-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T7fhGb9kHsk7PtI7twqQ/Esl6bSNdv2kgWmNHspJLMc94Ni6RcdMevqQ1or1UHe3 ZVenDmVH1JlqPC5wtJueqw== 0000773154-03-000009.txt : 20030905 0000773154-03-000009.hdr.sgml : 20030905 20030905151733 ACCESSION NUMBER: 0000773154-03-000009 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030905 EFFECTIVENESS DATE: 20030905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CO OPERATIVE BANK INVESTMENT FUND CENTRAL INDEX KEY: 0000773154 IRS NUMBER: 042871358 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04421 FILM NUMBER: 03883704 BUSINESS ADDRESS: STREET 1: 75 PARK PLZ CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6176950415 MAIL ADDRESS: STREET 1: 75 PARK PLAZA CITY: BOSTON STATE: MA ZIP: 02116-3934 N-CSRS 1 ncsrsfinal.txt SEMIANNUAL REPORT 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: 06/30/2003 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) SEMIANNUAL REPORTS June 30, 2003 OFFERING CIRCULAR - ----------------- 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 August 28, 2003 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 30 Account Application Forms 37 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, 2002. 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. BANKINVESTMENT FUND-FUND ONE ANNUAL TOTAL RETURN
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------ 6.01 -2.26 12.78 4.1 7.12 6.32 2.4 8.59 6.91 4.2 - -------------------- 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).
2 The table shows how the Fund's average annual return for one, five and ten years for the periods ended December 31, 2002 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 ---- ---- ---- Bank Investment Fund - Fund One 4.20% 5.66% 5.55% Merrill Lynch Government/Agency 1-3 year index 5.88% 6.49% 6.08% - -------------------- Total returns are based on past results and are not a prediction of future performance.
BANK INVESTMENTFUNE-FUND ONE INVESTMENT COMPARISON
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 - ---------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch 1-3 Yr. Gov't Index 10,000 11,208 11,271 12,510 13,137 14,012 14,990 15,457 16,714 18,120 18,047 Fund One 10,000 11,240 10,985 12,389 12,897 13,814 14,688 15,040 16,332 17,460 17,159 - -------------------- 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.
3 Management Discussion Fund One refelected a total return of 4.20% for the year ended December 31, 2002. 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 5.88%. 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 September 2006, in order that a 3 year maturity ladder will be in place by September 2003, 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 2003 should interest rates begin to increase thereafter. Fund One's portfolio turnover ratio was 80.3% for 2002, compared to its portfolio turnover ratio of 120.1% for 2001. The high portfolio turnover ratio for 2001 was attributed to the actions of the Federal Open Market Committee (FOMC) of the Federal Reserve Bank during 2001 wherein the FOMC reduced overnight rates a record eleven times for a total of 4.75%. During this large drop in the overnight rate, securities in the portfolio were called at an accelerated rate, resulting in the larger than normal turnover ratio in the portfolio for 2001. During 2002, overnight interest rates remained at 1.75% through November 5, 2002 and the FOMC further reduced its overnight interest rate by 50 basis points on November 6, 2002. By year end 2002, this rate was 1.25%. In such a low interest rate environment, the Fund continued to experience accelerated called security activity in 2002 that again resulted in a larger than normal turnover ratio. The turnover ratio in 2002 was however, less than the 2001 turnover ratio, due to the Fund's strategy of investing in securities with onetime 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, 2002 ----------------- Shareholder Transaction Expenses* 0% Annual Fund Operating Expenses (as a percentage of average net assets) Management Fees 0% 12b-1 Fees .04% Other Expenses Compensation, Payroll, Taxes, & Benefits .10% Occupancy . 03% Remainder . 08% . 21% TOTAL FUND OPERATING EXPENSES . 25% - -------------------- * The Fund charges no sales load or deferred sales load on any purchase, reinvested dividend, exchange, or redemption transactions.
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 ------ ------- ------- -------- December 31, 2002 $25.58 $80.74 $141.68 $323.50
The purpose of the foregoing table, which is based upon the Fund's fiscal year ended December 31, 2002, 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., 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 periods ended December 31, 2002 and June 30, 2003 were 1.98% and 1.21%, respectively. 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 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. 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 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. 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. 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 $48,924 (.04% of average net assets) pursuant to the 12b-1 plan were incurred in and for the year ended December 31, 2002: $413 for advertising in trade journals and similar publications; $5,137 for printing and mailing of offering circulars; $24,133 for sales related compensation, payroll taxes and benefits; $19,241 for sponsorship of annual subscriptions and other promotional materials. Expenditures of $20,259 (.02% of average net assets-annualized) pursuant to the 12b-1 plan were incurred in and for the six months ended June 30, 2003; $55 for advertising in trade journals and other publications; $2,517 for printing and mailing of offering circulars; $9,700 for sales related compensation, payroll taxes and benefits; $1,069 for sponsorship of annual subscriptions and other promotional materials; and $6,918 for other plan expenses. 12 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 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, 2002 and the six months ended June 30, 2003 were .25% and .18% of average net assets, respectively. As reimbursement of allocated expenses, operating expenses paid to the Central Bank for the year ended December 31, 2002 and the six months ended June 30, 2003 were $37,200 and $18,600, respectively. The Fund accrued or received from the Bank Investment Fund-Liquidity Fund for the year ended December 31, 2002 and for the six months ended June 30, 2003 the amounts of $276,200 and $133,000, respectively. 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 licensed 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 ----------- ----------------- ----------- ----------------------- ----------- ------------- William F. Casey, Jr. President (since Yearly President of The 2 None (58) 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 14 Susan L. Ellis Vice President Yearly Vice President of The 2 None (54) 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 (44) and Clerk of the since 1985 of The Co-operative 75 Park Plaza, Corporation Central Bank, Boston, MA (since June 19, 2003; Boston, Massachusetts 02116-3934 and Vice President prior thereto) John R. McSorley Vice President Yearly Vice President of 2 None (60) 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 (72) 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 President of the 2 None (66) 2006, since Newton South 26 Rustic Street, 1999 Co-operative Bank, Newton, MA Newton, Massachusetts 02458 Edward T. Mulvey Director* Term ends Chairman of the Board 2 None (67) 2005, since of the Pilgrim 50 Pond Street, 1999 Co-operative Bank, Cohasset, MA Cohasset, Massachusetts 02025 15 Harold S. Otto Director Term ends President of the Methuen 2 None (52) 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 (53) 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 (38) 2004, since Bank, 15 Tayla Drive, 2003 Weymouth, Massachusetts Weymouth, MA (since 2000) and Treasurer 02170 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 * Members of the Audit Committee
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).
