1933 Act Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
EVERGREEN SELECT EQUITY TRUST
(Evergreen Select Strategic Growth Fund)
[Exact Name of Registrant as Specified in Charter]
Area Code and Telephone Number: (617) 210-3200
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------
(Address of Principal Executive Offices)
Michael H. Koonce, Esq.
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------------
(Name and Address of Agent for Service)
Copies of All Correspondence to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP 1025
Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate date of proposed public offering: As soon as possible after
the effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Section 24(f) under the Investment
Company Act of 1940 (File No. 333- 36047); accordingly, no fee is payable
herewith. Pursuant to Rule 429, this Registration Statement relates to the
aforementioned registration on Form N-1A. A Rule 24f-2 Notice for the
Registrant's fiscal year ended June 30, 1998 will be filed with the Commission
on or about September 28, 1998.
It is proposed that this filing will become effective on May 14, 1998
pursuant to Rule 488 of the Securities Act of 1933.
<PAGE>
EVERGREEN SELECT EQUITY TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
<S> <C>
1. Beginning of Registration Cross Reference Sheet; Cover
Statement and Outside Page
Front Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis and Comparison of Fees and
Risk Factors Expenses; Summary; Comparison
of Investment Objectives and
Policies; Risks
4. Information About the Summary; Reasons for the
Transaction Reorganization; Comparative
Information on Shareholders'
Rights; Exhibit A (Agreement
and Plan of Reorganization)
5. Information about the Cover Page; Summary; Risks;
Registrant Comparison of Investment
Objectives and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
6. Information about the Cover Page; Summary; Risks;
Company Being Acquired Comparison of Investment
Objective and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
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<PAGE>
7. Voting Information Cover Page; Summary; Voting
Information Concerning the
Meeting
8. Interest of Certain Financial Statements and
Persons and Experts Experts; Legal Matters
9. Additional Information Inapplicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
10. Cover Page Cover Page
11. Table of Contents Omitted
12. Additional Information Statement of Additional
About the Registrant Information of Evergreen
Select Strategic Growth Fund
dated November 17, 1997
13. Additional Information Statement of Additional
about the Company Being Information of CoreFunds, Inc.
Acquired - Growth Equity Fund dated
November 1, 1997
14. Financial Statements Financial Statements of
Evergreen Strategic Growth
Fund dated December 31, 1997;
Financial Statements of
CoreFunds, Inc. - Growth
Equity Fund dated June 30,
1997 and December 31, 1997
(unaudited); Pro Forma
Financial Statements
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<PAGE>
Item of Part C of Form N-14
Incorporated by Reference to
15. Indemnification Part A Caption - "Comparative
Information on Shareholders'
Rights - Liability and
Indemnification of Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
</TABLE>
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<PAGE>
COREFUNDS, INC.
GROWTH EQUITY FUND
530 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
June 1, 1998
Dear Shareholder,
As a result of the Merger of CoreStates Financial Corp with and into a
wholly-owned subsidiary of First Union Corporation effective [April 30], 1998, I
am writing to shareholders of Growth Equity Fund (the "Fund"), a series of
CoreFunds, Inc., to inform you of a Special Shareholders' meeting to be held on
July 17, 1998. Before that meeting, I would like your vote on the important
issues affecting your Fund as described in the attached Prospectus/Proxy
Statement.
The Prospectus/Proxy Statement includes two proposals. The first proposal
requests that shareholders consider and act upon an Agreement and Plan of
Reorganization whereby all of the assets of the Fund would be acquired by
Evergreen Select Strategic Growth Fund in exchange for either Institutional
Service or Institutional shares of Evergreen Select Strategic Growth Fund and
the assumption by Evergreen Select Strategic Growth Fund of the identified
liabilities of the Fund. You will receive shares of Evergreen Select Strategic
Growth Fund having an aggregate net asset value equal to the aggregate net asset
value of your Fund shares. Details about Evergreen Select Strategic Growth
Fund's investment objective, portfolio management team, performance, etc. are
contained in the attached Prospectus/Proxy Statement. For federal income tax
purposes, the transaction is a non-taxable event for shareholders.
The second proposal requests shareholder consideration of an Interim Investment
Advisory Agreement between the Fund and CoreStates Investment Advisers, Inc.,
the Fund's current investment adviser.
Information relating to the Interim Investment Advisory Agreement is contained
in the attached Prospectus/Proxy Statement.
