems an emergency to exist, or
during any other period permitted by order of the Commission for the
protection of investors.
9
Bank Wire Transfers
Call the Fund by 4:00 P.M. Eastern Standard Time to redeem shares
that day (Trade Date), for payment on the following day (Settlement Date).
When the amount to be redeemed is at least $5,000.00, the Fund will
automatically wire transfer the amount to your correspondent bank account
at settlement. The Fund will make payment by check when the amounts
redeemed are less than $5,000.00.
Internal Money Transfers
If your bank's account is with the State Street Bank and Trust
Company, contact the Fund by 4:00 P.M. Eastern Standard Time for redemption
of shares that day (Trade Date) for payment the following day (Settlement
Date). The Fund will transfer the amount from its account to your account
at State Street Bank and Trust Company at settlement.
TRANSFER RESTRICTIONS
Fund shares may not be transferred by banks holding such shares to
any persons other than an eligible bank (except that the shares may be
pledged to such other persons or they may be transferred to The Co-
operative Central Bank, hereinafter the "Central Bank"). If the Fund shares
are acquired by any other persons by operation of law or by foreclosure
upon the pledge of such shares (or through transfer, in the case of the
Central Bank), the Corporation must offer to repurchase the shares from
such person at net asset value of the shares. If such offer is refused, no
dividend may be paid by the Corporation or Fund on such shares, and the
redemption price which the holder of such shares may obtain in any
subsequent repurchase of those shares by the Corporation or Fund is limited
to the net asset value of the shares on the date of the Corporation's
offer.
In the event of any transfer, it is extremely important to notify the
Corporation immediately of any purchase, sale or transfer of Fund shares
not made through the Corporation or its transfer agent. Immediate
notification should be furnished to the Corporation by telephone, with
written notification as a follow-up thereto. Prompt notification is
essential to avoid any delay in redemption offer and loss of earnings.
Please remember that a statutory restriction exists on the Corporation and
it would be unable to pay a dividend to an ineligible holder after expiry
of the 30-day repurchase period which is statutorily available following
such transfer.
ORGANIZATION
The Corporation was organized effective April 7, 1985 pursuant to a
Special Act of the Commonwealth [Acts of 1984, Chapter 482 as amended] of
Massachusetts under its chartered name "Co-operative Bank Investment Fund"
and does business under the name "Bank Investment Fund." The Special Act
indicates that the purpose of the Corporation is to hold, invest, reinvest
and manage one or more mutual investment funds, which shall include all
property of the Corporation, to be derived from voluntary subscription
thereto by the Banks.
The Corporation is an open-end diversified management investment
company authorized to invest its assets in certain real estate mortgages,
and a variety of other investments, including direct obligations of the
United States, obligations guaranteed by the United States, obligations
guaranteed by the Federal National Mortgage Association, bonds and other
evidences of indebtedness of corporations, shares of common or preferred
stock registered on a national securities exchange or for which quotations
are available through the National Quotation
10
Bureau, Inc. or a comparable service, or through a national securities
market established in conformance with Section 11A of the Securities Act of
1934, and other debt and equity securities. Fund One will only invest in
those securities described under "Principal Investment Strategies" and
"Investment Objectives and Restrictions" elsewhere herein.
The business of the Corporation is conducted by a Board of Directors
elected by the Corporation's Incorporators and the Directors have
investment discretion relative to Corporation assets. The Incorporators of
the Corporation are the Directors of The Co-operative Central Bank, which
is the statutory reserve bank and insurer of deposits in excess of Federal
deposit insurance limitations for Massachusetts co-operative banks.
The Corporation operates pursuant to an exemption from the sections
of the Investment Company Act of 1940 which deal with (a) voting rights of
security holders and (b) the manner of sale of redeemable shares.
Only Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts, The National Cooperative Bank and
directly or indirectly wholly-owned subsidiaries of such institutions are
currently offered shares in the Fund. Such investors may purchase shares of
beneficial interest, which do not entitle the shareholders thereof to
voting rights of any nature, including investment policy matters.
DESCRIPTION OF FUND SHARES
The Corporation has no capital stock. Beneficial ownership in each of
the Corporation's funds is represented by shares of beneficial ownership,
as recorded in book entry form. Each share is equal in every respect to
every other share, except that if the Directors of the Corporation
establish distinct investment funds, shares will be issued in distinct
classes and each share within each class will be equal in every respect to
every other share of that class.
The shares of beneficial ownership are no par, non-voting, with a
stated value of $1,000, issued in book entry form only. Investment and
redemption of shares is effected at the net asset value as described
elsewhere herein. Shares are recorded in whole and/or fractional shares, as
applicable. Physical certificates are not issued. Monthly statements are
furnished to reflect share balance and activity.
With regard to the absence of voting rights, management believes that
eligible investors are adequately protected because of a) regulation by the
Commissioner of Banks, b) the redeemable nature of the shares, c)
representation of co-operative bank investors in the election of Directors
of the Central Bank, who as Incorporators elect the Corporation's
Directors, and d) representation of savings bank investors by an advisor at
such corporate meetings of the Incorporators.
SUPERVISION AND REGULATION
As provided by Massachusetts statute [Chapter 482, Acts of 1984 as
amended] the Corporation is subject to the supervision of the Commissioner
of Banks of the Commonwealth of Massachusetts. Periodic reporting to the
Commissioner of Banks is also required by the same statute. The Corporation
is registered as an open-end diversi-
11
fied management investment company under the Investment Company Act of
1940, as amended, and is subject to reporting requirements thereunder.
INVESTMENT ADVISOR
The Corporation presently does not employ the services of any
investment advisory or management services company. Investment decisions
for the Fund are made by authorized officers of the Corporation, subject to
approval or ratification by its Board of Directors. The Corporation
reserves the right at any time in the future to appoint an investment
advisor at any reasonable and customary fee as may be agreed when, in the
opinion of the Corporation Directors, the use of such advisory or
management services would improve Fund performance.
TRANSFER AGENT
The Corporation maintains the records for the investment, redemption,
and/or transfer of Fund shares. The Corporation reserves its right at any
time in the future to appoint a separate transfer agent at any reasonable
and customary fee as may be agreed when, in the opinion of the Corporation
Directors, the use of such transfer service is necessary. The limited
number of shareholders and nature of Fund operation does not, at this time,
justify the use of a separate agent and would only be an extra or
unnecessary expense.
OPERATING AND DISTRIBUTION EXPENSES
Normal expenses which may be borne by the Fund include, but are not
limited to: Director fees, salaries and wages, payroll taxes, employee
benefits, taxes, corporate fees, occupancy, furniture and equipment, data
processing, legal, auditing and accounting, telephone and postage,
custodial and other bank fees, preparation, printing and distribution of
reports, insurance, membership fees, organization, and other miscellaneous
expenses.
The Corporation has adopted a plan of distribution pursuant to Rule
12b-1 of the Investment Company Act of 1940 (the "Plan") providing that the
Fund will pay certain expenses incurred by the Corporation which may be
considered to be primarily intended to result in the sale of shares in the
Fund. The expenses which may be incurred pursuant to the Plan include,
without limitation, those for the preparation, printing and distribution of
written materials for other than existing investors, preparation and
distribution of advertising material and sales literature, direct payments
to sales personnel, and other similar activities. The maximum expenditures
which may be made pursuant to the Plan in any year is .12 of 1% of the
average daily net asset value of the Corporation for such year. The Board
of Directors of the Corporation has concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
Expenditures of $46,214 (.03% of average net assets) pursuant to the
12b-1 plan were incurred in and for the year ended December 31, 2003:
$3,741 for advertising in trade journals and similar publications; $5,459
for printing and mailing of offering circulars; $17,973 for sales related
compensation, payroll taxes and benefits; $16,180 for sponsorship of annual
subscriptions and other promotional materials; and $2,861 for other plan
expenses.
Because more than one fund will be operated by the Corporation,
operating expenses and expenses incurred pursuant to the Plan related
directly to a single fund operation will be charged directly to that fund.
Common
12
or indirect expenses will be allocated among funds in accordance with the
annual budget as determined by the Board of Directors of the Corporation to
be fair and equitable or on such other basis as the Board of Directors of
the Corporation may determine from time to time to be fair and equitable.
The Fund reimburses the Co-operative Central Bank and receives
reimbursement from the Bank Investment Fund-Liquidity Fund for its
proportionate share of expense items used in common. All fees and expenses
for the Fund are estimated and accrued daily. Actual operating expenses for
the year ended December 31, 2003 were .18% of average net assets. As
reimbursement of allocated expenses, operating expenses paid to the Central
Bank for the year ended December 31, 2003 were $44,600. The Fund accrued or
received from the Bank Investment Fund-Liquidity Fund for the year ended
December 31, 2003 the amount of $261,300.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of another fund on the
basis of the respective net asset value of the shares involved, to the
extent that additional funds are established by the Corporation.
CUSTODIAN
The Corporation is required by statute to at all times employ a
national banking association located in the Commonwealth of Massachusetts,
or a Massachusetts state-chartered bank authorized to exercise trust
powers, as the Corporation's or Fund's custodian, to hold the securities
owned by the Corporation and any monies delivered by the Corporation's or
Fund's shareholders or due to the Corporation or Fund. Purchase and sale
transactions are effected through or by the custodian bank upon the
instructions of the Corporation.
The State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02110 serves as custodian of the Fund's cash and investments.
13
MANAGEMENT OF THE FUND
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank which is the statutory reserve bank and insurer of
deposits in excess of Federal deposit insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
William F. Casey, Jr., President, has been the Fund's primary
investment officer since April 1, 2000. Previously, Mr. Casey held the
position of Executive Vice President of the Bank Investment Fund since its
inception in 1985. Mr. Casey is also President of the Co-operative Central
Bank and served as Financial Vice President from 1980 to 1986 and Executive
Vice President and Treasurer of the Co-operative Central Bank from 1986 to
2000. Mr. Casey is a Certified Public Accountant and had been employed in
several executive positions in both public accounting and banking prior to
1980.
The Fund is governed by a Board of Directors that meets quarterly to
review the Fund's investments, performance, expenses, and other business
affairs. The Board elects the Fund's officers. All Board members are
independent directors.
The directors and officers of the Corporation are not eligible to
hold the equity securities of the Corporation; the Corporation's charter
limits its eligible shareholders to certain Massachusetts banks and certain
other institutions. The directors are also directors and/or officers of co-
operative banks which may own beneficial interests in shares of the Fund.
Robert W. Terravecchia, Jr. was elected as a director in May 2003 by
the Board of Incorporators and appointed as an additional member of the
audit committee in June 2003 by the Board of Directors. Mr. Terravecchia is
both an attorney and certified public accountant in Massachusetts. Mr.
Terravecchia has been an officer of Weymouth Bank since 1994 and held
several positions in public accounting prior thereto. Mr. Terravecchia has
been designated as the audit committee member with financial expertise.
Directors and Officers of the Corporation, together with information
as to their principal business occupations during the past five years, are
shown below:
Number of
Portfolios
Other
Term of
in Fund
Directorships
Office and
Complex
of Public
Name, Age Position(s) Held Length of Principal
Occupation(s) Overseen by
Companies
and Address With Fund Time Served During
Past 5 Years Directors
Held
----------- ---------------- ----------- ------------
- ----------- -----------
- -------------
<s> <c> <c> <c>
<c>
<c>
William F. Casey, Jr. President (since Yearly President of
The 2
None
(59) April 1, 2000); since 1985 Co-operative
Central
75 Park Plaza, Executive Vice Bank,
Boston, MA President prior Boston,
Massachusetts
02116-3934 thereto (since April
1, 2000);
Executive
Vice President
and
Treasurer of The
Co-operative
Central
Bank prior
thereto
14
Number of
Portfolios
Other
Term of
in Fund
Directorships
Office and
Complex
of Public
Name, Age Position(s) Held Length of Principal
Occupation(s) Overseen by
Companies
and Address With Fund Time Served During
Past 5 Years Directors
Held
----------- ---------------- ----------- ------------
- ----------- -----------
- -------------
<s> <c> <c> <c>
<c>
<c>
Susan L. Ellis Vice President Yearly Vice
President of The 2
None
(55) and Treasurer since 1985 Co-operative
Central
75 Park Plaza, Bank,
Boston, MA Boston,
Massachusetts
02116-3934
Annemarie Lee Vice President Yearly Assistant
Vice President 2
None
(45) and Clerk of the since 1985 of The Co-
operative
75 Park Plaza, Corporation (since Central
Bank,
Boston, MA June 19, 2003); Boston,
Massachusetts
02116-3934 and Vice President
prior thereto
John R. McSorley Vice President Yearly Vice
President of 2
None
(61) since 2003 R. Seelaus &
Co., Inc.