Six Months Ended Year Ended December 31, ---------------- -------------------------------------- June 30, 2003 2002 2001 2000 (unaudited) (audited)* (audited)* (audited)* -------------------------------------------------------- Net asset value, beginning of period $ 1,000.47 $ 998.09 $ 981.89 $ 956.42 ------------------------------------------------------- Income from investment operations: Net investment income 12.41 38.68 50.27 53.96 Net realized and unrealized gain (loss) on investment transactions (2.93) 2.38 16.20 25.47 ------------------------------------------------------- Total from investment operations 9.48 41.06 66.47 79.43 ------------------------------------------------------- Less distributions: Dividends from net investment income (12.41) (38.68) (50.27) (53.96) Distributions from capital gains 0.00 0.00 0.00 0.00 ------------------------------------------------------- Total distributions (12.41) (38.68) (50.27) (53.96) ------------------------------------------------------- Net asset value, end of period $ 997.54 $1,000.47 $ 998.09 $ 981.89 ====================================================== Total return 1.91%** 4.20% 6.91% 8.59% Ratios/Supplemental data: Net assets, end of period (in 000's) $ 199,585 $ 214,692 $ 109,089 $ 106,536 Ratio of expenses to average net assets 0.18% 0.25% 0.34% 0.52% Ratio of net investment income to average net assets 2.52% 3.73% 5.08% 5.64% Portfolio turnover rate 52.45% 80.30% 120.13% 6.42% Portfolio turnover was computed including U.S. Government and U.S. Government Agency obligations with maturities in excess of one year. - -------------------- * Financial Statements for each of the ten years in the ten year period ended December 31, 2002 were audited by Parent, McLaughlin & Nangle, the Fund's independent auditors, whose report, along with the Fund's financial statements are included elsewhere within. ** Annualized.
See notes to financial statements. 18
Year Ended December 31, - ---------------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 1994 1993 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- (audited)* (audited)* (audited)* (audited)* (audited)* (audited)* (audited)* $ 987.50 $ 983.75 $ 974.80 $ 996.20 $ 944.75 $1,029.85 $1,042.13 - ---------------------------------------------------------------------------------------------- 54.08 56.88 58.35 60.41 66.14 62.34 73.54 (31.08) 3.75 8.95 (21.40) 51.45 (85.10) (12.28) 23.00 60.63 67.30 39.01 117.59 (22.76) 61.26 - ---------------------------------------------------------------------------------------------- (54.08) (56.88) (58.35) (60.41) (66.14) (62.34) (73.54) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (54.08) (56.88) (58.35) (60.41) (66.14) (62.34) (73.54) - ---------------------------------------------------------------------------------------------- $ 956.42 $ 987.50 $ 983.75 $ 974.80 $ 996.20 $ 944.75 $1,029.85 ============================================================================================== 2.40% 6.32% 7.12% 4.10% 12.78% -2.26% 6.01% $113,205 $128,475 $143,608 $151,591 $146,555 $ 129,330 $ 146,767 0.52% 0.48% 0.45% 0.43% 0.45% 0.50% 0.39% 5.59% 5.74% 5.98% 6.21% 6.75% 6.37% 7.01% 26.48% 50.00% 25.93% 49.26% 84.45% 43.43% 30.04%
See notes to financial statements. 19 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 investments, as of December 31, 2002, 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, 2002, 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, 2002, 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 29, 2003 20 BANK INVESTMENT FUND-FUND ONE STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 December 31, 2002 (unaudited) (audited) ------------- ----------------- ASSETS: INVESTMENTS IN SECURITIES, at value (Identified cost $155,082,407 and $153,056,895, respectively) $156,367,071 $155,001,675 REPURCHASE AGREEMENTS 50,225,000 70,790,000 INTEREST RECEIVABLE 1,123,460 1,286,843 OTHER ASSETS 15,764 18,798 CASH 100,969 71,293 ------------------------------- TOTAL ASSETS 207,832,264 227,168,609 LIABILITIES: PAYABLE FOR INVESTMENTS PURCHASED 8,000,000 12,000,000 DIVIDENDS PAYABLE 242,955 369,788 ACCRUED EXPENSES 4,034 106,491 ------------------------------- TOTAL LIABILITIES 8,246,989 12,476,279 ------------------------------- NET ASSETS: (Equivalent to $997.5395 and $1,000.4745 per share based on 200,077.5661 and 214,590.5067 shares of beneficial interest outstanding) $199,585,275 $214,692,330 =============================== REPRESENTED BY: Paid-in Capital $215,483,207 $229,947,660 Accumulated net losses on investments (17,182,596) (17,200,110) Unrealized appreciation of investments-net 1,284,664 1,944,780 ------------------------------- TOTAL NET ASSETS $199,585,275 $214,692,330 ===============================
See notes to financial statements. 21 BANK INVESTMENT FUND-FUND ONE STATEMENT OF ASSETS AND LIABILITIES
Six Months Ended Year Ended June 30, 2003 December 31, 2002 (unaudited) (audited) ---------------- ----------------- INVESTMENT INCOME: $2,811,724 $5,234,128 EXPENSES: Compensation, payroll taxes and benefits-officers $ 52,865 $ 78,957 Compensation, payroll taxes and benefits-other 27,234 52,638 Professional fees 24,400 26,500 Occupancy 20,700 40,800 Distribution expenses 20,259 48,924 Other expenses 8,455 8,570 Insurance expense 6,200 6,900 Equipment and data processing 6,000 12,700 Meetings and travel 5,900 12,200 Directors' fees 4,100 6,000 Other bank fees 4,000 7,600 Shareholder reports 2,517 5,136 Postage and telephone 2,500 6,300 Stationary and supplies 1,300 3,300 Interest expense 0 14,999 ------------------------------- TOTAL EXPENSES 186,430 331,524 INVESTMENT INCOME-NET 2,625,294 4,902,604 ------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 17,514 48,195 Change in net unrealized appreciation (depreciation) on investment securities (660,116) 421,911 ------------------------------- Net realized and unrealized gain (loss) on investments (642,602) 470,106 ------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,982,692 $5,372,710 ===============================
See notes financial statements. 22 BANK INVESTMENT FUND-FUND ONE STATEMENT OF CHANGES IN NET ASSETS