The Board of Directors has approved the proposals and recommends that you vote
FOR these proposals.
I realize that this Prospectus/Proxy Statement will take time to review, but
your vote is very important. Please take the time to familiarize yourself with
the proposals. If you attend the meeting, you may vote your shares in person. If
you do not expect to attend the meeting, either complete, date, sign and return
the enclosed proxy card in the enclosed postage paid envelope or vote by calling
toll-free 1-800-733-8481 24 hours a day. Instructions on how to
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<PAGE>
complete the proxy card or vote by telephone are included immediately after the
Notice of Special Meeting.
If you have any questions about the proxy, please call our proxy solicitor,
Shareholder Communications Corporation at 800-733-8481 ext. 468. You may also
FAX your completed and signed proxy card to 800-733-1885. If we do not receive
your completed proxy card or your telephone vote after several weeks, you may be
contacted by Shareholder Communications Corporation, who will remind you to vote
your shares.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
Kevin Robins
Vice President
CoreFunds, Inc.
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<PAGE>
[SUBJECT TO COMPLETION, APRIL 10, 1998 PRELIMINARY COPY]
COREFUNDS, INC.
GROWTH EQUITY FUND
530 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 17, 1998
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Growth Equity Fund, a series of CoreFunds, Inc. (the "Fund"),
will be held at the offices of the Evergreen Funds, 26th Floor, 200 Berkeley
Street, Boston, Massachusetts 02116, on July 17, 1998 at 2:00 p.m. for the
following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the "Plan") dated as of April 15, 1998, providing for the acquisition of all of
the assets of the Fund by Evergreen Select Strategic Growth Fund, a series of
Evergreen Select Equity Trust, ("Evergreen Strategic Growth") in exchange for
shares of Evergreen Strategic Growth and the assumption by Evergreen Strategic
Growth of the identified liabilities of the Fund. The Plan also provides for
distribution of these shares of Evergreen Strategic Growth to shareholders of
the Fund in liquidation and subsequent termination of the Fund. A vote in favor
of the Plan is a vote in favor of the liquidation and dissolution of the Fund.
2. To consider and act upon the Interim Investment Advisory Agreement
between the Fund and CoreStates Investment Advisers, Inc.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
On behalf of the Fund, the Directors of CoreFunds, Inc. have fixed the
close of business on May 29, 1998 as the record date for the determination of
shareholders of the Fund entitled to notice of and to vote at the Meeting or any
adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors
James W. Jennings
Secretary
June 1, 1998
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<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears
in the Registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of
the party signing should conform exactly to a name shown in the
Registration on the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual
signing the proxy card should be indicated unless it is reflected in
the form of Registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr., Executor
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<PAGE>
INSTRUCTIONS FOR TELEPHONE VOTING
To vote your proxy by telephone follow the four easy steps below. Or if you
prefer you may send back your signed proxy ballot in the postage paid envelope
provided.
1. Read the accompanying proxy information and ballot.
2. Identify the twelve-digit "CONTROL NO." in the middle portion of your ballot
on the left hand side. This control number is the key to casting your vote over
the telephone.
3. Dial 1-800-733-8481 ext. 468.
4. Follow the simple instructions.
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<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JUNE 1, 1998
Acquisition of Assets of
GROWTH EQUITY FUND
a series of
CoreFunds, Inc.