75 Park Plaza, Boston,
Massachusetts
Boston, MA (2002-2003);
Vice President
02116-3934 of
PaineWebber Inc.,
Boston,
Massachusetts
(1977-2000)
James F. Culhane Director and Term ends Chairman of
the Board of 2
None
(73) Chairman of the 2006, since the North
Cambridge
75 Charles Diersch St., Board 2000 Co-operative
Bank,
E. Weymouth, MA Cambridge,
Massachusetts
02189 (since May
2002) and
President
prior thereto
Alfonso De Vito Director* Term ends Chairman of
the Board 2
None
(67) 2006, since of The
Village Bank,
26 Rustic Street, 1999 Newton,
Massachusetts
Newton, MA
02458
Edward T. Mulvey Director* Term ends Chairman of
the Board 2
None
(68) 2005, since of the
Pilgrim
50 Pond Street, 1999 Co-operative
Bank,
Cohasset, MA Cohasset,
Massachusetts
02025
15
Number of
Portfolios
Other
Term of
in Fund
Directorships
Office and
Complex
of Public
Name, Age Position(s) Held Length of Principal
Occupation(s) Overseen by
Companies
and Address With Fund Time Served During
Past 5 Years Directors
Held
----------- ---------------- ----------- ------------
- ----------- -----------
- -------------
<s> <c> <c> <c>
<c>
<c>
Harold S. Otto Director Term ends President of
the Methuen 2
None
(53) 2005, since Co-operative
Bank,
44 Laconia Circle, 2002 Methuen,
Massachusetts
North Andover, MA
01845
John H. Pearson, Jr. Director and Term ends President of
the Butler 2
None
(54) Clerk of the 2004, since Bank, a Co-
operative
62 Fairmount Street, Board 1998 Bank,
Lowell, MA Lowell,
Massachusetts
01852
Robert W. Terravecchia, Jr. Director* Term ends President of
the Weymouth 2
None
(39) 2004, since Bank,
15 Tayla Drive, 2003 Weymouth,
Massachusetts
Weymouth, MA (since 2000)
and Treasurer
02189 prior
thereto
Barry H. Whittaker Director Term ends President of
the 2
None
(50) 2006, since Holbrook Co-
operative
62 Bolas Road, 2000 Bank,
Duxbury, MA Holbrook,
Massachusetts
02332
<FN>
* Members of the Audit Committee
</FN>
16
--------------------
THIS PAGE LEFT BLANK INTENTIONALLY
--------------------
17
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 10 years. Certain information
reflects financial results for a single fund share. The total returns in
the table represent the rate that an investor would have earned (or lost)
on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Parent, McLaughlin &
Nangle, whose report, along with the Fund's financial statements, are
included elsewhere herein.
Year Ended December 31,
-------------------------------
- ------
2003 2002
2001
---- ----
- ----
<s> <c> <c> <c>
Net asset value, beginning of year $1,000.47 $ 998.09 $
981.89
--------- --------- ---
- ------
Income from investment operations:
Net investment income 23.86 38.68
50.27
Net realized and unrealized gain (loss)
on investment transactions (8.20) 2.38
16.20
--------- --------- ---
- ------
Total from investment operations 15.66 41.06
66.47
--------- --------- ---
- ------
Less distributions:
Dividends from net investment income (23.86) (38.68)
(50.27)
Distributions from capital gains 0.00 0.00
0.00
--------- --------- ---
- ------
Total distributions (23.86) (38.68)
(50.27)
--------- --------- ---
- ------
Net asset value, end of year $ 992.27 $1,000.47 $
998.09
========= =========
=========
Total return 1.58% 4.20%
6.91%
Ratios/Supplemental data:
Net assets, end of year (in 000's) $ 89,935 $ 214,692 $
109,089
Ratio of expenses to average net assets 0.18% 0.25%
0.34%
Ratio of net investment income to average
net assets 2.45% 3.73%
5.08%
Portfolio turnover rate 102.16% 80.30%
120.13%
Portfolio turnover was computed including U.S. Governments and U.S.
Government Agency obligations with maturities in excess of one year.
See notes to financial statements.
18
Year
Ended December 31,
---------------------------------
- ----------------------------------
- --------------
2000 1999 1998
1997 1996 1995
1994
---- ---- ----
- ---- ---- ----
----
<s> <c> <c> <c>
<c> <c> <c>
<c>
Net asset value, beginning of year $ 956.42 $ 987.50 $ 983.75
$ 974.80 $ 996.20 $
944.75 $1,029.85
-------- -------- --------
- -------- -------- -------
- - ---------
Income from investment operations:
Net investment income 53.96 54.08 56.88
58.35 60.41
66.14 62.34
Net realized and unrealized gain (loss)
on investment transactions 25.47 (31.08) 3.75
8.95 (21.40)
51.45 (85.10)
-------- -------- --------
- -------- -------- -------
- - ----------
Total from investment operations 79.43 23.00 60.63
67.30 39.01
117.59 (22.76)
-------- -------- --------
- -------- -------- -------
- - ----------
Less distributions:
Dividends from net investment income (53.96) (54.08) (56.88)
(58.35) (60.41)
(66.14) (62.34)
Distributions from capital gains 0.00 0.00 0.00
0.00 0.00
0.00 0.00
-------- -------- --------
- -------- -------- -------
- - ----------
Total distributions (53.96) (54.08) (56.88)
(58.35) (60.41)
(66.14) (62.34)
-------- -------- --------
- -------- -------- -------
- - ----------
Net asset value, end of year $ 981.89 $ 956.42 $ 987.50
$ 983.75 $ 974.80 $
996.20 $ 944.75
======== ======== ========
======== ========
======== ==========
Total return 8.59% 2.40% 6.32%
7.12% 4.10%
12.78% -2.26%
Ratios/Supplemental data:
Net assets, end of year (in 000's) $106,536 $113,205 $128,475
$143,608 $151,591
$146,555 $ 129,330
Ratio of expenses to average net assets 0.52% 0.52% 0.48%
0.45% 0.43%
0.45% 0.50%
Ratio of net investment income to average
net assets 5.64% 5.59% 5.74%
5.98% 6.21%
6.75% 6.37%
Portfolio turnover rate 6.42% 26.48% 50.00%
25.93% 49.26%
84.45% 43.43%
See notes to financial statements.
19
Form of Letterhead of Parent, McLaughlin & Nangle
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
BANK INVESTMENT FUND-FUND ONE
BOSTON, MASSACHUSETTS
We have audited the accompanying statement of assets and liabilities
of Bank Investment Fund-Fund One, including the schedule of portfolio of
investments, as of December 31, 2003, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2003, by correspondence with the custodians and brokers. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Bank Investment Fund-Fund One as of December 31, 2003, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the
financial highlights for each of the ten years in the period then ended, in
conformity with accounting principles generally accepted in the United
State of America.
/s/ Parent, McLaughlin & Nangle
Certified Public Accountants
Member of the SEC Practice Section, American Institute of
Certified Public Accountants
January 21, 2004
20
BANK INVESTMENT FUND-FUND ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003
<s>
<c>
ASSETS:
INVESTMENTS IN SECURITIES, at value
(Identified cost $86,040,765)
$ 86,198,880
REPURCHASE AGREEMENTS
3,225,000
INTEREST RECEIVABLE
690,242
OTHER ASSETS
15,475
CASH
35,910
------------
TOTAL ASSETS
90,165,507
------------
LIABILITIES:
DIVIDENDS PAYABLE
127,217
ACCRUED EXPENSES
103,329
------------
TOTAL LIABILITIES
230,546
------------
NET ASSETS: (Equivalent to $992.2726 per share based on 90,635.3360 shares of
beneficial interest outstanding)
$ 89,934,961
============
REPRESENTED BY:
Paid-in Capital
$106,855,227
Accumulated net losses on investments
(17,078,381)
Unrealized appreciation of investments-net
158,115
------------
TOTAL NET ASSETS
$ 89,934,961
============
See notes to financial statements.
21
BANK INVESTMENT FUND-FUND ONE
STATEMENT OF OPERATIONS
Year Ended December 31, 2003
<s> <c>
<c>
INVESTMENT INCOME:
$4,487,533
EXPENSES:
Compensation, payroll taxes and benefits-officers $70,028
Compensation, payroll taxes and benefits-other 52,829
Distribution expenses 46,214
Occupancy 41,500
Professional fees 27,200
Equipment and data processing 14,200
Other expenses 11,120
Meetings and travel 9,300
Other bank fees 8,300
Directors' fees 8,300
Insurance expense 7,100
Shareholder reports 5,459
Postage and telephone 5,200
Stationary and supplies 2,000
-------
TOTAL EXPENSES
308,750
----------
INVESTMENT INCOME-NET
4,178,783
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments
121,729
Change in net unrealized appreciation on investment securities
(1,786,666)
Net realized and unrealized loss on investments
----------
(1,664,937)
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS
$2,513,846
==========
See notes to financial statements.
22
BANK INVESTMENT FUND-FUND ONE
STATEMENT OF CHANGES IN NET ASSETS
Year Ended
December 31,
------------------
- -------------
2003
2002
----
----
<s> <c>
<c>
INCREASE IN NET ASSETS FROM OPERATIONS:
Investment income-net $ 4,178,783
$ 4,902,604
Net realized gain on investments 121,729
48,195
Unrealized appreciation (depreciation)-net (1,786,666)
421,911
-------------
- -------------
Net increase in net assets resulting from operations 2,513,846
5,372,710
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net (4,178,783)
(4,902,604)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST-NET
INCREASE (DECREASE) (123,092,432)
105,132,797
-------------
- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (124,757,369)
105,602,903
NET ASSETS:
Beginning of year 214,692,330
109,089,427
-------------
- -------------
End of year $ 89,934,961
$ 214,692,330
=============
=============
See notes to financial statements.
23
BANK INVESTMENT FUND-FUND ONE
PORTFOLIO OF INVESTMENTS
December 31, 2003
Obligations of the U.S. Treasury-4.4%
Par Coupon Maturity Date
Value
--- ------ -------------
-----
<s> <c> <c> <c>
<c>
U.S Treasury Notes $ 4,000,000 1.625% 09/30/05 $
3,998,125
----------- --
- ---------
(Cost $ 3,992,592)
Obligations of Federal Agencies-86.8%
Federal Home Loan Bank $ 2,000,000 4.00% 12/08/04 $
2,050,000
5,000,000 4.125 01/14/05
5,139,062
4,000,000 2.01 06/24/05*
4,008,546
2,000,000 5.65 02/23/06*
2,012,925
4,000,000 2.04 03/03/06*
3,989,410
4,000,000 2.125 03/17/06*
3,992,727
3,000,000 1.875 06/15/06
2,968,594
4,000,000 2.00 07/10/06*
3,959,349
4,000,000 2.00 07/14/06*
3,958,959
4,000,000 2.075 07/28/06*
3,962,458
4,000,000 3.20 10/04/06*
4,046,817
4,000,000 2.25 01/29/07*
3,935,457
4,000,000 2.66 02/13/07*
3,980,197
4,000,000 2.50 04/30/07*
3,972,500
----------- --
- ---------
$52,000,000 (Cost $51,968,319)
$51,977,001
----------- --
- ---------
Federal Home Loan Mortgage
Corporation $ 5,000,000 3.875% 02/15/05 $
5,134,375
4,000,000 2.00 12/19/05*
3,991,250
4,000,000 2.08 05/26/06*
3,978,510
4,000,000 2.15 06/02/06*
3,981,953
4,000,000 2.70 10/02/06*
4,008,689
----------- --
- ---------
$21,000,000 (Cost $20,980,306)
$21,094,777
----------- --
- ---------
<FN>
- --------------------
* May be subject to call by issuer prior to maturity date.
</FN>
See notes to financial statements.