Six Months Year Ended Year Ended Ended December 31, December 31, June 30, 2003 2002 2001 (unaudited) (audited) (audited) ------------- ------------ ------------ INCREASE IN NET ASSETS FROM OPERATIONS: Investment income-net $ 2,625,294 $ 4,902,604 $ 5,384,831 Net realized gain on investments 17,514 48,195 23,510 Unrealized appreciation (depreciation)-net (660,116) 421,911 1,652,809 ----------------------------------------------- Net increase in net assets resulting from operations 1,982,692 5,372,710 7,061,150 DIVIDENDS TO SHAREHOLDERS FROM: Investment income-net (2,625,294) (4,902,604) (5,384,831) TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST-NET INCREASE (DECREASE) (14,464,453) 105,132,797 877,521 ----------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (15,107,055) 105,602,903 2,553,840 NET ASSETS: Beginning of period 214,692,330 109,089,427 106,535,587 ----------------------------------------------- End of period $199,585,275 $214,692,330 $109,089,427 ===============================================
See notes to financial statements. 23 BANK INVESTMENT FUND-FUND ONE PORTFOLIO OF INVESTMENTS June 30, 2003 (unaudited) Obligations of Federal Agencies-73.3%
Par Coupon Maturity Date Value --- ------ ------------- ----- Federal Home Loan Bank $ 4,000,000 1.41% 03/08/04* $ 4,001,875 4,000,000 2.07 10/14/04* 4,005,215 3,000,000 2.00 11/15/04* 2,998,125 2,000,000 4.00 12/08/04 2,078,798 3,000,000 5.05 01/11/05* 3,003,378 5,000,000 4.125 01/14/05 5,217,187 4,000,000 2.04 05/13/05* 4,014,881 4,000,000 2.01 06/24/05* 4,026,767 4,000,000 2.25 07/21/05* 4,002,860 4,000,000 3.03 08/15/05* 4,010,000 4,000,000 2.10 09/26/05* 4,010,568 4,000,000 2.315 10/24/05* 4,016,428 4,000,000 2.50 12/05/05* 4,010,676 4,000,000 2.58 01/17/06* 4,018,552 2,000,000 3.00 02/06/06* 2,003,905 4,000,000 2.52 02/07/06* 4,020,835 2,000,000 3.25 02/22/06* 2,006,421 2,000,000 5.65 02/23/06* 2,058,603 4,000,000 2.04 03/03/06* 4,027,947 4,000,000 3.03 03/10/06* 4,015,671 4,000,000 2.125 03/17/06* 4,009,443 2,000,000 3.375 05/12/06* 2,017,058 4,000,000 2.00 07/10/06* 4,000,000(1) 4,000,000 2.00 07/14/06* 4,000,000(1) 4,000,000 3.03 07/14/06* 4,009,832 4,000,000 3.10 09/05/06* 4,054,498 4,000,000 3.20 10/04/06* 4,099,012 ------------ ------------ $ 97,000,000 (Cost $ 96,991,534) $ 97,738,535 ------------ ------------ - -------------------- * May be subject to call by issuer prior to maturity date. When issued securities.
See notes to financial statements. 24 BANK INVESTMENT FUND-FUND ONE PORTFOLIO OF INVESTMENTS (continued) June 30, 2003 (unaudited) Obligations of Federal Agencies-73.3%(continued)
Par Coupon Maturity Date Value --- ------ ------------- ----- Federal Home Loan Mortgage Corporation $ 5,000,000 3.875% 02/15/05* $ 5,206,250 2,000,000 3.20 09/19/05* 2,009,670 4,000,000 3.00 11/04/05* 4,026,875 4,000,000 2.00 12/19/05* 4,007,500 4,000,000 3.15 04/28/06* 4,027,995 2,000,000 3.50 05/05/06* 2,016,875 4,000,000 2.08 05/26/06* 4,023,937 4,000,000 2.15 06/02/06* 4,026,475 ------------ ------------ $ 29,000,000 (Cost $ 28,993,650) $ 29,345,577 ------------ ------------ Federal National Mortgage Association $ 4,000,000 5.91% 08/25/03 $ 4,029,462 2,000,000 5.66 01/05/04 2,046,563 4,000,000 1.75 07/02/04* 4,000,000 3,000,000 1.875 12/15/04 3,028,594 2,000,000 3.09 09/09/05* 2,045,840 4,000,000 3.25 11/14/05* 4,032,500 ------------ ------------ $ 19,000,000 (Cost $ 18,997,223) $ 19,182,959 ------------ ------------ Total Federal Agencies Obligations (Cost $144,982,407) $146,267,071 ------------ Certificates of Deposit-5.1% NCB, FSB $ 3,000,000 2.30% 07/30/03 $ 3,000,000 100,000 1.70 11/14/03 100,000 3,000,000 1.40 03/29/04 3,000,000 2,000,000 2.55 06/25/04 2,000,000 2,000,000 2.55 08/27/04 2,000,000 ------------ ------------ $ 10,100,000 (Cost $ 10,100,000) $ 10,100,000 ------------ ------------ - -------------------- * May be subject to call by issuer prior to maturity date. When issued securities.
See notes to financial statements. 25 BANK INVESTMENT FUND-FUND ONE PORTFOLIO OF INVESTMENTS(continued) June 30, 2003 (unaudited) Repurchase Agreement-22.7%
Par Coupon Maturity Date Value --- ------ ------------- ----- $45,225,000 Repurchase Agreement dated June 30, 2003 with Morgan Stanley Dean Witter, Inc. due July 1, 2003 with a maturity value of $45,226,508 for an effective yield of 1.20%. Term Repurchase Agreement-2.4% $ 5,000,000 Term Repurchase Agreement dated June 3, 2003 with Morgan Stanley Dean Witter, Inc. due July 2, 2003 with a maturity value of $5,004,914 for an effective yield of 1.22%. Agreements are covered by various U.S. Governments and Federal Agencies ranging from: Par Value $18,000-$23,000,000-Totaling $67,525,000 Market Value $20,166-14,195,773-Totaling $51,230,481 Rate Range 1.70%-7.35% Maturity Range 07/03/03-05/15/29 (Cost $ 50,225,000) $ 50,225,000 ------------ Total Investments-103.5% (Cost $205,307,407) $206,592,071 ------------ Liabilities in excess of other assets-(3.5)% (7,006,796) ------------ Net assets-100% $199,585,275 ============
See notes to financial statements. 26 BANK INVESTMENT FUND-FUND ONE PORTFOLIO OF INVESTMENTS December 31, 2002 Obligations of Federal Agencies-69.4%
Par Coupon Maturity Date Value --- ------ ------------- ----- Federal Home Loan Bank $ 4,000,000 2.07% 09/30/04* $ 4,014,727 4,000,000 2.07 10/14/04* 4,000,000(1) 3,000,000 2.00 11/15/04 2,998,125 2,000,000 4.00 12/08/04 2,083,217 3,000,000 5.05 01/11/05* 3,059,595 5,000,000 4.125 01/14/05 5,230,469 2,000,000 7.15 01/28/05* 2,008,442 2,000,000 7.25 02/10/05* 2,012,545 2,000,000 5.40 03/21/05* 2,018,021 3,000,000 5.43 03/28/05* 3,029,642 2,000,000 5.27 04/04/05* 2,020,331 4,000,000 4.15 04/11/05* 4,031,542 2,000,000 5.24 04/25/05* 2,024,375 4,000,000 4.00 05/13/05* 4,039,731 3,000,000 5.52 06/13/05* 3,056,250 2,000,000 5.385 06/27/05* 2,040,070 4,000,000 3.00 07/27/05* 4,016,576 4,000,000 3.03 08/15/05* 4,041,250 2,000,000 3.15 10/07/05* 2,009,881 2,000,000 3.06 10/17/05* 2,010,420 3,000,000 3.00 10/21/05* 3,015,697 2,000,000 3.00 02/06/06* 2,019,012 2,000,000 5.80 02/21/06* 2,012,256 2,000,000 3.25 02/22/06* 2,024,540 2,000,000 5.65 02/23/06* 2,095,723 4,000,000 3.03 03/10/06* 4,042,524 2,000,000 3.375 05/12/06* 2,032,758 4,000,000 3.03 07/14/06* 4,000,000(1) 4,000,000 3.28 08/22/06* 4,030,279 4,000,000 3.10 09/05/06* 4,045,482 4,000,000 3.20 10/04/06* 4,059,326 ------------ ------------ $ 92,000,000 (Cost $ 91,988,812) $ 93,122,806 ------------ ------------ - -------------------- * May be subject to call by issuer prior to maturity date. When issued securities.