530 East Swedesford Road
Wayne, Pennsylvania 19087
By and in Exchange for Shares of
EVERGREEN SELECT STRATEGIC GROWTH FUND
a series of
Evergreen Select Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Growth Equity Fund ("CoreFunds Growth") in connection with a proposed Agreement
and Plan of Reorganization (the "Plan") to be submitted to shareholders of
CoreFunds Growth for consideration at a Special Meeting of Shareholders to be
held on July 17, 1998 at 2:00 p.m. at the offices of the Evergreen Funds, 200
Berkeley Street, 25th Floor, Boston, Massachusetts, 02116, and any adjournments
thereof (the "Meeting"). The Plan provides for all of the assets of CoreFunds
Growth to be acquired by Evergreen Select Strategic Growth Fund ("Evergreen
Strategic Growth") in exchange for shares of Evergreen Strategic Growth and the
assumption by Evergreen Strategic Growth of the identified liabilities of
CoreFunds Growth (hereinafter referred to as the "Reorganization"). Evergreen
Strategic Growth and CoreFunds Growth are sometimes hereinafter referred to
individually as the "Fund" and collectively as the "Funds." Following the
Reorganization, shares of Evergreen Strategic Growth will be distributed to
shareholders of CoreFunds Growth in liquidation of CoreFunds Growth and such
Fund will be terminated. Holders of Class A and Class B shares of CoreFunds
Growth will receive Institutional Service shares of Evergreen Strategic Growth
and holders of Class Y shares of CoreFunds Growth will receive Institutional
shares of Evergreen Strategic Growth. Each such class of shares of Evergreen
Strategic Growth has the same Rule 12b-1 distribution-related fees, if any, as
the shares of the respective class of CoreFunds Growth held by them prior to the
Reorganization except that Institutional Service shares of Evergreen Strategic
Growth will bear substantially less in 12b-1 distribution fees than Class B
shares of CoreFunds Growth. No sales charges are imposed on Evergreen Strategic
Growth's Institutional Service or Institutional shares. In addition, holders of
Class B shares of CoreFunds Growth will not be subject to the imposition of a
contingent deferred sales charge on Institutional Service shares of Evergreen
Strategic Growth received in the Reorganization. As a
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<PAGE>
result of the proposed Reorganization, shareholders of CoreFunds Growth will
receive that number of full and fractional shares of Evergreen Strategic Growth
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares of CoreFunds Growth. The Reorganization is being
structured as a tax-free reorganization for federal income tax purposes.
Evergreen Strategic Growth is a separate series of Evergreen Select
Equity Trust, an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The investment
objective of Evergreen Strategic Growth is to seek long-term capital
appreciation. The investment objective of CoreFunds Growth is substantially
similar -- to obtain capital growth and an increasing flow of dividends.
Shareholders of CoreFunds Growth are also being asked to approve the
Interim Investment Advisory Agreement with CoreStates Investment Advisers, Inc.
("CSIA"), a subsidiary of First Union Corporation(the "Interim Advisory
Agreement"), with the same terms and fees as the previous advisory agreement
between CoreFunds Growth and CSIA. The Interim Advisory Agreement will be in
effect for the period of time between [April 30], 1998, the date on which the
merger of CoreStates Financial Corp with and into a wholly-owned subsidiary of
First Union Corporation was consummated, and the date of the Reorganization
(scheduled for on or about July 27, 1998).
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Evergreen Strategic Growth
that shareholders of CoreFunds Growth should know before voting on the
Reorganization. Certain relevant documents listed below, which have been filed
with the Securities and Exchange Commission ("SEC"), are incorporated in whole
or in part by reference. A Statement of Additional Information dated June 1,
1998, relating to this Prospectus/Proxy Statement and the Reorganization which
includes the financial statements of Evergreen Strategic Growth dated December
31, 1997 and of CoreFunds Growth dated June 30, 1997 and December 31, 1997, has
been filed with the SEC and is incorporated by reference in its entirety into
this Prospectus/Proxy Statement. A copy of such Statement of Additional
Information is available upon request and without charge by writing to Evergreen
Strategic Growth at 200 Berkeley Street, Boston, Massachusetts 02116 or by
calling toll-free 1-800-343-2898.
The two Prospectuses of Evergreen Strategic Growth dated November 21,
1997 and its Semi-Annual Report for the period ended December 31, 1997 are
incorporated herein by reference in their entirety, insofar as they relate to
Evergreen Strategic Growth only, and not to any other fund described therein.
The Prospectuses, which pertain (i) to Institutional Service shares and (ii) to
Institutional shares, differ only insofar as they describe the separate
distribution and shareholder servicing arrangements applicable to the classes.
Shareholders of CoreFunds Growth will
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<PAGE>
receive, with this Prospectus/Proxy Statement, copies of the Prospectus
pertaining to the class of shares of Evergreen Strategic Growth that they will
receive as a result of the consummation of the Reorganization. Additional
information about Evergreen Strategic Growth is contained in its Statement of
Additional Information dated November 17, 1997 which has been filed with the SEC
and which is available upon request and without charge by writing to or calling
Evergreen Strategic Growth at the address or telephone number listed in the
preceding paragraph.
The two Prospectuses of CoreFunds Growth which pertain (i) as
applicable, to Class A and Class B shares (Individual shares) and (ii) to Class
Y shares (Institutional shares) dated November 1, 1997, insofar as they relate
to CoreFunds Growth only, and not to any other funds described therein, are
incorporated herein in their entirety by reference. Copies of the Prospectuses,
related Statement of Additional Information dated the same date, the Annual
Report for the fiscal year ended June 30, 1997 and the Semi-Annual Report for
the six month period ended December 31, 1997, are available upon request without
charge by writing to CoreFunds Growth at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free 1-800-355-2673.