24
BANK INVESTMENT FUND-FUND ONE
PORTFOLIO OF INVESTMENTS
December 31, 2003
Obligations of Federal Agencies-86.8% (continued)
Par Coupon Maturity Date
Value
--- ------ -------------
-----
<s> <c> <c> <c>
<c>
Federal National Mortgage
Association $ 2,000,000 3.09% 09/09/05* $
2,025,227
3,000,000 2.625 11/15/06
3,003,750
----------- --
- ---------
$ 5,000,000 (Cost $ 4,999,548) $
5,028,977
----------- --
- ---------
Total Federal Agencies
Obligations (Cost $77,948,173)
$78,100,755
Certificates of Deposit-4.6%
NCB, FSB $ 2,000,000 1.40% 01/28/04 $
2,000,000
NCB, FSB 100,000 1.75 08/10/04
100,000
NCB, FSB 2,000,000 2.55 08/27/04
2,000,000
----------- --
- ---------
$ 4,100,000 (Cost $ 4,100,000) $
4,100,000
----------- --
- ---------
Repurchase Agreement-3.6%
$3,225,000 Repurchase Agreement dated December 31, 2003 with
Morgan Stanley Dean Witter, Inc. due January 2,
2004
with respect to $3,290,461 U.S. Treasury Note
2.00% due
November 30, 2004-maturity value $3,225,182.75
for
an effective yield of 1.02%.
(Cost $ 3,225,000) $
3,225,000
--
- ---------
Total Investments-99.4% (Cost $89,265,765)
$89,423,880
--
- ---------
Assets in excess of other liabilities-0.6%
511,081
--
- ---------
Net assets-100%
$89,934,961
===========
<FN>
- --------------------
* May be subject to call by issuer prior to maturity date.
</FN>
See notes to financial statements.
25
BANK INVESTMENT FUND-FUND ONE
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Organization:
The Bank Investment Fund (the "Corporation") was organized effective
April 7, 1985 pursuant to a Special Act of the Commonwealth of
Massachusetts (Acts of 1984, Chapter 482, as amended,) under its chartered
name "Co-operative Bank Investment Fund" and does business under the name
"Bank Investment Fund." The Corporation is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
Corporation invests and manages two mutual investment funds derived from
the voluntary subscriptions made by eligible investors.
Fund One (the "Fund") is a no-load, diversified, open-end investment
fund. Fund shares are currently offered to the following eligible
investors: Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts, the National Cooperative Bank, and
directly or indirectly wholly-owned subsidiaries of such institutions.
Because more than one fund will be operated by the Corporation,
operating expenses related directly to a single fund operation will be
charged directly to that fund. Common or indirect expenses will be
allocated among funds in proportion to the ratio of the net assets of each
fund to total net assets of the Corporation or on such other basis as the
Board of Directors of the Corporation may determine from time to time to be
fair and equitable.
NOTE 2. Significant Accounting Policies:
The Fund's financial statements are prepared in accordance with
generally accepted accounting principles which require the use of
management estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
26
BANK INVESTMENT FUND-FUND ONE
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2. Significant Accounting Policies (continued):
Investment security valuation:
U.S. debt securities are normally valued on the basis of valuations
provided by market makers. Such prices are believed to reflect the fair
value of such securities and to take into account appropriate factors such
as institutional size trading in similar groups of securities, yield
quality, coupon rate, maturity, type of issue, and other market data.
Securities for which market quotations are not readily available will be
valued at fair value using methods determined in good faith by or at the
direction of the Board of Directors.
Accounting for investments:
Security transactions are accounted for on the trade date (date the
order to buy or sell is executed). In computing net investment income prior
to January 1, 1997, the Fund did not amortize premiums or accrete discounts
on fixed income securities in the portfolio, except those original issue
discounts for which amortization is required for federal income tax
purposes. Since January 1, 1997, the Fund amortizes premiums or accretes
discounts on related fixed income securities, which change had an
immaterial effect on investment income. Premiums, if any, and discounts are
amortized or accreted on a straight line basis, which approximates the
income method. Additionally, with respect to market discount on bonds
issued after July 18, 1984, a portion of any capital gain realized upon
disposition may be recharacterized as taxable ordinary income in accordance
with the provisions of the 1984 Tax Reform Act. Realized gains and losses
on security transactions are determined on the identified cost method.
Repurchase agreements:
It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying investments to ensure the existence of a proper level of
collateral.
Federal income taxes:
The Corporation's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. The Fund realized a
tax basis gain of $147,830 during 2003, which was applied towards the
available capital loss carryforward, resulting in a remaining capital loss
carryforward of ($22,448) at December 31, 2003. Such capital loss
carryforward will reduce the Fund's taxable income arising from future net
realized gain on investments, if any, to the extent permitted by the
Internal Revenue Code, and thus will reduce the amount of distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal income tax. Such capital loss carryforward will
expire at December 31, 2008.
27
BANK INVESTMENT FUND-FUND ONE
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2. Significant Accounting Policies (continued):
Dividends to shareholders:
The Fund distributes all of its net investment income on a daily
basis. Dividends are declared on each day that the Fund is open for
business. Investors receive dividends in additional shares unless they
elect to receive cash. Payment is made in additional shares at the net
asset value on the payable date or in cash, on a monthly basis.
Distributions of otherwise taxable realized net capital gains, if any, are
declared and paid once each year and are reinvested in additional shares at
net asset value or, at each shareholder's option, paid in cash.
Net asset value:
The net asset value per share is determined daily by adding the
appraised value of all securities and all other assets, deducting
liabilities and dividing by the number of shares outstanding.
NOTE 3. Security Transactions:
The cost of securities purchased and the proceeds from the sales of
securities, all of which were Obligations of U.S. Treasuries Federal
Agencies and certificates of deposit, (excluding short-term investments)
aggregated $132,858,426 and $190,128,820, respectively for the year ended
December 31, 2003. As of December 31, 2003, unrealized appreciation of
investments was $158,115; accumulated net realized loss on investment
transactions totaled ($17,078,381).
NOTE 4. Distribution Expenses:
The Fund has adopted a Plan of Distribution (the "Plan"), pursuant to
rule 12b-1 under the Investment Company Act of 1940, to use the assets of
the Fund to finance certain activities relating to the distribution of its
shares to investors. The Plan authorizes the Fund to pay for the cost of
preparing, printing, and distributing offering circulars to prospective
investors, for certain other direct or indirect marketing expenses, direct
payments to sales personnel, and for the cost of implementing and operating
the Plan. Plan expenses may not exceed an amount computed at an annual rate
of .12 of 1% of the Fund's average daily net assets. The Fund paid or
accrued $46,214 (.03% of average net assets) pursuant to this Plan for the
year ended December 31, 2003.
28
BANK INVESTMENT FUND-FUND ONE
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 5. Pension Plans:
The Fund is a participating employer in the Co-operative Banks
Employees Retirement Association, and has, in effect, a Defined
Contribution Plan covering all eligible officers and employees. Under the
plan, contributions by employees are doubled by the Fund, up to a maximum
of 10% of each employee's salary. Effective January 1, 1989, the Fund also
participates in a Defined Benefit Plan, which covers all eligible
employees, and is funded currently. The Fund's contributions to these
multi-employer plans for the year ended December 31, 2003 were $14,777.
NOTE 6. Shares of Beneficial Interest:
Chapter 482 of the Acts of 1984, as amended, of the Commonwealth of
Massachusetts permits the directors to issue an unlimited number of full
and fractional shares of beneficial interest (no par, non-voting, with a
stated value of $1,000 per share). As of December 31, 2003 capital paid-in
aggregate was $106,855,227.
Transactions in shares of beneficial interest are summarized as
follows:
Year Ended
Year Ended
December 31, 2003
December 31, 2002
------------------------------ -------
- -----------------
- ----
Shares Amount
Shares
Amount
------------- ------------- -------
- ----- --------
- ----
<s> <c> <c> <c>
<c>
Sold 74,508.0791 $ 74,259,582
210,979.8663
$210,504,000
Issued in reinvestment of dividends 1,564.0312 1,557,657
1,876.7136
1,871,722
------------- ------------- -------
- ----- --------
- ----
76,072.1103 75,817,239
212,856.5799
212,375,722
Redeemed 200,027.2810 198,909,671
107,563.7839
107,242,925
------------- ------------- -------
- ----- --------
- ----
Net increase (decrease) (123,955.1707) $(123,092,432)
105,292.7960
$105,132,797
============= =============
============
============
NOTE 7. Transactions With Related Parties:
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank, which is the statutory reserve bank and insurer of
deposits in excess of Federal deposit insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
The Fund reimburses The Co-operative Central Bank and receives
reimbursement from the Bank Investment Fund-Liquidity Fund for its
proportionate share of expense items used in common. All fees and expenses
for the Fund are estimated and accrued daily. Actual operating expenses for
the year ended December 31, 2003 was .18% of average net assets. As
reimbursement of allocated expenses, operating expenses paid to The Central
Bank for the year ended December 31, 2003 was $44,600. The Fund accrued or
received from the Bank Investment Fund-Liquidity Fund for the year ended
December 31, 2003 the amount of $261,300.
29
This sheet and the following sheet are perforated for your removal
and use in the establishment or updating of your account.
CERTIFICATE OF CORPORATE RESOLUTION
For Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts, the National Cooperative Bank and
directly or indirectly wholly-owned subsidiaries of such institutions only.
This form authorizes the individuals below to redeem shares by telephone or
exchange.
The undersigned is Secretary or Clerk of ____________________ and
hereby
certifies that the following individuals: (name of corporation)
Name Title
---- -----
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
are duly authorized by corporate resolution or otherwise to act on behalf
of the eligible bank in connection with its ownership of shares in the Bank
Investment Fund, Fund One and in particular to give instructions for the
purchase, sale or exchange of any said shares and to execute any necessary
forms in connection therewith.
The Bank Investment Fund will consider this authorization to be in
full force and in effect until otherwise notified in writing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate the
_______________ day of
___________________ 20__________.
___________________________________________________________________________
Secretary or Clerk
30
BANK INVESTMENT FUND
FUND ONE
ACCOUNT APPLICATION FORM
REGISTRATION. The account should be registered as follows:
DATE: ____________
NAME: _____________________________________________________________________
POST OFFICE BOX: __________________________________________________________
STREET ADDRESS: ___________________________________________________________
CITY/TOWN: ______________________________________ STATE: __________________
ZIP CODE: ____________________________ TELEPHONE NUMBER: __________________
TAX ID NUMBER _____________________________________________________________
INITIAL INVESTMENT: $____________________________________ (Minimum $50,000)
MONTHLY CASH DIVIDENDS
[ ] Check if dividends are to be paid monthly in cash. Otherwise
dividends will be AUTOMATICALLY REINVESTED in additional shares of
the Fund.
TELEPHONE REDEMPTION ORDERS
Redemption proceeds will be sent ONLY to the bank or trust company
listed below, for credit to the investor's account. The investor hereby
authorizes the BANK INVESTMENT FUND to honor telephone or written
instructions, without a signature guarantee, for redemption of Fund shares.
THE FUND and its Agents will not be liable for any loss, expense or cost
arising out of such transactions.
Enclose a specimen copy of your check or deposit slip (marked VOID)
for the bank account listed below. To facilitate the wiring of your
redemption proceeds the indicated bank should be a commercial bank.
Name of Bank: _____________________________________________________________
Bank Account No.: _________________________________________________________
Bank Address: _____________________________________________________________
street
______________________________________________MA ____________
city zip
Name on Account: __________________________________________________________
Bank Routing/Transit No.: _________________________________________________
AUTHORIZED PERSONS-TELEPHONE INVESTMENTS AND REDEMPTIONS
Authorized person Title Initials
----------------- ----- --------
1. ________________________________________________________________________
2. ________________________________________________________________________
3. ________________________________________________________________________
4. ________________________________________________________________________
5. ________________________________________________________________________
31
CORPORATE RESOLUTIONS
We have enclosed with this application form the necessary corporate
resolutions to authorize corporate officers to make wire or cash payment
transfers to the Bank Investment Fund and to purchase, sell or exchange
shares of beneficial ownership in the Bank Investment Fund, Fund One.
SIGNATURE AND CERTIFICATION
We have received and read the Offering Circular, and agree to its
terms and conditions by signing below. By the execution of this
Application, the undersigned represent and warrant that they are duly
authorized to sign this Application and to purchase or redeem shares of the
Fund on behalf of the investor.
The undersigned hereby certify under penalty of perjury that the
above Taxpayer Identification Number is correct and that the investor is
not subject to backup withholding.