See notes to financial statements. 27 BANK INVESTMENT FUND-FUND ONE PORTFOLIO OF INVESTMENTS(continued) December 31, 2002 Obligations of Federal Agencies-69.4%(continued)
Par Coupon Maturity Date Value --- ------ ------------- ----- Federal Home Loan Mortgage Corporation $ 2,000,000 4.00% 11/09/04* $ 2,019,249 2,000,000 7.35 02/03/05* 2,010,625 5,000,000 3.875 02/15/05 5,212,500 2,000,000 3.20 09/19/05* 2,027,016 4,000,000 3.00 11/04/05* 4,051,916 4,000,000 3.15 04/28/06* 4,052,317 2,000,000 3.50 05/05/06* 2,033,750 4,000,000 3.05 06/06/06* 4,027,213 ------------ ------------ $ 25,000,000 (Cost $ 24,991,719) $ 25,434,586 ------------ ------------ Federal National Mortgage Association $ 4,000,000 5.91% 08/25/03 $ 4,119,280 2,000,000 5.66 01/05/04 2,085,313 2,000,000 3.60 05/14/04 1,997,500 4,000,000 1.75 07/02/04* 4,000,000(1) 5,000,000 3.95 08/19/04* 5,010,937 4,000,000 3.875 09/07/04* 4,018,125 3,000,000 1.875 12/15/04* 3,007,969 2,000,000 3.09 09/09/05* 2,042,034 4,000,000 3.25 11/14/05* 4,063,125 ------------ ------------ $ 30,000,000 (Cost $ 29,976,364) $ 30,344,283 ------------ ------------ Total Federal Agencies (Cost $146,956,895) $148,901,675 ------------ Certificates of Deposit-2.8% NCB, FSB $ 100,000 2.20% 05/16/03 $ 100,000 NCB, FSB 3,000,000 2.25 06/30/03 3,000,000 NCB, FSB 3,000,000 2.30 07/30/03 3,000,000 ------------ ------------ $ 6,100,000 (Cost $ 6,100,000) $ 6,100,000 ------------ ------------ - -------------------- * May be subject to call by issuer prior to maturity date. When issued securities.
See notes to financial statements. 28 BANK INVESTMENT FUND-FUND ONE PORTFOLIO OF INVESTMENTS (continued) December, 2003 Repurchase Agreement-33.0%
Par Coupon Maturity Date Value --- ------ ------------- ----- $70,790,000 Repurchase Agreement dated December 31, 2002 with Morgan Stanley Dean Witter, Inc. due January 2, 2003 with respect to $71,981,000 U.S. Treasury Note 1.75% due December 31, 2004-maturity value $70,794,326 for an effective yield of 1.10%. (Cost $ 70,790,000) $ 70,790,000 ------------ Total Investments-105.2% (Cost $223,846,895) $225,791,675 ------------ Liabilities in excess of other assets-(5.2)% (11,099,345) ------------ Net assets-100% $214,692,330 ============
See notes to financial statements. 29 t BANK INVESTMENT FUND-FUND ONE NOTES TO FINANCIAL STATEMENTS (Information for the six months ended June 30, 2003 is unaudited) 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. 30 BANK INVESTMENT FUND-FUND ONE NOTES TO FINANCIAL STATEMENTS (continued) (Information for the six months ended June 30, 2003 is unaudited) 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 $64,975 during 2002, which was applied towards the available capital loss carryforward, resulting in a remaining capital loss carryforward of ($3,783,482) at December 31, 2002. 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 31 BANK INVESTMENT FUND-FUND ONE NOTES TO FINANCIAL STATEMENTS (continued) (Information for the six months ended June 30, 2003 is unaudited) NOTE 2. Significant Accounting Policies (continued): by the Internal Revenue Code, and thus will reduce the amount of the 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 on December 31, 2003 ($3,761,034) and December 31, 2008 ($22,448). 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 Federal Agencies, (excluding short-term investments) aggregated $130,351,202 and $82,471,800, respectively, for the year ended December 31, 2002. As of December 31, 2002, unrealized appreciation of investments was $1,944,780; accumulated net realized loss on investment transactions totaled ($17,200,110). The cost of securities purchased and the proceeds from the sales of securities, all of which were Obligations of Federal Agencies and bank certificates of deposit (excluding short-term investments) aggregated $91,000,000 and $77,000,000, respectively, for the six months ended June 30, 2003. As of June 30, 2003, unrealized appreciation of investments was $1,284,664; accumulated net realized loss on investment transactions totaled ($17,182,596). NOTE 4. Borrowed Funds: The maximum amount of borrowed funds and the average balance for the year ended December 31, 2002 were $7,500,000 and $783,333, respectively. The average interest rate on these borrowings was 1.91%. Total interest expense of $14,999 is posted on the Statement of Operations for the year ended December 31, 2002. No borrowed funds were transacted for the six months ended June 30, 2003. 32 BANK INVESTMENT FUND-FUND ONE NOTES TO FINANCIAL STATEMENTS (continued) (Information for the six months ended June 30, 2003 is unaudited) NOTE 5. 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 $48,924 (.04% of average net assets) and $20,259 (.02% of average net assets-annualized) pursuant to this Plan for the year ended December 31, 2002 and for the six months ended June 30, 2003, respectively. NOTE 6. 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, 2002 and the six months ended June 30, 2003 were $17,944 and $9,207, respectively. NOTE 7. 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, 2002 and June 30, 2003 capital paid-in aggregate were $229,947,660 and $215,483,207, respectively. Transactions in shares of beneficial interest are summarized as follows:
Six Months Ended Year Ended Year Ended June 30, 2003 December 31, 2002 December 31, 2001 ---------------------- ---------------------- --------------------- (unaudited) (audited) (audited) Shares Amount Shares Amount Shares Amount ------ ------ ------ ------ ------ ------ Sold 47,162.9838 $ 47,102,846 210,979.8663 $210,504,000 73,514.2997 $73,300,000 Issued in reinvestment of dividends 979.9405 978,438 1,876.7136 1,871,722 2,431.5414 2,415,965 ------------ ------------ ------------ ------------ ----------- ----------- 48,142.9243 48,081,284 212,856.5799 212,375,722 75,945.8411 75,715,965 Redeemed 62,655.8649 62,545,737 107,563.7839 107,242,925 75,148.4359 74,838,444 ------------ ------------ ------------ ------------ ----------- ----------- Net increase (decrease) (14,512.9406) $(14,464,453) 105,292.7960 $105,132,797 797.4052 $ 877,521 ============ ============ ============ ============ =========== ===========
33 BANK INVESTMENT FUND-FUND ONE NOTES TO FINANCIAL STATEMENTS (continued) (Information for the six months ended June 30, 2003 is unaudited) NOTE 8. 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, 2002 and the six months ended June 30, 2003 were .25% and .18% of average net assets, respectively. As reimbursement of allocated expenses, operating expenses paid to The Central Bank for the year ended December 31, 2002 and the six months ended June 30, 2003 were $37,200 and $18,600, respectively. The Fund accrued or received from the Bank Investment Fund-Liquidity Fund for the year ended December 31, 2002 and the six months ended June 30, 2003 the amounts of $276,200 and $133,000, respectively. 34 -------------------- THIS PAGE LEFT BLANK INTENTIONALLY -------------------- 35 The following sheets are perforated for your removal and use in the establishment or updating of your account. 36 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. ________________________________________________________________________ 37 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) 38 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 39 NOTES 40 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 August 28, 2003 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 28 Account Application Forms 33 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, 2002.