Included as Exhibits A and B to this Prospectus/Proxy Statement are a
copy of the Plan and the Interim Advisory Agreement, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered by this Prospectus/Proxy Statement are not deposits
or obligations of any bank and are not insured or otherwise protected by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency and involve investment risk, including
possible loss of
capital.
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<PAGE>
TABLE OF CONTENTS
Page
COMPARISON OF FEES AND EXPENSES...........................................7
SUMMARY ................................................................11
Proposed Plan of Reorganization .....11
Tax Consequences .....13
Investment Objectives and Policies of the Funds .....13
Comparative Performance Information for each Fund .....14
Management of the Funds .....15
Investment Advisers .....15
Administrators .....16
Portfolio Management .....16
Distribution of Shares .....17
Purchase and Redemption Procedures .....18
Exchange Privileges .....19
Dividend Policy .....19
Risks .....20
REASONS FOR THE REORGANIZATION...........................................21
Agreement and Plan of Reorganization .....24
Federal Income Tax Consequences .....26
Pro-forma Capitalization .....28
Shareholder Information .....30
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.........................31
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS..........................32
Forms of Organization .....32
Capitalization .....32
Shareholder Liability .....33
Shareholder Meetings and Voting Rights .....34
Liquidation or Dissolution .....35
Liability and Indemnification of Trustees .....35
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT.....................36
Introduction .....36
Comparison of the Interim Advisory Agreement
and the Previous Advisory Agreement .....37
Information About CoreFunds Growth's Investment
Adviser .....38
ADDITIONAL INFORMATION...................................................39
VOTING INFORMATION CONCERNING THE MEETING................................40
FINANCIAL STATEMENTS AND EXPERTS.........................................42
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LEGAL MATTERS............................................................43
OTHER BUSINESS...........................................................43
APPENDIX A...............................................................44
EXHIBIT A
EXHIBIT B
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<PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Institutional and Institutional Service shares of
Evergreen Strategic Growth set forth in the following tables and in the examples
are based on the estimated expenses of Evergreen Strategic Growth for the period
ending June 30, 1998. The amounts for Class Y and Class A shares of CoreFunds
Growth set forth in the following tables and in the examples are based on the
expenses for CoreFunds Growth for the fiscal year ended June 30, 1997 and the
amounts for Class B shares are estimated for the fiscal year ending June 30,
1998. The pro forma amounts for Institutional and Institutional Service shares
of Evergreen Strategic Growth are based on what the combined expenses would be
for Evergreen Strategic Growth for the fiscal period ending June 30, 1998. All
amounts are adjusted for voluntary expense waivers.
The following tables show for Evergreen Strategic Growth, CoreFunds
Growth and Evergreen Strategic Growth pro forma, assuming consummation of the
Reorganization, the shareholder transaction expenses and annual fund operating
expenses associated with an investment in the Institutional and Institutional
Service shares of Evergreen Strategic Growth and the Class Y, Class A and Class
B shares of CoreFunds Growth.