We further certify and agree that the certifications, authorizations
and appointments in this document will continue until the Bank Investment
Fund receives actual written notice of any change thereof.
Signature ______________________________ Title ____________________________
Signature ______________________________ Title ____________________________
Two signatures are required, one of which should be the Secretary or Clerk
of the corporation.
SIGNATURE GUARANTEE
In order to facilitate telephone redemptions, you must have your
signature(s) on this application guaranteed by a commercial bank or stock
exchange member firm.
___________________________________________________________________________
Name of Bank or Investment Dealer
___________________________________________________________________________
By (signature of authorized person)
___________________________________________________________________________
Title (authorized person)
32
FINANCIAL STATEMENTS
As required by applicable statutes, semi-annual financial statements
are furnished to the shareholder, the Commissioner of Banks and the
Securities and Exchange Commission.
ADDITIONAL INFORMATION
The Bank Investment Fund (the "Corporation") has filed with the
Securities and Exchange Commission in Washington, D.C., under the chartered
name the "Co-operative Bank Investment Fund" a registration statement on
Form N-1A (together with all amendments and exhibits thereto, hereinafter
referred to as the "Registration Statement") under the Investment Company
Act of 1940. This Offering Circular does not contain all of the information
in the Registration Statement. The Registration Statement may be reviewed
and copied at the Public Reference Room of the Securities and Exchange
Commission; or:
By Phone: 1-800-Sec-0330
By mail: Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
(Investment Company Act File No. 811-4421)
The Corporation will provide, without charge to any person to whom
this Offering Circular is delivered on the written or oral request of any
such person, a copy of the Registration Statement and the additional
information contained therein and documents relating to certain exemptions
from the Investment Company Act of 1940 (see ORGANIZATION). Written
requests should be directed to the Bank Investment Fund, 75 Park Plaza,
Boston, MA 02116-3934. Telephone requests may be directed collect to 617-
695-0415.
==================================
BANK INVESTMENT FUND
FUND ONE
75 Park Plaza
Boston, MA 02116-3934
617-695-0415
Web: www.bankinvestmentfund.com
E-mail: bif@bankinvestmentfund.com
==================================
OFFERING CIRCULAR
- -----------------
[LOGO] Bank Investment Fund
Liquidity Fund
75 Park Plaza
Boston, Massachusetts 02116-3934
617-695-0415
--------------------
The Bank Investment Fund (the "Corporation") is an investment company
which currently invests and manages two mutual funds derived from voluntary
subscriptions made by eligible investors.
Liquidity Fund (the "Fund") is a no-load, diversified, open-end money
market investment fund whose objective is maximum current income consistent
with liquidity and the preservation of capital. The Fund is designed solely
for use by eligible investors as an economical and convenient way to make
liquid investments. Fund shares are currently offered to the following
eligible investors: Massachusetts Co-operative Banks, Massachusetts Savings
Banks, Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts and the National Cooperative Bank
(sometimes hereinafter called "Banks").
Investors should read this Offering Circular and retain it for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF BANKS OF THE COMMONWEALTH OF MASSACHUSETTS (the
"Commissioner of Banks"), NOR HAS THE COMMISSIONER OF BANKS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED BY ANY GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND IS NOT
GUARANTEED OR INSURED BY THE U.S. GOVERNMENT AND THERE IS NO ASSURANCE THAT
THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. SUCH SHARES ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES ACTS AND HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER SUCH ACTS.
--------------------
The date of this Offering Circular is February 27, 2004
TABLE OF CONTENTS
Page
----
Risk Return Summary 1
Investment Objectives 1
Principal Investment Strategies 1
Principal Investment Risk 2
Bar Chart and 7 Day Yield 2
Fee Table 3
Investment Objectives and Restrictions 4
Statutory Limitation on Investments 5
Dividends 6
Net Asset Value 6
Investors' Accounts 6
Investors' Privacy 6
Taxes 6
Auditors and Legal 7
Capital Gains 7
How Shares of Fund are Purchased 7
How Shares of Fund are Redeemed 8
Transfer Restrictions 8
Organization 9
Description of Fund Shares 10
Supervision and Regulation 10
Investment Advisor 10
Transfer Agent 10
Operating and Distribution Expenses 11
Exchange Privilege 11
Custodian 12
Management of the Fund 12
Financial Highlights 16
Independent Auditor's Report 18
Financial Statements 19
Investments 22
Notes to Financial Statements 25
Account Application Forms 30
Additional Information Back Cover
BANK INVESTMENT FUND
LIQUIDITY FUND
75 Park Plaza
Boston, Massachusetts 02116-3934
RISK RETURN SUMMARY
Investment Objectives
The investment objectives of Liquidity Fund is to maximize current
income consistent with liquidity of assets and safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified, high-quality investment vehicle designed to assist
liquidity management, while seeking preservation of capital.
Principal Investment Strategies
In addition to maintaining cash on hand and in checking accounts due
from banks, the Fund invests principally in short-term marketable debt
securities issued by the United States Government or by agencies of the
United States, bank money instruments, repurchase agreements, short-term
corporate debt instruments, commercial paper, and reverse repurchase
agreements.
The categories of those securities include, but may not be limited to
a) certificates of deposit due from any trust company, national banking
association or banking company, or any federally insured savings banks, co-
operative bank or savings & loan association, b) Federal funds sold, c)
bonds and other direct obligations of the United States which are
unconditionally guaranteed as to principal and interest by the United
States, and issues of U.S. Government agencies and instrumentalities, d)
repurchase agreements, e) commercial paper which, when purchased, is rated
A-1 by Standard & Poor's Corporation ("Standard & Poor's") and/or Prime-1
by Moody's Investors Service, Inc. ("Moody's") or, if not rated, has been
determined to be of comparable high quality under procedures adopted and
approved by the Fund's Board of Directors. Commercial paper obligations may
include variable amount of master demand notes; short-term obligations of
corporations; f) Second Tier securities to the extent permissible by Rule
2a-7 of the Investment Company Act of 1940 (see investment restrictions)
including commercial paper which when purchased is rated A-2 by Standard &
Poor's or Prime-2 by Moody's or if not rated, has been determined to be of
comparable quality under procedures adopted and approved by the Fund's
Board of Directors, and g) certain money market instruments which, when
purchased, are rated A-1 by Standard and Poor's Corporation and/or Prime-1
by Moody's Investor Services or, if not rated, has been determined to be of
comparable high quality under procedures adopted and approved by the Fund's
Board of Directors.
All the above investments must have original maturities or remaining
maturities of 397 days or less. In addition, the Fund will maintain a
dollar weighted average maturity of 90 days or less.
The Fund may invest more than 25% of its assets in the banking
industry through certificates of deposit and Federal funds sold in the
ordinary course of its business. However, the Fund will not invest more
than 35% of the Fund's assets in that industry. The Fund will not
concentrate it's investments in any other industry other than banking.
The Fund may enter into reverse repurchase agreements to meet short-
term liquidity needs of the Fund. These agreements may not be in excess of
three business days.
1
Principal Investment Risk
The main risk factor in the Fund's performance is interest rates, the
fluctuation of which will cause the income of the Fund to correspondently
change. The average portfolio duration may cause a delayed effect before
the market interest rate change is fully reflected in the Fund's income
performance.
An additional risk factor in the Fund's performance, to a limited
extent, is credit risk. Credit risk is the chance that the issuer of the
security could have its credit rating downgraded or be unable to pay
interest and principal in a timely manner. While the credit quality of the
Fund's investment portfolio is extremely high based on the principal
investment strategies discussed above, the Fund is subject to some degree
of credit risk.
While the Fund seeks to maintain, it does not guaranty a stable net
asset value of $1,000 per share. In addition, the shares being offered are
not savings accounts or deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, U.S. Government or its agencies.
Bar Chart and 7 Day Yield
The bar chart shows the changes of the Fund's total return
performance from year to year over a ten year period ended December 31,
2003.
BANK INVESTMENT FUND - LIQUIDITY FUND
ANNUAL TOTAL RETURN
1994 1995 1996 1997 1998 1999 2000 2001
2002 2003
---- ---- ---- ---- ---- ---- ---- ---- ---
- - ----
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
<c>
Percent 3.87 5.86 5.38 5.52 5.44 5.00 6.31 4.17
1.85 1.09
<FN>
- --------------------
During the ten-year period shown in the bar chart, the highest quarterly
return was 6.7% (for the quarter ended September 30, 2000) and the lowest
quarterly return was 1.0% (for the quarter ended September 30, 2003).
</FN>
2
The table shows how the Fund's average annual return for one, five
and ten years for the period ended December 31, 2003 compared to the 3
month U.S. Treasury Bill.
One Five Ten
Year Year Year
---- ---- ----
<s> <c> <c> <c>
Bank Investment Fund-Liquidity Fund 1.09% 3.67% 4.44%
U.S. Treasury Bill-3 month 1.02% 3.38% 4.27%
<FN>
Total returns are based on past results and are not a prediction of future
performance.
</FN>
The annualized average net yield of the seven-day period ended
December 31, 2003 was .96%. Yield is calculated based on the last 7 days
ending on the date of the most recent statement of Assets and Liabilities,
(as presented elsewhere within). The Fund's yield fluctuates as a result of
numerous factors. Therefore, the yield stated here is not necessarily
representative of the Fund's future yield. The most recent daily yield,
together with the 7 day yield for the most recent calendar month end may be
obtained by directly calling the rate line 617-695-0419 or by calling our
main office telephone number 617-695-0415 collect.
Fee Table
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
Year Ended
December 31,
2003
----------------
- -
<s> <c> <c>
Shareholder Transaction Expenses* 0%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0%
12b-1 Fees .02%
Other Expenses
Compensation, Payroll, Taxes, & Benefits .05%
Occupancy .01%
Remainder .04%
---
.10%
---
TOTAL FUND OPERATING EXPENSES .12%
===
<FN>
- --------------------
* The Fund charges no sales load or deferred sales load on any
purchase, reinvested dividend, exchange, or redemption transactions.
</FN>
See notes to financial statements.
3
Example
You would pay the following expenses on a $10,000 investment,
assuming (1) 5% annual return and (2) with or without redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<s> <c> <c> <c> <c>
December 31, 2003 $12.28 $38.75 $68.01 $155.28
The purpose of the foregoing table, which is based upon the Fund's
fiscal year ended December 31, 2003, is to assist you in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Example provided is intended to show the dollar amount
of expenses that would be incurred over the indicated periods on a
hypothetical $10,000 investment in the Fund, assuming a 5% annual return
and assuming that the Fund's expenses continue at the rates shown in the
table. However, the actual return on an investment in the Fund may be
greater or less than 5%. Furthermore, the Example should not be considered
a representation of past or future expenses; actual expenses may be greater
or less than those shown.
INVESTMENT OBJECTIVES AND RESTRICTIONS
The investment objective of the Liquidity Fund is to maximize current
income consistent with liquidity of assets and safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified high-quality investment vehicle designed to assist
liquidity management while seeking preservation of capital. The Fund
pursues this objective by investing principally in short-term marketable
debt securities issued by the United States Government or by agencies of
the United States, bank money instruments, short-term corporate debt
instruments including commercial paper, repurchase agreements and reverse
repurchase agreements.
Shares of the Bank Investment Fund are eligible investments to be
included in legal liquidity under Massachusetts General Laws, Chapter 170,
Section 22.
The Board of Directors of the Corporation has investment discretion
with regard to Liquidity Fund assets.
No more than 5% of the Fund's assets at the time of purchase may be
invested in the securities of any one issuer except for direct obligations
of the United States or obligations guaranteed by the United States, and
other obligations issued under federal programs or by certain federal
agencies.
In accordance with amendments, effective June 1, 1991 to Rule 2a-7 of
the Investment Company Acts of 1940, no more than 5% of the Fund's assets,
in the aggregate, may be invested in "second tier" securities, with no more
than 1% of the Fund's assets or one million dollars, whichever is greater,
invested in the second tier securities of any one issuer.
The Fund is further restricted through the investment policy
maintained by the Corporation's Officers and Directors. The investment
policy restricts the Fund from a) purchasing any securities other than
money market
4
instruments and other securities described under "Principal Investment
Strategies", and b) investing more than 25% of its total assets in the
securities of a particular industry other than U.S. Government securities,
Government Agency securities or bank money instruments.