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 - ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 3.15 3.87 5.86 5.38 5.52 5.44 5 6.31 4.17 1.85
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 1.5% (for the quarter ended December 31, 2002). The table shows how the Fund's average annual return for one, five and ten years for the period ended December 31, 2002 compared to the 3 month U.S. Treasury Bill.
One Five Ten Year Year Year ---- ---- ---- Bank Investment Fund-Liquidity Fund 1.85% 4.54% 4.65% U.S. Treasury Bill-3 month 1.61% 4.18% 4.49% Total returns are based on past results and are not a prediction of future performance.
The annualized average net yield of the seven-day period ended December 31, 2002 and the six months ended June 30, 2003 were 1.33% and 1.02%, respectively. 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, 2002 ----------------- 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 .03% --- .09% --- TOTAL FUND OPERATING EXPENSES .11% === * The Fund charges no sales load or deferred sales load on any purchase, reinvested dividend, exchange, or redemption transactions.
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 ------ ------- ------- -------- December 31, 2002 $11.26 $35.52 $62.34 $142.34
The purpose of the foregoing table, which is based upon the Fund's fiscal year ended December 31, 2002, 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., 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. 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 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. 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 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. 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. 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 $119,501 (.02% of average net assets) pursuant to the 12b-1 plan were incurred in and for the year ended December 31, 2002: $962 for advertising in trade journals and similar publications; $5,389 for printing and mailing of offering circulars; $56,310 for sales related compensation, payroll taxes and benefits; $47,650 for sponsorship of annual subscriptions and other promotional materials; and $9,190 for other plan expenses. Expenditures of $45,123 (.01% of average net assets-annualized) pursuant to the 12b-1 plan were incurred in and for the six months ended June 30, 2003: $140 for advertising in trade journals and similar publications; $2,727 for printing and mailing of offering circulars; $24,944 for sales related compensation, payroll taxes and benefits; $2,748 for sponsorship of annual subscriptions and other promotional materials; and $14,564 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 $276,200 and $133,000 for the year ended December 31, 2002 and the six months ended June 30, 2003, respectively; 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, 2002 and the six months ended June 30, 2003 were .11% and .13%, of average net assets, respectively. 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 licensed 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 ----------- ----------------- ----------- ----------------------- ----------- ------------- William F. Casey, Jr. President (since Yearly President of The 2 None (58) 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 (54) 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 (44) 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 (60) 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 (72) 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 ----------- ----------------- ----------- ----------------------- ----------- ------------- Alfonso De Vito Director* Term ends President of the 2 None (66) 2006, since Newton South 26 Rustic Street, 1999 Co-operative Bank, Newton, MA Newton, Massachusetts 02458 Edward T. Mulvey Director* Term ends Chairman of the Board 2 None (67) 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 (52) 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 (53) 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 (38) 2004, since Bank, 15 Tayla Drive, 2003 Weymouth, Massachusetts Weymouth, MA (since 2000) and Treasurer 02170 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 * Members of the Audit Committee
14 ------------------- 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).
Year Ended December 31, Six Months Ended ---------------------------------------- June 30, 2003 2002 2001 2000 ---------------- ---------- ---------- ---------- (unaudited) (audited)* (audited)* (audited)* Net asset value, beginning of period $1,000.00 $1,000.00 $1,000.00 $1,000.00 --------- --------- --------- --------- Income from investment operations: Net investment income 5.84 18.38 40.90 61.35 --------- --------- --------- --------- Total from investment operations 5.84 18.38 40.90 61.35 --------- --------- --------- --------- Less distributions: Dividends from net investment income (5.84) (18.38) (40.90) (61.35) --------- --------- --------- --------- Total distributions (5.84) (18.38) (40.90) (61.35) --------- --------- --------- --------- Net asset value, end of period $1,000.00 $1,000.00 $1,000.00 $1,000.00 ========= ========= ========= ========= Total return 1.17%** 1.85% 4.17% 6.31% Ratios/Supplemental data: Net assets, end of period (in 000's) $ 627,657 $ 808,883 $ 667,421 $ 184,592 Ratio of expenses to average net assets 0.13% 0.11% 0.14% 0.17% Ratio of net investment income to average net assets 1.17% 1.81% 3.72% 6.14% * Financial Statements for each of the ten years in the ten year period ended December 31, 2002 were audited by Parent, McLaughlin & Nangle, the Fund's independent auditors, whose report, along with the Funds Financial Statements are included elsewhere within. ** Annualized.