<TABLE>
<CAPTION>
Comparison of Institutional and Institutional Service Shares
of Evergreen Strategic Growth With Class Y, Class A
and Class B Shares of CoreFunds Growth
Evergreen
Strategic Growth CoreFunds Growth
Shareholder Institu-
Transaction Institu- tional
Expenses tional Service Class Y Class A Class B
<S> <C> <C> <C> <C> <C>
Maximum Sales None None None 5.50% None
Load Imposed on
Purchases (as a
percentage of
offering price)
Maximum Sales None None None None None
Load Imposed on
Reinvested
Dividends (as a
percentage of
offering price)
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<PAGE>
Contingent
Deferred Sales None None None None 5% in the
Charge (as a first year
percentage of declining
original purchase to 1% in
price or the fifth
redemption year and 0%
proceeds, thereafter
whichever is
lower)
Annual Fund
Operating
Expenses (as a
percentage of
average daily net
assets)
Management Fee 0.60% 0.60% 0.75% 0.75% .75%
(After Waiver)(1)
12b-1 Fees None 0.25% None 0.25% 1.00%
Other Expenses 0.12% 0.12% 0.21% 0.21% 0.21%
----- ----- ----- ----- -----
(After Waiver)
(2)
Annual Fund 0.72% 0.97% 0.96% 1.21% 1.96%
===== ===== ===== ===== =====
Operating
Expenses (3)
</TABLE>
Evergreen Strategic Growth Pro Forma
Shareholder Transaction Expenses
Institutional
Institutional Service
Maximum Sales Load Imposed on None None
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on None None
Reinvested Dividends (as a
percentage of offering price)
Contingent Deferred Sales Charge None None
(as a percentage of original
purchase price or redemption
proceeds, whichever is lower)
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Annual Fund Operating Expenses (as
a percentage of average daily net
assets)
Management Fee (After Waiver)(1) 0.60% 0.60%
12b-1 Fees None 0.25%
Other Expenses 0.08% 0.08%
--------- --------
Annual Fund Operating Expenses (3)
0.68% 0.93%
====== =======
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(1) The management fee for Evergreen Strategic Growth has been reduced from
0.70% of average daily net assets to reflect the voluntary waiver by
the investment adviser. The investment adviser currently intends to
continue this fee waiver through November 30, 1998; however, this
waiver may be modified or canceled at any time.
(2) Absent voluntary waivers by CoreFunds Growth's administrator, Other
Expenses would have been 0.31% of average daily net assets.
(3) Annual Fund Operating Expenses for the Institutional and
Institutional Service shares of Evergreen Strategic Growth are
estimated to be 0.82% and 1.07% for the fiscal period ending
June 30, 1998, Annual Fund Operating Expenses for the Class Y
and Class A shares of CoreFunds Growth would have been 1.06%
and 1.31%, respectively, for the year ended June 30, 1997 and
estimated Annual Fund Operating Expenses for Class B shares of
CoreFunds Growth would be 2.06% for the year ending June 30,
1998, absent fee and expense waivers. The investment adviser
of Evergreen Strategic Growth has undertaken to limit the
Fund's Annual Operating Expenses for a period of at least two
years to 1.06% and 1.31% for Institutional and Institutional
Service shares, respectively.
Examples. The following tables show for Evergreen Strategic Growth and
CoreFunds Growth, and for Evergreen Strategic Growth pro forma, assuming
consummation of the Reorganization, examples of the cumulative effect of
shareholder transaction expenses and annual fund operating expenses indicated
above on a $1,000 investment in each class of shares for the periods specified,
assuming (i) a 5% annual return and (ii) redemption at the end of such period
and, additionally for Class B shares, no redemption at the end of each period.
<TABLE>
<CAPTION>
Evergreen Strategic Growth
<PAGE>
One Year Three Five Ten Years
Years Years
<S> <C> <C> <C> <C>
Institutional $7 $23 $40 $89
Institutional $10 $31 $54 $119
Service
CoreFunds Growth
Three Five
One Year Years Years Ten Years
Class Y $10 $31 $53 $118
Class A $67 $91 $118 $194
Class B (Assuming $70 $92 $116 $190
redemption at end
of period)
Class B (Assuming $20 $62 $106 $190
no redemption at
end of period)
</TABLE>
<TABLE>
<CAPTION>
Evergreen Strategic Growth Pro Forma
Three Five
One Year Years Years Ten Years
<S> <C> <C> <C> <C>
Institutional $7 $22 $38 $85
Institutional $9 $30 $51 $114
Service
</TABLE>
The purpose of the foregoing examples is to assist CoreFunds Growth
shareholders in understanding the various costs and expenses that an investor in
Evergreen Strategic Growth as a result of the Reorganization would bear directly
and indirectly, as compared with the various direct and indirect expenses
currently borne by a shareholder in CoreFunds Growth. These examples should not
be considered a representation of past or future expenses or annual return.
Actual expenses may be greater or less than those shown.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
the Prospectuses of Evergreen Strategic Growth dated
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<PAGE>
November 21, 1997 and the Prospectuses of CoreFunds Growth dated November 1,
1997 (which are incorporated herein by reference), the Plan and the Interim
Advisory Agreement, the forms of which are attached to this Prospectus/Proxy
Statement as Exhibits A and B, respectively.
Proposed Plan of Reorganization
The Plan provides for the transfer of all of the assets of CoreFunds
Growth in exchange for shares of Evergreen Strategic Growth and the assumption
by Evergreen Strategic Growth of the identified liabilities of CoreFunds Growth.