STATUTORY LIMITATION ON INVESTMENTS IN THE FUND
BY PARTICIPATING BANKS
Under Massachusetts General Laws, Chapter 167F, Section 3(2) as
amended, a participating or eligible savings bank or co-operative bank may
invest an amount in excess of 100% of its capital and surplus in any
distinct non-equity investment fund of the Corporation except to the extent
that the Commissioner of Banks for the Commonwealth of Massachusetts may by
regulation set limits and conditions. The participating bank will be
responsible for monitoring and compliance with this limitation.
Under Massachusetts General Laws, Acts of 1932, Chapter 45, Section
7, as amended, The Co-operative Central Bank Reserve Fund may not invest or
hold at any one time more than 20% of its assets with the Corporation.
Investments in the Fund are affected by Section 303 of the FDIC
Improvement Act of 1991 which limits investments by FDIC-insured state
banks (including Massachusetts co-operative banks, savings banks and trust
companies) in common or preferred stock or shares of mutual funds to the
extent that such investments are permissible for national banks.
Permissible national bank investments, as described in section 24(7) of the
National Bank Act and 12 C.F.R. Part 1, include mutual funds which invest
in securities and financial instruments eligible for direct investment by
national banks. The underlying investment portfolio composition of the
Liquidity Fund is comprised of assets (Federal agency obligations,
certificates of deposit, commercial paper, short-term corporate bonds and
notes, and Federal funds sold) that a national bank may purchase and sell
for its own account under 12 C.F.R. Part 1. An FDIC-insured state bank may
hold these investments directly or indirectly (i.e. pass-through mutual
fund investment) that are permissible for national banks without being
subject to limit restrictions for national banks. Therefore, Liquidity Fund
balances may be excluded (on a pass-through basis with shares of beneficial
interest) from an FDIC-insured state-chartered bank's (such as a
Massachusetts savings bank or co-operative bank) computation of equity
securities in measuring compliance with 12 C.F.R. 362 limits (usually 100%
of Tier 1 capital).
Federally chartered savings banks and savings and loan associations
(with their principal place of business in Massachusetts) may invest in an
open-end mutual fund, such as the Liquidity Fund, which invests in
securities and financial instruments in which such institutions may invest
directly (e.g., Federal agency obligations and high quality commercial
paper and corporate debt). For purposes of determining compliance with
quantitative investment limitations under the Home Owners Loan Act
("HOLA"), an investing bank's or association's proportionate share of a
mutual fund's individual investments will, under 12 C.F.R.,
[SECTION]560.32, be aggregated with such investments held directly by the
bank or association. Apart from this requirement, a bank or association may
invest, without prior notice to the Office of Thrift Supervision, an amount
up to 15% of its total capital in any one mutual fund or up to 50% of total
capital in all such pass-through investment vehicles. Investments in excess
of the 15% and 50% limits may only be made when thirty days' advance notice
has been provided to the Office of Thrift Supervision.
Certain federally chartered savings banks which converted from a
Massachusetts savings bank charter may, under certain grandfather
provisions of HOLA, retain broader investment authority than that described
in the preceding paragraph. For example, section 5(i) of HOLA grandfathers
state authorized investment powers of certain Fed-
5
eral savings banks in existence as of the date of enactment of Federal
statutes (e.g., the Financial Institution Reform, Recovery and Enforcement
Act of 1989) which may have otherwise limited such investments.
DIVIDENDS
The Fund distributes all of its net income on a daily basis.
Dividends are declared on each day that the Fund is open for business.
Investors receive dividends in additional shares unless they elect to
receive cash. Payment is made in additional shares at the net asset value
on the payable date or in cash, on a monthly basis.
Investors wishing to change the method of receiving dividends must
notify the Fund in writing at least one week before payment is to be made.
Net income for dividend purposes consists of interest accrued and discount
earned, less amortization of any premium and accrued expenses, plus or
minus all realized short-term gains or losses, if any.
NET ASSET VALUE
The Fund's net asset value per share is determined by dividing the
value of all investment securities and all other assets, less liabilities,
by the number of shares outstanding. The Fund's investment securities are
valued based on their amortized cost, which does not take into account
unrealized appreciation or depreciation. The Corporation's Board of
Directors has established procedures reasonably designed to stabilize the
net asset value per share at $1,000.00.
INVESTORS' ACCOUNTS
The Fund maintains an account for each investor in full and
fractional shares. All purchase and sale transactions are confirmed to the
investor. Statements of account showing all transactions for the month,
including dividends paid, are sent to participating banks on a monthly
basis. In addition, statements of accounts showing all transactions for the
calendar year, including dividends paid, are sent to participating banks on
annual basis.
INVESTORS' PRIVACY
Protecting the privacy and confidentiality of investor's account
information is important to the Fund. We value your business and the trust
you placed with us. The Fund does not share any non-public information
concerning our investor banks with any other party; except as necessary, to
process transactions or service accounts. In addition, we maintain physical
and electronic control procedures to safeguard our business records
relative to investor accounts.
TAXES
The Fund has qualified as a regulated investment company under the
Internal Revenue Code and will not be liable for federal income taxes to
the extent its earnings are distributed. Dividends derived from interest,
together with distributions of any short-term capital gains, are taxable as
ordinary income, whether or not reinvested. Dividends of the Fund do not
qualify for the dividends received exclusion for corporations.
6
A statement setting forth the federal income tax status of all
distributions made during each calendar year is sent to each shareholder
promptly after the end of such year.
AUDITORS AND LEGAL
Parent, McLaughlin and Nangle, Certified Public Accountants, Inc.,
are the auditors of the Fund. The law firm of Steptoe & Johnson has passed
upon certain legal matters of the Fund in connection with the shares
offered by this offering circular.
CAPITAL GAINS
The Fund does not expect to experience long-term capital gains or
losses due to the short-term nature of the portfolio, and therefore the
Fund does not expect to pay capital gain dividends.
HOW THE SHARES OF THE FUND ARE PURCHASED-
TELEPHONE INVESTMENT PROCEDURE
Shares of the Fund are offered for sale on days on which the New York
Stock Exchange is open for business. The Fund and its custodian bank
observe the following holidays during the calendar year: New Year's Day,
Martin Luther King Day, President's Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
There is no sales charge. The minimum initial investment is $50,000.
Additional investments may be made in any amount in excess of the minimum.
Bank Wire Transfers
Call your correspondent bank and speak to your account officer. Tell
him that you want to transfer funds to State Street Bank and Trust Company.
Instruct him to wire transfer the money before 2:00 P.M., Eastern Standard
Time, to:
State Street Bank and Trust Company
Boston, Massachusetts
Routing number: 0110-0002-8
For account of the Bank Investment Fund, Liquidity Fund
Account number: 9006-884-2
Internal Money Transfers
If your correspondent bank account is with the State Street Bank and
Trust Company, contact your account officer and instruct him to transfer
funds from your account to the account of the Bank Investment Fund,
Liquidity Fund, Account number: 9006-884-2.
AFTER INSTRUCTING YOUR BANK TO TRANSFER FUNDS, PLEASE CALL THE FUND
AND TELL US THE AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK SENDING THE
TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. REMEMBER, IT IS
IMPORTANT TO DO THIS BEFORE 2:00 P.M. EASTERN STANDARD TIME.
7
The securities market, in which the Fund buys and sells securities,
usually requires immediate settlement in Federal funds for all security
transactions; therefore, payment for the purchase of Fund shares must be
made by Federal funds or bank wire, which can be converted immediately into
Federal funds. Orders received prior to 2:00 P.M., Eastern Standard Time,
will be invested in shares of the Fund at the next determined net asset
value.
HOW SHARES OF THE FUND ARE REDEEMED-
TELEPHONE REDEMPTION PROCEDURE
An investor may withdraw all or any portion of his investment by
redeeming shares on any day that the Fund is open for business at the next
determined net asset value. The proceeds of redemptions will be wired
directly to the investor's bank account within one business day.
The right of redemption can be suspended and the payment of the
redemption proceeds deferred during any period in which a) the New York
Stock Exchange is closed or trading on such Exchange is restricted or b)
the Securities and Exchange Commission deems an emergency to exist, or
during any other period permitted by order of the Commission for the
protection of investors.
Bank Wire Transfers
Call the Fund by 2:00 P.M. Eastern Standard Time to redeem shares
that day (Trade Date), for payment the following day (Settlement Date).
When the amount to be redeemed is at least $5,000.00, the Fund will
automatically wire transfer the amount to your correspondent bank account
at settlement. The Fund will make payment by check when the amounts
redeemed are less than $5,000.00.
Internal Money Transfers
If your bank's account is with the State Street Bank and Trust
Company, contact the Fund by 2:00 P.M. Eastern Standard Time for redemption
of shares that day (Trade Date) for payment on the following day
(Settlement Date). The Fund will transfer the amount from its account to
your account at State Street Bank and Trust Company at settlement.
TRANSFER RESTRICTIONS
Fund shares may not be transferred by banks holding such shares to
any persons other than an eligible bank (except that the shares may be
pledged to such other persons or they may be transferred to the Central
Bank). If the Fund shares are acquired by any other persons by operation of
law or by foreclosure upon the pledge of such shares (or through transfer,
in the case of the Central Bank), the Corporation must offer to repurchase
the shares from such person at net asset value of the shares. If such offer
is refused, no dividend may be paid by the Corporation or Fund on such
shares, and the redemption price which the holder of such shares may obtain
in any subsequent repurchase of those shares by the Corporation or Fund is
limited to the net asset value of the shares on the date of the
Corporation's offer.
8
In the event of any transfer, it is extremely important to notify the
Corporation immediately of any purchase, sale or transfer of Fund shares
not made through the Corporation or its transfer agent. Immediate
notification should be furnished to the Corporation by telephone, with
written notification as a follow-up thereto. Prompt notification is
essential to avoid any delay in redemption offer and loss of earnings.
Please remember that a statutory restriction exists on the Corporation and
it would be unable to pay a dividend to an ineligible holder after
expiration of the 30-day repurchase period which is statutorily available
following such transfer.
ORGANIZATION
The Corporation was organized effective April 7, 1985 pursuant to a
Special Act of the Commonwealth [Acts of 1984, Chapter 482 as amended] of
Massachusetts under its chartered name "Co-operative Bank Investment Fund"
and does business under the name "Bank Investment Fund." The Special Act
indicates that the purpose of the Corporation is to hold, invest, reinvest
and manage one or more mutual investment funds, which shall include all
property of the Corporation, to be derived from voluntary subscription
thereto by the Banks.
The Liquidity Fund commenced operations on October 12, 1988.
The Corporation is an open-end diversified management investment
company authorized to invest its assets in certain real estate mortgages,
and a variety of other investments, including direct obligations of the
United States, obligations guaranteed by the United States, obligations
guaranteed by the Federal National Mortgage Association, bonds and other
evidences of indebtedness of corporations, shares of common or preferred
stock registered on a national securities exchange or for which quotations
are available through the National Quotation Bureau, Inc. or a comparable
service, or through a national securities market established in conformance
with Section 11A of the Securities Act of 1934, and other debt and equity
securities. The Liquidity Fund will only invest in those securities
described under "Principal Investments Strategies" and "Investment
Objectives and Restrictions" elsewhere herein.
The business of the Corporation is conducted by a Board of Directors
elected by the Corporation's Incorporators and the Directors have
investment discretion relative to Corporation assets. The Incorporators of
the Corporation are the Directors of The Co-operative Central Bank,
which
is the statutory reserve bank and insurer of deposits in excess
of Federal deposit insurance limitations for Massachusetts co-operative
banks.
The Corporation operates pursuant to an exemption from the sections
of the Investment Company Act of 1940 which deal with a) voting rights of
security holders and b) the manner of sale of redeemable securities.
Only Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts and the National Cooperative Bank
are currently offered shares in the Fund. Such investors may purchase
shares of beneficial interest, which do not entitle the shareholders
thereof to voting rights of any nature, including investment policy
matters.
9
DESCRIPTION OF FUND SHARES
The Corporation has no capital stock. Beneficial ownership in each of
the Corporation's funds is represented by shares of beneficial ownership in
such fund, as recorded in book entry form. Each share of beneficial
interest in each fund is equal in every respect to every other share of
that fund. As the Directors of the Corporation establish distinct
investment funds, shares will be issued in distinct classes and each share
within each class will be equal in every respect to every other share of
that class.