See notes to financial statements. 16
Year Ended December 31, - ---------------------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- ---- ---- (audited)* (audited)* (audited)* (audited)* (audited)* (audited)* (audited)* $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 - --------- -------- --------- --------- --------- --------- --------- 48.87 53.07 53.83 52.53 57.12 38.00 31.18 - --------- -------- --------- --------- --------- --------- --------- 48.87 53.07 53.83 52.53 57.12 38.00 31.18 - --------- -------- --------- --------- --------- --------- --------- (48.87) (53.07) (53.83) (52.53) (57.12) (38.00) (31.18) - --------- -------- --------- --------- --------- --------- --------- (48.87) (53.07) (53.83) (52.53) (57.12) (38.00) (31.18) - --------- -------- --------- --------- --------- --------- --------- $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 ========= ========= ========= ========= ========= ========= ========= 5.00% 5.44% 5.52% 5.38% 5.86% 3.87% 3.15% $ 175,656 $ 286,629 $ 235,204 $ 210,208 $ 245,151 $ 91,623 $ 266,821 0.15% 0.15% 0.16% 0.15% 0.13% 0.30% 0.28% 4.84% 5.30% 5.22% 5.26% 5.75% 3.63% 3.12%
See notes to financial statements. 17 [Form of Parent, McLaughlin & Nangle Letterhead] 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 investments, as of December 31, 2002, 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, 2002, 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, 2002, 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 29, 2003 18 BANK INVESTMENT FUND-LIQUIDITY FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 December 31, 2002 ------------- ----------------- (unaudited) (audited) ASSETS: INVESTMENTS, at cost which approximates value $256,345,362 $321,394,538 REPURCHASE AGREEMENTS 375,725,000 487,695,000 INTEREST RECEIVABLE 1,001,922 1,592,084 CASH 396,581 383,873 ------------ ------------ TOTAL ASSETS 633,468,865 811,065,495 ------------ ------------ LIABILITIES: DUE TO BANK - 1,500,000 PAYABLE FOR INVESTMENTS PURCHASED 5,244,006 - DIVIDENDS PAYABLE 196,342 522,152 ACCRUED EXPENSES 371,702 160,377 ------------ ------------ TOTAL LIABILITIES 5,812,050 2,182,529 ------------ ------------ NET ASSETS: (Equivalent to $1,000 per share for each period based on 627,656.8150 and 808,882.9660 shares of beneficial interest outstanding) $627,656,815 $808,882,966 ============ ============ REPRESENTED BY: Paid-in Capital $627,656,815 $808,882,966 ============ ============
See notes to financial statements. 19 BANK INVESTMENT FUND-LIQUIDITY FUND STATEMENT OF OPERATIONS
Six Months Ended Year Ended June 30, 2003 December 31, 2002 ---------------- ----------------- (unaudited) (audited) INVESTMENT INCOME: $4,912,253 $14,382,178 EXPENSES: Compensation, payroll taxes and benefits-officers $ 141,572 $ 207,274 Compensation, payroll taxes and benefits-other 72,930 138,182 Occupancy 53,277 95,093 Distribution expenses 45,123 119,501 Other bank fees 40,744 67,976 Professional fees 37,223 37,979 Other expenses 23,365 30,902 Insurance expense 15,869 16,147 Equipment and data processing 15,607 29,821 Meetings and travel 15,025 28,366 Directors' fees 10,700 14,100 Postage and telephone 6,589 14,613 Stationary and supplies 3,424 7,583 Shareholder reports 2,727 5,388 ---------- ----------- TOTAL EXPENSES 484,175 812,925 ---------- ----------- INVESTMENT INCOME-NET 4,428,078 13,569,253 ---------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,428,078 $13,569,253 ========== ===========
See notes to financial statements. 20 BANK INVESTMENT FUND-LIQUIDITY FUND STATEMENT OF CHANGES IN NET ASSETS
Six Months Year Ended Year Ended Ended December 31, December 31, June 30, 2003 2002 2001 ------------- ------------ ------------ (unaudited) (audited) (audited) INCREASE IN NET ASSETS FROM OPERATIONS: Investment income-net $ 4,428,078 $ 13,569,253 $ 19,409,403 DIVIDENDS TO SHAREHOLDERS FROM: Investment income-net (4,428,078) (13,569,253) (19,409,403) TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST-NET INCREASE (DECREASE) (181,226,151) 141,461,917 482,829,099 ------------- ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (181,226,151) 141,461,917 482,829,099 NET ASSETS: Beginning of period 808,882,966 667,421,049 184,591,950 ------------- ------------ ------------ End of period $ 627,656,815 $808,882,966 $667,421,049 ============= ============ ============
See notes to financial statements. 21 BANK INVESTMENT FUND-LIQUIDITY FUND PORTFOLIO OF INVESTMENTS June 30, 2003 (unaudited) Obligations of the U.S. Treasury-11.1%
Par Coupon Maturity Date Cost --- ------ ------------- ---- U.S. Treasury Bills $ 20,000,000 1.15%* 10/16/03 $ 19,931,000 50,000,000 1.00 * 12/04/03 49,781,945 ------------ ------------ $ 70,000,000 (Value $ 69,733,067) $ 69,712,945 ------------ ------------ Obligations of Federal Agencies-8.0% Federal Farm Credit Bank $ 10,000,000 1.50% 12/23/03 $ 10,000,000 10,000,000 1.20 06/09/04** 10,000,000 ------------ ------------ $ 20,000,000 (Value $ 20,023,993) $ 20,000,000 ------------ ------------ Federal Home Loan Bank $ 15,000,000 1.40% 05/07/04** $ 15,000,000 15,000,000 1.02 07/16/04** 15,000,000 ------------ ------------ $ 30,000,000 (Value $ 29,989,844) $ 30,000,000 ------------ ------------ Total U.S. Treasury and Federal Agencies Obligations (Value $119,746,904) $119,712,945 ------------ Certificates of Deposit-5.3% Bank of Fall River, a Cooperative Bank $ 500,000 2.25% 07/14/03 $ 500,000 Fidelity Cooperative Bank 500,000 2.00 07/23/03 500,000 First Trade Union Bank 90,000 2.71 11/07/03 90,000 Foxborough Savings Bank 250,000 2.25 07/14/03 250,000 Lowell Cooperative Bank 200,000 2.00 08/01/03 200,000 Mechanics Cooperative Bank 500,000 2.25 12/26/03 500,000 Mt. Washington Cooperative Bank 450,000 2.00 07/07/03 450,000 Mt. Washington Cooperative Bank 300,000 1.75 08/25/03 300,000 Mt. Washington Cooperative Bank 600,000 2.00 10/06/03 600,000 - ------------------- * Annualized yield on date of purchase. ** May be subject to call by issuer prior to maturity date.