The shares of beneficial ownership are no par, non-voting, with a
stated value of $1,000, issued in book entry form only. Investment and
redemption of shares is effected at the net asset value as described
elsewhere herein. Shares are recorded in whole and/or fractional shares, as
applicable. Physical certificates are not issued. Monthly statements are
furnished to reflect share balance and activity.
With regard to the absence of voting rights, management believes that
eligible investors are adequately protected because of a) regulation by the
Commissioner of Banks, b) the redeemable nature of the shares, c)
representation of co-operative bank investors in the election of Directors
of the Central Bank, who as Incorporators elect the Corporation's
Directors, and d) representation of savings bank investors by an advisor at
such corporate meetings of the Incorporators.
SUPERVISION AND REGULATION
As provided by Massachusetts statute [Chapter 482, Acts of 1984 as
amended] the Corporation is subject to the supervision of the Commissioner
of Banks of the Commonwealth of Massachusetts. Periodic reporting to the
Commissioner of Banks is also required by the same statute. The Corporation
is registered as an open-end diversified management investment company
under the Investment Company Act of 1940, as amended, and is subject to
reporting requirements thereunder.
INVESTMENT ADVISOR
The Corporation presently does not employ the services of any
investment advisory or management services company. Investment decisions
for the Fund are made by authorized officers of the Corporation, subject to
approval or ratification by its Board of Directors. The Corporation
reserves the right at any time in the future to appoint an investment
advisor at any reasonable and customary fee as may be agreed when, in the
opinion of the Corporation Directors, the use of such advisory or
management services would improve Fund performance.
TRANSFER AGENT
The Corporation maintains the records for the investment, redemption,
and/or transfer of Fund shares. The Corporation reserves its right at any
time in the future to appoint a separate transfer agent at any reasonable
and customary fee as may be agreed when, in the opinion of the Corporation
Directors, the use of such transfer service is necessary. The limited
number of shareholders and nature of Fund operation does not, at this time,
justify the use of a separate agent and would only be an extra or
unnecessary expense.
10
OPERATING AND DISTRIBUTION EXPENSES
Normal expenses which may be borne by the Fund include, but are not
limited to: Director fees, salaries and wages, payroll taxes, employee
benefits, taxes, corporate fees, occupancy, furniture and equipment, data
processing, legal, auditing and accounting, telephone and postage,
custodial and other bank fees, preparation, printing and distribution of
reports, insurance, membership fees, organization, and other miscellaneous
expenses.
The Corporation has adopted a plan of distribution pursuant to Rule
12b-1 of the Investment Company Act of 1940 (the "Plan") providing that the
Fund will pay certain expenses incurred by the Corporation which may be
considered to be primarily intended to result in the sale of shares in the
Fund. The expenses which may be incurred pursuant to the Plan include,
without limitation, those for the preparation, printing and distribution of
written materials for other than existing investors, preparation and
distribution of advertising material and sales literature, direct payments
to sales personnel, and other similar activities. The maximum expenditures
which may be made pursuant to the Plan in any year is .12 of 1% of the
average daily net asset value of the Corporation for such year. The Board
of Directors of the Corporation has concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
Expenditures of $110,459 (.02% of average net assets) pursuant to the
12b-1 plan were incurred in and for the year ended December 31, 2003:
$9,618 for advertising in trade journals and similar publications; $5,491
for printing and mailing of offering circulars; $46,216 for sales related
compensation, payroll taxes and benefits; $41,606 for sponsorship of annual
subscriptions and other promotional materials; and $7,528 for other plan
expenses.
Because more than one fund will be operated by the Corporation,
operating expenses and expenses incurred pursuant to the Plan related
directly to a single fund operation will be charged directly to that fund.
Common or indirect expenses will be allocated among funds in accordance
with the annual budget as determined by the Board of Directors of the
Corporation to be fair and equitable or on such other basis as the Board of
Directors of the Corporation may determine from time to time to be fair and
equitable.
The Fund accrued or paid the Bank Investment Fund-Fund One $261,300
for the year ended December 31, 2003 as a net reimbursement for the
proportionate share of expense items used in common by both funds. All fees
and expenses for the Fund are estimated and accrued daily. Actual operating
expenses for the year ended December 31, 2003 were .12% of average net
assets.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of another fund of the
Corporation on the basis of the respective net asset value of the shares
involved.
11
CUSTODIAN
The Corporation is required by statute to at all times employ a
national banking association located in the Commonwealth of Massachusetts,
or a Massachusetts state-chartered bank authorized to exercise trust
powers, as the Corporation's or Fund's custodian, to hold the securities
owned by the Corporation and any monies delivered by the Corporation's or
Fund's shareholders or due to the Corporation or Fund. Purchase and sale
transactions are effected through or by the custodian bank upon the
instructions of the Corporation.
The State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02110, serves as custodian of the Fund's cash and investments, other
than cash and Federal funds sold. Investments held under custody include
certificates of deposit. The Fund also maintains cash and Federal fund
balances with a number of qualified national banks or Massachusetts state
chartered banks. The banks utilized have been determined by the officers
and directors of the Fund to have been qualified to be custodian banks
themselves. State Street Bank and Trust Company, the Fund's custodian, and
other qualified banks, as discussed above, may be used by the Fund for the
placement of short-term, usually overnight, funds in Federal funds sold.
MANAGEMENT OF THE FUND
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank which is the statutory reserve bank and insurer of
deposits in excess of Federal deposit insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
William F. Casey, Jr., President, has been the Fund's primary
investment officer since April 1, 2000. Previously, Mr. Casey held the
position of Executive Vice President of the Bank Investment Fund since its
inception in 1985. Mr. Casey is also President of the Co-operative Central
Bank and served as Financial Vice President from 1980 to 1986 and Executive
Vice President and Treasurer of the Co-operative Central Bank from 1986 to
2000. Mr. Casey is a Certified Public Accountant and had been employed in
several executive positions in both public accounting and banking prior to
1980.
The Fund is governed by a Board of Directors that meets quarterly to
review the Fund's investments, performance, expenses, and other business
affairs. The Board elects the Fund's officers. All Board members are
independent directors.
The directors and officers of the Corporation are not eligible to
hold the equity securities of the Corporation; the Corporation's charter
limits its eligible shareholders to certain Massachusetts banks and certain
other institutions. The directors are also directors and/or officers of co-
operative banks which may own beneficial interests in shares of the Fund.
Robert W. Terravecchia, Jr. was elected as a director in May 2003 by
the Board of Incorporators and appointed as an additional member of the
audit committee in June 2003 by the Board of Directors. Mr. Terravecchia is
both an attorney and certified public accountant in Massachusetts. Mr.
Terravecchia has been an officer of Weymouth Bank since 1994 and held
several positions in public accounting prior thereto. Mr. Terravecchia has
been designated as the audit committee member with financial expertise.
12
Directors and Officers of the Corporation, together with information
as to their principal business occupations during the past five years, are
shown below:
Number of
Portfolios
Other
Term of
in Fund
Directorships
Office and
Complex
of Public
Name, Age Position(s) Held Length of Principal
Occupation(s) Overseen by
Companies
and Address With Fund Time Served During
Past 5 Years Directors
Held
----------- ---------------- ----------- ------------
- ----------- -----------
- -------------
<s> <c> <c> <c>
<c>
<c>
William F. Casey, Jr. President (since Yearly President of
The 2
None
(59) April 1, 2000); since 1985 Co-operative
Central
75 Park Plaza, Executive Vice Bank,
Boston, MA President prior Boston,
Massachusetts
02116-3934 thereto (since April
1, 2001);
Executive
Vice President
and
Treasurer of The
Co-operative
Central
Bank prior
thereto
Susan L. Ellis Vice President Yearly Vice
President of The 2
None
(55) and Treasurer since 1985 Co-operative
Central
75 Park Plaza, Bank,
Boston, MA Boston,
Massachusetts
02116-3934
Annemarie Lee Vice President and Yearly Assistant
Vice President 2
None
(45) Clerk of the since 1985 of The Co-
operative
75 Park Plaza, Corporation (since Central
Bank,
Boston, MA June 19, 2003); and Boston,
Massachusetts
02116-3934 Vice President
prior thereto
John R. McSorley Vice President Yearly Vice
President of 2
None
(61) since 2003 R. Seelaus &
Co., Inc.
75 Park Plaza, Boston,
Massachusetts
Boston, MA (2002-2003);
Vice
02116-3934 President of
PaineWebber
Inc.,
Boston, Massachusetts
(1977-2000)
James F. Culhane Director and Term ends Chairman of
the Board of 2
None
(73) Chairman of the 2006, since the North
Cambridge
75 Charles Diersch St., Board 2000 Co-operative
Bank,
E. Weymouth, MA Cambridge,
Massachusetts
02189 (since May
2002) and
President
prior thereto
13
Number of
Portfolios
Other
Term of
in Fund
Directorships
Office and
Complex
of Public
Name, Age Position(s) Held Length of Principal
Occupation(s) Overseen by
Companies
and Address With Fund Time Served During
Past 5 Years Directors
Held
----------- ---------------- ----------- ------------
- ----------- -----------
- -------------
<s> <c> <c> <c>
<c>
<c>
Alfonso De Vito Director* Term ends Chairman of
the Board 2
None
(67) 2006, since of The
Village Bank,
26 Rustic Street, 1999 Newton,
Massachusetts
Newton, MA
02458
Edward T. Mulvey Director* Term ends Chairman of
the Board 2
None
(68) 2005, since of the
Pilgrim
50 Pond Street, 1999 Co-operative
Bank,
Cohasset, MA Cohasset,
Massachusetts
02025
Harold S. Otto Director Term ends President of
the Methuen 2
None
(53) 2005, since Co-operative
Bank,
44 Laconia Circle, 2002 Methuen,
Massachusetts
North Andover, MA
01845
John H. Pearson, Jr. Director and Term ends President of
the Butler 2
None
(54) Clerk of the 2004, since Bank, a Co-
operative
62 Fairmount Street, Board 1998 Bank,
Lowell, MA Lowell,
Massachusetts
01852
Robert W. Terravecchia, Jr. Director* Term ends President of
the Weymouth 2
None
(39) 2004, since Bank,
15 Tayla Drive, 2003 Weymouth,
Massachusetts
Weymouth, MA (since 2000)
and Treasurer
02189 prior
thereto
Barry H. Whittaker Director Term ends President of
the 2
None
(50) 2006, since Holbrook Co-
operative
62 Bolas Road, 2000 Bank,
Duxbury, MA Holbrook,
Massachusetts
02332
<FN>
* Members of the Audit Committee
</FN>
15
--------------------
THIS PAGE LEFT BLANK INTENTIONALLY
--------------------
15
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 10 years. Certain information
reflects financial results for a single fund share. The total returns in
the table represent the rate that an investor would have earned (or lost)
on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Parent, McLaughlin &
Nangle, whose report, along with the Fund's financial statements, are
included elsewhere herein.
Year
Ended December 31,
----------------------
- -----------------------------
2003 2002
2001 2000
---- ----
- ---- ----
<s> <c> <c>
<c> <c>
Net asset value, beginning of year $1,000.00
$1,000.00 $1,000.00 $1,000.00
--------- --------
- - --------- ---------
Income from investment operations:
Net investment income 10.89
18.38 40.90 61.35
--------- --------
- - --------- ---------
Total from investment operations 10.89
18.38 40.90 61.35
--------- --------
- - --------- ---------
Less distributions:
Dividends from net investment income (10.89)
(18.38) (40.90) (61.35)
--------- --------
- - --------- ---------
Total distributions (10.89)
(18.38) (40.90) (61.35)
--------- --------
- - --------- ---------
Net asset value, end of year $1,000.00
$1,000.00 $1,000.00 $1,000.00
=========
========= ========= =========
Total return 1.09%
1.85% 4.17% 6.31%
Ratios/Supplemental data:
Net assets, end of year (in 000's) $ 401,193 $
808,883 $ 667,421 $ 184,592
Ratio of expenses to average net assets 0.12%
0.11% 0.14% 0.17%
Ratio of net investment income to average net assets 1.10%
1.81% 3.72% 6.14%
See notes to financial statements.
16
Year Ended December 31,
------------------------
- ----------------------------------
- -----------------
1999 1998
1997 1996
1995 1994
---- ----
- ---- ---- ---
- - ----
<s> <c> <c>
<c> <c> <c>
<c>
Net asset value, beginning of year $1,000.00 $1,000.00
$1,000.00 $1,000.00
$1,000.00 $1,000.00
--------- --------
- - --------- --------- --------- ----------
Income from investment operations:
Net investment income 48.87 53.07
53.83 52.53
57.12 38.00
Total from investment operations 48.87 53.07
53.83 52.53
57.12 38.00
Less distributions:
Dividends from net investment income (48.87) (53.07)
(53.83) (52.53)
(57.12) (38.00)
Total distributions (48.87) (53.07)
(53.83) (52.53)
(57.12) (38.00)
Net asset value, end of year $1,000.00 $1,000.00
$1,000.00 $1,000.00
$1,000.00 $1,000.00
Total return 5.00% 5.44%
5.52% 5.38%
5.86% 3.87%
Ratios/Supplemental data:
Net assets, end of year (in 000's) $ 175,656 $ 286,629
$ 235,204 $ 210,208 $
245,151 $ 91,623
Ratio of expenses to average net assets 0.15% 0.15%
0.16% 0.15%
0.13% 0.30%
Ratio of net investment income to average net assets 4.84% 5.30%
5.22% 5.26%
5.75% 3.63%
See notes to financial statements.
17
PMN Logo
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
BANK INVESTMENT FUND-LIQUIDITY FUND
BOSTON, MASSACHUSETTS
We have audited the accompanying statement of assets and liabilities
of Bank Investment Fund-Liquidity Fund, including the schedule of portfolio
of investments, as of December 31, 2003, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2003, by correspondence with the custodians and brokers. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Bank Investment Fund-Liquidity Fund as of December 31, 2003,
the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the ten years in the period then ended, in
conformity with accounting principles generally accepted in the United
States of America.
/s/ Parent, McLaughlin & Nangle
Certified Public Accountants
Member of the SEC Practice Section, American Institute
of Certified Public Accountants
January 21, 2004
18
BANK INVESTMENT FUND-LIQUIDITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003
<s>
<c>
ASSETS:
INVESTMENTS, at cost which approximates value
$198,966,696
REPURCHASE AGREEMENTS
200,600,000
INTEREST RECEIVABLE
1,479,834
CASH
433,243
------------
TOTAL ASSETS
401,479,773
------------
LIABILITIES:
DIVIDENDS PAYABLE
143,263
ACCRUED EXPENSES
143,424
------------
TOTAL LIABILITIES
286,687
------------
NET ASSETS: (Equivalent to $1,000 per share based on 401,193.0860 shares of
beneficial interest outstanding)
$401,193,086
============
REPRESENTED BY:
Paid-in Capital
$401,193,086
============
See notes to financial statements.
19
BANK INVESTMENT FUND-LIQUIDITY FUND
STATEMENT OF OPERATIONS
Year Ended December 31, 2003
<s> <c>
<c>
INVESTMENT INCOME:
$8,299,792
EXPENSES:
Compensation, payroll taxes and benefits-officers $182,191
Compensation, payroll taxes and benefits-other 137,443
Distribution expenses 110,459
Occupancy 106,594
Other bank fees 74,980
Professional fees 41,167
Equipment and data processing 36,575
Other expenses 31,008
Meetings and travel 23,928
Directors' fees 21,700
Insurance expense 18,356
Postage and telephone 13,077
Shareholder reports 5,491
Stationary and supplies 5,231
--------
TOTAL EXPENSES
808,200
----------
INVESTMENT INCOME-NET
7,491,592
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS
$7,491,592
==========
See notes to financial statements.
20
BANK INVESTMENT FUND-LIQUIDITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended
December 31,
------------------
- -------------
2003
2002
----
----
<s> <c>
<c>
INCREASE IN NET ASSETS FROM OPERATIONS:
Investment income-net $ 7,491,592
$ 13,569,253
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net (7,491,592)
(13,569,253)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST-
NET INCREASE (DECREASE) (407,689,880)
141,461,917
-------------
- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (407,689,880)
141,461,917
NET ASSETS:
Beginning of year 808,882,966
667,421,049
-------------
- -------------
End of year $ 401,193,086
$ 808,882,966
=============
=============
See notes to financial statements.
21
BANK INVESTMENT FUND-LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 2003
Obligations of the U.S. Treasury-5.0%
Par Coupon Maturity Date
Cost
--- ------ -------------
- ----
<s> <c> <c> <c>
<c>
U.S. Treasury Bills $20,000,000 1.04%* 02/19/04
$ 19,971,944
-----------
- ------------
(Value $
19,974,444)
Obligations of Federal Agencies-15.5%
Federal Farm Credit Bank $10,000,000 1.20% 06/09/04**
$ 10,000,000
5,000,000 1.14 07/29/04**
5,000,000
-----------
- ------------
$15,000,000 (Value $
14,998,021) $ 15,000,000
-----------
- ------------
Federal Home Loan Bank $15,000,000 1.02% 07/16/04**
$ 15,000,000
5,000,000 1.15 08/13/04
5,000,000
5,000,000 1.51 11/12/04**
5,000,000
5,000,000 1.50 11/19/04**
5,000,000
-----------
- ------------
$30,000,000 (Value $
29,989,744) $ 30,000,000
-----------
- ------------
Federal Home Loan Mortgage
Corporation $ 5,000,000 1.30% 11/02/04**
$ 5,000,000
5,000,000 1.40 11/12/04**
5,000,000
-----------
- ------------
$10,000,000 (Value $
10,000,677) $ 10,000,000
-----------
- ------------
Federal National Mortgage
Association $ 2,000,000 5.66% 01/05/04
$ 2,001,223
5,000,000 1.20 08/17/04**
5,000,000
-----------
- ------------
$ 7,000,000 (Value $ 6,999,919)
$ 7,001,223
-----------
- ------------
Total Federal Agencies
Obligations (Value $
61,988,361) $ 62,001,223
- ------------
<FN>
- --------------------
* Annualized yield on date of purchase.
** May be subject to call by issuer prior to maturity date.
</FN>
See notes to financial statements.
22
BANK INVESTMENT FUND-LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS (continued)
December 31, 2003
Certificates of Deposit-5.5%
Par Coupon Maturity Date
Cost
--- ------ -------------
- ----
<s> <c> <c> <c>
<c>
Bank of Fall River $ 500,000 1.60% 01/12/04
$ 500,000
Fidelity Cooperative Bank 500,000 1.50 01/21/04
500,000
First Trade Union Bank 90,000 1.49 11/05/04
90,000
Foxborough Savings Bank 250,000 1.75 01/12/04
250,000
Lowell Cooperative Bank 200,000 1.39 02/02/04
200,000
Mechanics Cooperative Bank 500,000 1.98 06/25/04
500,000
Mt. Washington Cooperative Bank 450,000 1.50 01/05/04
450,000
Mt. Washington Cooperative Bank 300,000 1.45 02/23/04
300,000
Mt. Washington Cooperative Bank 600,000 1.40 04/05/04
600,000
NCB, FSB 2,500,000 1.40 01/13/04
2,500,000
NCB, FSB 5,000,000 1.30 02/10/04
5,000,000
NCB, FSB 3,000,000 1.40 03/29/04
3,000,000
NCB, FSB 100,000 1.50 04/01/04
100,000
NCB, FSB 3,000,000 1.40 05/10/04
3,000,000
NCB, FSB 2,000,000 2.55 06/25/04
2,000,000
NCB, FSB 3,000,000 1.40 07/09/04
3,000,000
-----------
- ------------
$21,990,000 (Value $
21,990,000) $ 21,990,000
-----------
- ------------
Commercial Paper-2.5%
Metlife, Inc. $10,000,000 1.05%* 01/14/04
$ 9,995,917
-----------
- ------------
(Value $
9,995,956)
Short-Term Corporate Bonds and Notes-16.7%
AIG Funding, Inc. $ 5,000,000 5.20% 05/10/04
$ 5,072,448
American General Finance Corp. 3,000,000 6.75 11/15/04
3,137,865
Associates Corp. of N.A. 7,080,000 5.80 04/20/04
7,179,547
Merrill Lynch & Co., Inc. 5,000,000 5.70 02/06/04
5,022,832
<FN>
- --------------------
* Annualized yield on date of purchase.
</FN>
See notes to financial statements.
23
BANK INVESTMENT FUND-LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS (continued)
December 31, 2003
Short-Term Corporate Bonds and Notes-16.7% (continued)
Par Coupon Maturity Date
Cost
--- ------ -------------
- ----
<s> <c> <c> <c>
<c>
Merrill Lynch & Co., Inc. $ 3,500,000 5.46 05/07/04
$ 3,552,732
Merrill Lynch & Co., Inc. 8,568,000 5.35 06/15/04
8,728,420
Morgan Stanley Dean Witter & Co. 8,000,000 5.625 01/20/04
8,018,311
Wal-Mart, Inc. 9,149,000 6.55 08/10/04
9,444,942
Wells Fargo & Co. 5,000,000 5.45 05/03/04
5,072,754
Wells Fargo & Co. 11,612,000 6.625 07/15/04
11,948,959
-----------
- ------------
$65,909,000 (Value $
67,113,378) $ 67,178,810
-----------
- ------------
Federal Funds Sold-4.4%
Citizens Bank $ 1,043,737 0.75% 01/02/04
$ 1,043,737
Fleet Bank 2,785,065 0.6875 01/02/04
2,785,065
Peoples Bank 14,000,000 0.84 01/02/04
14,000,000
-----------
- ------------
$17,828,802 (Value $
17,828,802) $ 17,828,802
-----------
- ------------
(Value
$198,890,941) $198,966,696
- ------------
Repurchase Agreement-50.0%
$200,600,000 Repurchase Agreement dated December 31, 2003 with Morgan
Stanley Dean Witter, Inc. due January 2, 2004 with respect to
various U.S. Governments ranging from:
Par Value $1,000-$49,092,000-Totaling $330,290,904
Rate Range 1.625%-15.00%
Maturity Range 01/06/2004-12/01/2033
Maturity value of $200,611,367 for an effective yield of
1.02%.
(Value
$200,600,000) $200,600,000
- ------------
Total Investments-99.6% (Value
$399,490,941) $399,566,696
- ------------
Other assets in excess of liabilities-0.4%
1,626,390
- ------------
Net assets-100.0%
$401,193,086
============
See notes to financial statements.
24
BANK INVESTMENT FUND-LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Organization:
The Bank Investment Fund (the "Corporation") was organized effective
April 7, 1985 pursuant to a Special Act of the Commonwealth of
Massachusetts (Acts of 1984, Chapter 482, as amended,) under the chartered
name "Co-operative Bank Investment Fund" and does business under the name
"Bank Investment Fund." The Corporation is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
Corporation invests and manages two mutual funds derived from the voluntary
subscriptions made by eligible banks.
Liquidity Fund (the "Fund") is a no-load, diversified, open-end money
market fund, which commenced operations on October 12, 1988. Fund shares
are currently offered to the following eligible investors: Massachusetts
Co-operative Banks, Massachusetts Savings Banks, Massachusetts Trust
Companies, Federally Chartered Savings Banks and Savings and Loan
Associations with their principal place of business in Massachusetts, The
Co-operative Central Bank Reserve Fund, The Savings Bank Life Insurance
Company of Massachusetts and the National Cooperative Bank.
Because more than one fund will be operated by the Corporation,
operating expenses related directly to a single fund operation will be
charged directly to that fund. Common or indirect expenses will be
allocated among funds in proportion to the ratio of the net assets of each
fund to total net assets of the Corporation or on such other basis as the
Board of Directors of the Corporation may determine from time to time to be
fair and equitable.
NOTE 2. Significant Accounting Policies:
The Fund's financial statements are prepared in accordance with
generally accepted accounting principles which require the use of
management estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.
Accounting for investments:
Security transactions are accounted for on the trade date (date the
order to buy or sell is executed). The Fund's investment securities are
carried at their amortized cost, which does not take into account
unrealized appreciation or depreciation. Interest income is accrued on all
debt securities on a daily basis and includes accretion of original issue
discount. Premiums, if any, and discounts are amortized or accreted on a
straight line basis, which approximates the income method.
25
BANK INVESTMENT FUND-LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2. Significant Accounting Policies (continued):
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
Repurchase agreements:
It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying investments to ensure the existence of a proper level of
collateral.