See notes to financial statements. 22 BANK INVESTMENT FUND-LIQUIDITY FUND PORTFOLIO OF INVESTMENTS (continued) June 30, 2003 (unaudited) Certificates of Deposit-5.3% (continued)
Par Coupon Maturity Date Cost --- ------ ------------- ---- NCB, FSB $ 5,000,000 1.70% 07/11/03 $ 5,000,000 NCB, FSB 5,000,000 1.74 08/14/03 5,000,000 NCB, FSB 5,000,000 1.74 09/15/03 5,000,000 NCB, FSB 100,000 1.85 10/01/03 100,000 NCB, FSB 5,000,000 1.74 10/10/03 5,000,000 NCB, FSB 5,000,000 1.47 11/05/03 5,000,000 NCB, FSB 5,000,000 1.40 12/10/03 5,000,000 ------------ ------------ $ 33,490,000 (Value $ 33,490,000) $ 33,490,000 ------------ ------------ Commercial Paper-1.6% Johnson & Johnson $ 5,000,000 1.20%* 07/21/03 $ 4,996,500 Johnson & Johnson 5,000,000 1.20 * 07/22/03 4,996,333 ------------ ------------ $ 10,000,000 (Value $ 9,993,789) $ 9,992,833 ------------ ------------ Short-Term Corporate Bonds and Notes-8.5% Associates Corp. of N.A $ 11,550,000 5.75% 10/15/03 $ 11,697,938 Associates Corp. of N.A. 5,000,000 5.80 04/20/04 5,185,200(1) IBM Credit Corp. 3,500,000 5.25 12/01/03 3,554,177 Merrill Lynch & Co., Inc. 500,000 6.80 11/03/03 508,744 Morgan Stanley Dean Witter & Co. 2,000,000 7.125 08/15/03 2,014,271 Morgan Stanley Dean Witter & Co. 2,590,000 6.125 10/01/03 2,621,312 Morgan Stanley Dean Witter & Co. 8,000,000 5.625 01/20/04 8,186,771 Wal-Mart Co. 4,500,000 4.375 08/01/03 4,510,134 Wal-Mart Co. 10,000,000 3.25 09/29/03 10,046,452 Wells Fargo Co. 5,000,000 4.25 08/15/03 5,015,118 ------------ ------------ $ 52,640,000 (Value $ 53,356,336) $ 53,340,117 ------------ ------------ - ------------------- * Annualized yield on date of purchase. ** May be subject to call by issuer prior to maturity date.
See notes to financial statements. 23 BANK INVESTMENT FUND-LIQUIDITY FUND PORTFOLIO OF INVESTMENTS (continued) June 30, 2003 (unaudited) Federal Funds Sold-6.3%
Par Coupon Maturity Date Cost --- ------ ------------- ---- Citizens Bank N.A. $ 1,039,538 0.8125% 07/01/03 $ 1,039,538 Fleet Bank N.A. 13,769,929 1.00 07/01/03 13,769,929 Peoples Bank 25,000,000 1.21 07/01/03 25,000,000 ------------ ------------ $ 39,809,467 (Value $ 39,809,467) $ 39,809,467 ------------ ------------ (Value $256,396,496) $256,345,362 ------------ Repurchase Agreement-58.3% $365,725,000 Repurchase Agreement dated June 30, 2003 with Morgan Stanley Dean Witter, Inc. due July 1, 2003 with a maturity value of $365,737,191 for an effective yield of 1.20%. Term Repurchase Agreement-1.6% $10,000,000 Term Repurchase Agreement dated March 27, 2003 with Morgan Stanley Dean Witter, Inc. due July 25, 2003 with a maturity value of $10,040,000 for an effective yield of 1.20%. Agreements are covered by various U.S. Governments and Federal Agencies ranging from: Par Value $4,000-$65,852,829-Totaling $412,039,590 Market Value $3,093-$66,054,660-Totaling $383,240,913 Rate Range 2.50%-7.35% Maturity Range 08/04/03-06/01/33 (Value $375,725,000) $375,725,000 ------------ Total Investments-100.7% (Value $632,121,496) $632,070,362 ------------ Liabilities in excess of other assets-(0.7)% (4,413,547) ------------ Net assets-100.0% $627,656,815 ============
See notes to financial statements. 24 BANK INVESTMENT FUND-LIQUIDITY FUND PORTFOLIO OF INVESTMENTS December 31, 2002 Obligations of Federal Agencies-23.2%
Par Coupon Maturity Date Cost --- ------ ------------- ---- Federal Farm Credit Bank $ 5,000,000 1.67% 01/02/03 $ 5,000,000 20,000,000 1.60 02/03/03 20,000,000 10,000,000 1.72 03/03/03 10,000,000 20,000,000 1.55 05/01/03 20,000,000 10,000,000 1.50 12/23/03 10,000,000 ------------ ------------ $ 65,000,000 (Value $ 65,029,282) $ 65,000,000 ------------ ------------ Federal Home Loan Bank $ 2,500,000 2.53% 04/04/03 $ 2,500,000 5,000,000 1.90 10/27/03* 5,000,000 5,000,000 1.80 10/30/03* 5,000,000 5,000,000 1.80 11/05/03* 5,000,000 5,000,000 1.86 11/10/03* 5,000,000 10,000,000 2.00 11/14/03* 10,000,000 5,000,000 2.05 11/18/03* 5,000,000 20,000,000 1.70 12/08/03* 20,000,000 10,000,000 1.55 12/12/03* 10,000,000 10,000,000 1.52 12/16/03* 10,000,000 10,000,000 1.60 12/19/03* 10,000,000 10,000,000 1.65 12/24/03* 10,000,000 5,000,000 1.55 01/13/04* 5,000,000 ------------ ------------ $102,500,000 (Value $102,579,343) $102,500,000 ------------ ------------ Federal Home Loan Mortgage Corporation $ 10,000,000 2.45% 01/16/03 $ 10,000,000 ------------ ------------ (Value $ 10,004,688) Federal National Mortgage Association $ 10,000,000 1.70% 12/26/03 $ 10,000,000 ------------ ------------ (Value $ 10,008,023) Total Federal Agencies (Value $187,621,336) $187,500,000 ------------ - ------------------- * May be subject to call by issuer prior to maturity date.