Federal income taxes:
The Corporation's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
Dividends to shareholders:
The Fund distributes all of its net investment income on a daily
basis. Dividends are declared on each day that the Fund is open for
business. Investors receive dividends in additional shares unless they
elect to receive cash. Payment is made in additional shares at the net
asset value on the payable date or in cash, on a monthly basis.
Distributions of realized net capital gains, if any, are declared and paid
once each year and are reinvested in additional shares at net asset value
or, at each shareholder's option, paid in cash.
Net asset value:
The net asset value per share is determined daily by dividing the
value of all investment securities and all other assets, less liabilities,
by the number of shares outstanding. The Fund has established procedures
reasonably designed to stabilize the net asset value per share at $1,000.
26
BANK INVESTMENT FUND-LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3. Shares of Beneficial Interest:
Chapter 482 of the Acts of 1984, as amended by Chapter 244, Acts of
1986, of the Commonwealth of Massachusetts permits the directors to issue
an unlimited number of full and fractional shares of beneficial interest
(no par, non-voting, with a stated value of $1,000 per share).
Transactions in shares of beneficial interest are summarized as
follows:
Year Ended
Year Ended
December 31, 2003
December 31,
2002
-------------------------------- -----
- -----------------
- ----------
Shares Amount
Shares
Amount
-------------- -------------- -----
- --------- ----
- ----------
<s> <c> <c> <c>
<c>
Sold 2,875,965.4073 $2,875,965,407
3,652,512.4085
$3,652,512,408
Issued in reinvestment
of dividends 4,827.0807 4,827,081
7,735.3067
7,735,307
-------------- -------------- -----
- --------- ----
- ----------
2,880,792.4880 2,880,792,488
3,660,247.7152
3,660,247,715
Redeemed 3,288,482.3685 3,288,482,368
3,518,785.7977
3,518,785,798
-------------- -------------- -----
- --------- ----
- ----------
Net increase (decrease) (407,689.8805) $ (407,689,880)
141,461.9175 $
141,461,917
============== ==============
==============
==============
NOTE 4. Distribution Expenses:
The Fund has adopted a Plan of Distribution (the "Plan"), pursuant to
rule 12b-1 under the Investment Company Act of 1940, to use the assets of
the Fund to finance certain activities relating to the distribution of its
shares to investors. The Plan authorizes the Fund to pay for the cost of
preparing, printing, and distributing offering circulars to prospective
investors, for certain other direct or indirect marketing expenses, direct
payments to sales personnel, and for the cost of implementing and operating
the Plan. Plan expenses may not exceed an amount computed at an annual rate
of .12 of 1% of the Fund's average daily net assets. The Fund paid or
accrued $110,459 (.02% of average net assets) pursuant to this Plan for the
year ended December 31, 2003.
NOTE 5. Pension Plans:
The Fund is a participating employer in the Co-operative Banks
Employees Retirement Association, and has, in effect, a Defined
Contribution Plan covering all eligible officers and employees. Under the
plan, contributions by employees are doubled by the Fund, up to a maximum
of 10% of each employee's salary. Effective January 1, 1989, the Fund also
participates in a Defined Benefit Plan, which covers all eligible
employees, and is funded currently. The Fund's contributions to these
multi-employer plans for the year ended December 31, 2003 was $37,996.
27
BANK INVESTMENT FUND-LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 6. Transactions With Related Parties:
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank, which is the statutory reserve bank and insurer of
deposits in excess of Federal deposits insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
The Fund paid the Bank Investment Fund-Fund One $261,300 for the year
ended December 31, 2003 as a net reimbursement for the proportionate share
of expense items used in common by both funds. All fees and expenses for
the Fund are estimated and accrued daily. Actual operating expenses for the
year ended December 31, 2003 were .12% of average net assets.
28
The following sheets are perforated for your removal
and use in the establishment or updating of your account.
29
CERTIFICATE OF CORPORATE RESOLUTION
For Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts and the National Cooperative Bank
only. This form authorizes the individuals below to redeem shares by
telephone or exchange.
The undersigned is Secretary or Clerk of ___________________ and hereby
certifies that the following individuals: (name of corporation)
Name Title
---- -----
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
are duly authorized by corporate resolution or otherwise to act on behalf
of the eligible bank in connection with its ownership of shares in the Bank
Investment Fund, Liquidity Fund and in particular to give instructions for
the purchase, sale or exchange of any said shares and to execute any
necessary forms in connection therewith.
The Bank Investment Fund will consider this authorization to be in
full force and in effect until otherwise notified in writing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate the
_______________ day of ___________________ 20__________.
___________________________________________________________________________
Secretary or Clerk
30
BANK INVESTMENT FUND
LIQUIDITY FUND
ACCOUNT APPLICATION FORM
REGISTRATION. The account should be registered as follows:
DATE: _____________
NAME: _____________________________________________________________________
POST OFFICE BOX: __________________________________________________________
STREET ADDRESS: ___________________________________________________________
CITY/TOWN: ___________________________________ STATE: _____________________
ZIP CODE: _________________________ TELEPHONE NUMBER: _____________________
TAX ID NUMBER _____________________________________________________________
INITIAL INVESTMENT: $ ___________________________________ (Minimum $50,000)
MONTHLY CASH DIVIDENDS
[ ] Check if dividends are to be paid monthly in cash. Otherwise
dividends will be AUTOMATICALLY REINVESTED in additional shares of
the Fund.
TELEPHONE REDEMPTION ORDERS
Redemption proceeds will be sent ONLY to the bank or trust company
listed below, for credit to the investor's account. The investor hereby
authorizes the BANK INVESTMENT FUND to honor telephone or written
instructions, without a signature guarantee, for redemption of Fund shares.
THE FUND and its Agents will not be liable for any loss, expense or cost
arising out of such transactions.
Enclose a specimen copy of your check or deposit slip (marked VOID)
for the bank account listed below. To facilitate the wiring of your
redemption proceeds the indicated bank should be a commercial bank.
Name of Bank: _____________________________________________________________
Bank Account No.: _________________________________________________________
Bank Address: _____________________________________________________________
street
_______________________________________________ MA __________
city zip
Name on Account: __________________________________________________________
Bank Routing/Transit No.: _________________________________________________
AUTHORIZED PERSONS-TELEPHONE INVESTMENTS AND REDEMPTIONS
Authorized person Title Initials
1. ________________________________________________________________________
2. ________________________________________________________________________
3. ________________________________________________________________________
4. ________________________________________________________________________
5. ________________________________________________________________________
31
CORPORATE RESOLUTIONS
We have enclosed with this application form the necessary corporate
resolutions to authorize corporate officers to make wire or cash payment
transfers to the Bank Investment Fund and to purchase, sell or exchange
shares of beneficial ownership in the Bank Investment Fund.
SIGNATURE AND CERTIFICATION
We have received and read the Offering Circular, and agree to its
terms and conditions by signing below. By the execution of this
Application, the undersigned represent and warrant that they are duly
authorized to sign this Application and to purchase or redeem shares of the
Fund on behalf of the investor.
The undersigned hereby certify under penalty of perjury that the
above Taxpayer Identification Number is correct and that the investor is
not subject to backup withholding.
We further certify and agree that the certifications, authorizations
and appointments in this document will continue until the Bank Investment
Fund receives actual written notice of any change thereof.
Signature _____________________________ Title _____________________________
Signature _____________________________ Title _____________________________
Two signatures are required, one of which should be the Secretary or Clerk
of the corporation.
SIGNATURE GUARANTEE
In order to facilitate telephone redemptions, you must have your
signature(s) on this application guaranteed by a commercial bank or stock
exchange member firm.
___________________________________________________________________________
Name of Bank or Investment Dealer
___________________________________________________________________________
By (signature of authorized person)
___________________________________________________________________________
Title (authorized person)
32
FINANCIAL STATEMENTS
As required by applicable statutes, semi-annual financial statements
are furnished to the shareholder, the Commissioner of Banks and the
Securities and Exchange Commission.
ADDITIONAL INFORMATION
The Bank Investment Fund (the "Corporation") has filed with the
Securities and Exchange Commission in Washington, D.C., under the chartered
name the "Co-operative Bank Investment Fund" a registration statement on
Form N-1A (together with all amendments and exhibits thereto, hereinafter
referred to as the "Registration Statement") under the Investment Company
Act of 1940. This Offering Circular does not contain all of the information
in the Registration Statement. The Registration Statement may be reviewed
and copied at the Public Reference Room of the Securities and Exchange
Commission; or:
By Phone: 1-800-Sec-0330
By mail: Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
(Investment Company Act File No. 811-4421)
The Corporation will provide, without charge to any person to whom
this Offering Circular is delivered on the written or oral request of any
such person, a copy of the Registration Statement and the additional
information contained therein and documents relating to certain exemptions
from the Investment Company Act of 1940 (see ORGANIZATION). Written
requests should be directed to the Bank Investment Fund, 75 Park Plaza,
Boston, MA 02116-3934. Telephone requests may be directed collect to 617-
695-0415.
BANK INVESTMENT FUND
LIQUIDITY FUND
[LOGO]
75 Park Plaza
Boston, MA 02116-3934
617-695-0415
Web: www.bankinvestmentfund.com
E-mail: bif@bankinvestmentfund.com
Item 2. Code of Ethics.
The Corporation has adopted a code of ethics that applies to the
Corporation s principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions.
Item 3. Audit committee Financial Expert.
The Corporation s Board of Directors has determined that Robert
W. Terravecchia, Jr., a member of the Audit Committee of the
Board, is a financial expert as defined by the Securities and
Exchange Commission (the SEC). Mr. Terravecchia is
(independent) as defined by the SEC for purposes of audit
committee financial expert determinations.
Item 4. Principal Account Fees and Services.
(a) Audit Fees. The aggregate fees billed for each of the last
two fiscal years for professional services by the Corporation s
principal accountant for the audit of the Corporation s annual
financial statements were $35,000 in 2002 and $36,000 in 2003.
(b) Audit Related Fees. The aggregate fees billed for the
assurance and related services by the accountant that are
reasonably related to the performance of the audit of the
Corporation s (Series 2) financial statements and are not
reported under paragraph (a) of this Item 4 were $2,100 in 2002
and $2,100 in 2003. These services consisted of security
verifications required by Rule 17f-2 under the Investment Company
Act of 1940, as amended.
(c) Tax Fees. The aggregate fees billed for professional
services rendered by the accountant for tax return preparation
were $4,000 in 2002 and $4,000 in 2003. These services consisted
of preparation of U.S. Federal income and excise tax returns.
(d) All Other Fees. No other fees were billed by the accountant
for any products and services.
Audit Committee Pre-Approval Policies and Procedures. The
Corporation s Audit Committee has established procedures for pre-
approval of the accountant s engagement letter for all audit,
audit related tax or other non-audit, if any, services.
Auditor Independence. The Corporation s Audit Committee
considers the $4,000 annual tax return preparation fees, which
were pre-approved, to be compatible with maintaining auditor s
independence.
Items. 5-8. Reserved
Item 9. Controls and Procedures.
(a) The Corporation s principal executive officer and
principal financial officer have evaluated the Corporation s
disclosure controls and procedures within 90 days of this filing
of this report and have concluded that they are effective in
ensuring that the information required to be disclosed by the
registrant in its reports or statements is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.
(b) There were no significant changes in the registrant s
internal controls or in other factors that could significantly
affect these controls subsequent to the date of the last
evaluation. No significant deficiencies or material weaknesses
were noted that would require any corrective action.
Item 10. Exhibits.
(a) Code of Ethics referred to in Item 2
(b)(1) Certifications pursuant to Section 302 of the Sabanes-
Oxley Act of 2002 of the principal executive and principal
financial officers as required by Rule 30a-2(a) under the
Investment Company Act of 1940.
(b)(2) Certifications pursuant to Section 906 of the Sabanes-
Oxley Act of 2002 of the principal executive and principal
financial officers as required by Rule 30a-2(b) under the
Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CO-OPERATIVE BANK INVESTMENT FUND
d/b/a Bank Investment Fund
By / s/William F. Casey, Jr.
William F. Casey Jr.
President
Date: March 26, 2004
Pursuant to the requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By / s/William F. Casey, Jr.
William F. Casey Jr.
President
By /s/Susan L. Ellis
Susan L. Ellis
Treasurer
Date: March 26, 2004