See notes to financial statements. 25 BANK INVESTMENT FUND-LIQUIDITY FUND PORTFOLIO OF INVESTMENTS (continued) December 31, 2002 Certificates of Deposit-4.1%
Par Coupon Maturity Date Cost --- ------ ------------- ---- Bank of Fall River, a Cooperative Bank $ 500,000 2.75% 01/13/03 $ 500,000 Fidelity Cooperative Bank 500,000 2.60 01/22/03 500,000 First Trade Union Bank 90,000 2.71 11/07/03 90,000 Foxborough Savings Bank 250,000 2.75 01/13/03 250,000 Lowell Cooperative Bank 200,000 2.47 01/31/03 200,000 Mechanics Cooperative Bank 500,000 3.00 06/26/03 500,000 Mt. Washington Cooperative Bank 450,000 2.50 01/06/03 450,000 Mt. Washington Cooperative Bank 600,000 2.60 01/07/03 600,000 Mt. Washington Cooperative Bank 300,000 2.60 02/24/03 300,000 NCB, FSB 5,000,000 2.60 01/13/03 5,000,000 NCB, FSB 5,000,000 2.40 02/14/03 5,000,000 NCB, FSB 5,000,000 2.40 03/10/03 5,000,000 NCB, FSB 100,000 2.45 04/01/03 100,000 NCB, FSB 5,000,000 1.97 05/09/03 5,000,000 NCB, FSB 5,000,000 1.70 06/12/03 5,000,000 NCB, FSB 5,000,000 1.70 07/11/03 5,000,000 ------------ ------------ $ 33,490,000 (Value $ 33,490,000) $ 33,490,000 ------------ ------------ Short-Term Corporate Bonds and Notes-7.1% American General Corp. $ 1,900,000 6.17% 05/21/03 $ 1,926,627 American General Corp. 8,230,000 7.70 06/26/03 8,480,295 Associates Corp. of N.A. 5,000,000 5.75 10/15/03 5,165,626 Beneficial Finance Corp. 2,000,000 6.03 01/14/03 2,002,844 General Electric Co. 412,000 7.00 02/03/03 413,720 IBM Corp. 3,500,000 5.25 12/01/03 3,617,853 Merrill Lynch & Co., Inc. 500,000 6.80 11/03/03 521,306 Morgan Stanley Dean Witter & Co. 4,000,000 7.125 01/15/03 4,007,726 Morgan Stanley Dean Witter & Co. 1,000,000 6.75 03/04/03 1,007,274 Morgan Stanley Dean Witter & Co. 2,000,000 7.125 08/15/03 2,070,428 Morgan Stanley Dean Witter & Co. 1,000,000 6.125 10/01/03 1,034,454 Wal-Mart, Inc. 3,000,000 4.625 04/15/03 3,019,824
See notes to financial statements. 26 BANK INVESTMENT FUND-LIQUIDITY FUND PORTFOLIO OF INVESTMENTS (continued) December 31, 2002 Short-Term Corporate Bonds and Notes-7.1% (continued)
Par Coupon Maturity Date Cost --- ------ ------------- ---- Wal-Mart, Inc. $ 4,500,000 4.375 08/01/03 $ 4,567,451 Wal-Mart, Inc. 6,000,000 3.25 09/29/03 6,079,812 Wells Fargo & Co. 8,000,000 7.20 05/01/03 8,151,111 Wells Fargo & Co. 5,000,000 4.25 08/15/03 5,074,602 ------------ ------------ $ 56,042,000 (Value $ 57,067,961) $ 57,140,953 ------------ ------------ Federal Funds Sold-5.1% Citizens Bank $ 5,017,919 1.125% 01/02/03 $ 5,017,919 Fleet Bank, N.A. 1,245,666 1.00 01/02/03 1,245,666 Peoples Bank, N.A. 35,000,000 1.14 01/02/03 35,000,000 ------------ ------------ $ 41,263,585 (Value $ 41,263,585) $ 41,263,585 ------------ ------------ Federal Funds Sold-Term-0.2% BayState Federal Savings Bank $ 2,000,000 1.50% 02/13/03 $ 2,000,000 ------------ ------------ (Value $ 2,000,000) (Value $321,442,882) $321,394,538 ------------ Repurchase Agreement-60.3% $487,695,000 Repurchase Agreement dated December 31, 2002 with Morgan Stanley Dean Witter, Inc. due January 2, 2003 with respect to various U.S. Governments ranging from: Par Value $2,000-$144,783,000-Totaling $487,724,804 Rate Range 1.75%-14.00% Maturity Range 01/02/2003-02/15/2031 Maturity value of $487,724,804 for an effective yield of 1.10%. (Value $487,695,000) $487,695,000 ------------ Total Investments-100.0% (Value $809,137,882) $809,089,538 ------------ Other assets in excess of liabilities-(0.0)% (206,572) ------------ Net assets-100.0% $808,882,966 ============
See notes to financial statements. 27 BANK INVESTMENT FUND-LIQUIDITY FUND NOTES TO FINANCIAL STATEMENTS (Information for the six months ended June 30, 2003 is unaudited) 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. 28 BANK INVESTMENT FUND-LIQUIDITY FUND NOTES TO FINANCIAL STATEMENTS (continued) (Information for the six months ended June 30, 2003 is unaudited) 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. 29 BANK INVESTMENT FUND-LIQUIDITY FUND NOTES TO FINANCIAL STATEMENTS (continued) (Information for the six months ended June 30, 2003 is unaudited) 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:
Six Months Ended Year Ended Year Ended June 30, 2003 December 31, 2002 December 31, 2001 -------------------------------- -------------------------------- -------------------------------- (unaudited) (audited) (audited) Shares Amount Shares Amount Shares Amount ------ ------ ------ ------ ------ ------ Sold 1,703,790.6904 $1,703,790,690 3,652,512.4085 $3,652,512,408 2,289,591.8871 $2,289,591,887 Issued in reinvest- ment of dividends 2,816.7716 2,816,772 7,735.3067 7,735,307 10,559.3568 10,559,357 -------------- -------------- -------------- -------------- -------------- -------------- 1,706,607.4620 1,706,607,462 3,660,247.7152 3,660,247,715 2,300,151.2439 2,300,151,244 Redeemed 1,887,833.6125 1,887,833,613 3,518,785.7977 3,518,785,798 1,817,322.1450 1,817,322,145 -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) (181,226.1505) $ (181,226,151) 141,461.9175 $ 141,461,917 482,829.0989 $ 482,829,099 ============== ============== ============== ============== ============== ==============
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 $119,501 (.02% of average net assets) and $45,123 (.01 of average net assets-annualized) pursuant to this Plan for the year ended December 31, 2002 and the six months ended June 30, 2003, respectively. 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, 2002 and the six months ended June 30, 2003 were $41,869 and $23,675, respectively. 30 BANK INVESTMENT FUND-LIQUIDITY FUND NOTES TO FINANCIAL STATEMENTS (continued) (Information for the six months ended June 30, 2003 is unaudited) 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 accrued or paid the Bank Investment Fund-Fund One $276,200 and $133,000 for the year ended December 31, 2002 and the six months ended June 30, 2003, respectively; 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, 2002 and the six months ended June 30, 2003 were .11% and .13%, of average net assets, respectively. 31 The following sheets are perforated for your removal and use in the establishment or updating of your account. 32 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. ________________________________________________________________________ 33 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) ___________________________________________________________________________ 34 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 35 NOTES 36 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. Not applicable to Semi-Annual Reports. Item 3. Audit committee Financial Expert. Not applicable to Semi-Annual Reports. Item 4-8. Reserved Item 9. Controls and Procedures. (a) The Registrant's principal executive officer and principal financial officer have evaluated the registrant'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) Not applicable (b) Certifications required by item 10(b) of Form N-CSR are filed herewith 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: September 5, 2003 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: September 5, 2003 EX-99.CERT 3 certncsr.txt 302 CERTIFICATIONS Exhibit 99.302 SECTION 302 CERTIFICATIONS I, William F. Casey, Jr., certify that: 1. I have reviewed this report on Form N-CSR of Co-operative Bank Investment Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report December 31, 2002; and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 5, 2003 /s/ William F. Casey, Jr. - ------------------------- William F. Casey, Jr. President Exhibit 99.302 SECTION 302 CERTIFICATIONS I, Susan L. Ellis, certify that: 1. I have reviewed this report on Form N-CSR of Co-operative Bank Investment Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report December 31, 2002; and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 5, 2003 /s/ Susan L. Ellis - ------------------------ Susan Ellis Treasurer -----END PRIVACY-ENHANCED MESSAGE-----