The identified liabilities consist only of those liabilities reflected on the
Fund's statement of assets and liabilities determined immediately preceding the
Reorganization. The Plan also calls for the distribution of shares of Evergreen
Strategic Growth to CoreFunds Growth shareholders in liquidation of CoreFunds
Growth as part of the Reorganization. As a result of the Reorganization, the
holders of Class A, Class B and Class Y shares of CoreFunds Growth will become
the owners of that number of full and fractional Institutional Service,
Institutional Service and Institutional shares, respectively, of Evergreen
Strategic Growth having an aggregate net asset value equal to the aggregate net
asset value of the shareholders' shares of CoreFunds Growth, as of the close of
business immediately prior to the date that CoreFunds Growth's assets are
exchanged for shares of Evergreen Strategic Growth. See "Reasons for the
Reorganization - Agreement and Plan of Reorganization."
The Directors of CoreFunds, Inc., including the Directors who are not
"interested persons," as such term is defined in the 1940 Act (the "Independent
Directors"), have concluded that the Reorganization would be in the best
interests of shareholders of CoreFunds Growth, and that the interests of the
shareholders of CoreFunds Growth will not be diluted as a result of the
transactions contemplated by the Reorganization. Accordingly, the Directors have
submitted the Plan for the approval of CoreFunds Growth's shareholders.
THE BOARD OF DIRECTORS OF COREFUNDS, INC.
RECOMMENDS APPROVAL BY SHAREHOLDERS OF COREFUNDS GROWTH
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Select Equity Trust have also approved the Plan
and, accordingly, Evergreen Strategic Growth's participation in the
Reorganization.
Approval of the Reorganization on the part of CoreFunds Growth will
require the affirmative vote of a majority of CoreFunds Growth's outstanding
shares, with all classes voting together as a single class at a Meeting at which
a quorum of the Fund's shares is present. A majority of the outstanding shares
entitled to vote,
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<PAGE>
represented in person or by proxy, is required to constitute a quorum at the
Meeting. See "Voting Information Concerning the Meeting."
The merger of CoreStates Financial Corp ("CoreStates Financial") with
and into a wholly-owned subsidiary of First Union Corporation ("First Union")
(the "Merger") has been consummated and, as a result, by law the Merger
terminated the investment advisory agreement between CSIA and CoreFunds Growth.
Prior to consummation of the Merger, CoreFunds Growth received an order from the
SEC which permitted the implementation, without formal shareholder approval, of
a new investment advisory agreement between the Fund and CSIA for a period of
not more than 150 days beginning on the date of the closing of the Merger and
continuing through the date the Interim Advisory Agreement is approved by the
Fund's shareholders. The Interim Advisory Agreement has the same terms and fees
as the previous investment advisory agreement between CoreFunds Growth and CSIA.
The Reorganization is scheduled to take place on or about July 27, 1998.
Approval of the Interim Advisory Agreement requires the affirmative
vote of (i) 67% or more of the shares of CoreFunds Growth present in person or
by proxy at the Meeting, if holders of more than 50% of the shares of CoreFunds
Growth outstanding on the record date are present, in person or by proxy, or
(ii) more than 50% of the outstanding shares of CoreFunds Growth, whichever is
less. See "Voting Information Concerning the Meeting."
If the shareholders of CoreFunds Growth do not vote to approve the
Reorganization, the Directors will consider other possible courses of action in
the best interests of shareholders.
Tax Consequences
Prior to or at the completion of the Reorganization, CoreFunds Growth
will have received an opinion of Sullivan & Worcester LLP that the
Reorganization has been structured so that no gain or loss will be recognized by
the Fund or its shareholders for federal income tax purposes as a result of the
receipt of shares of Evergreen Strategic Growth in the Reorganization. The
holding period and aggregate tax basis of shares of Evergreen Strategic Growth
that are received by CoreFunds Growth's shareholders will be the same as the
holding period and aggregate tax basis of shares of the Fund previously held by
such shareholders, provided that shares of the Fund are held as capital assets.
In addition, the holding period and tax basis of the assets of CoreFunds Growth
in the hands of Evergreen Strategic Growth as a result of the Reorganization
will be the same as in the hands of the Fund immediately prior to the
Reorganization, and no gain or loss will be recognized by Evergreen Strategic
Growth upon the receipt of the assets of the Fund in exchange for shares of
Evergreen Strategic Growth and the assumption by Evergreen Strategic Growth of
the identified liabilities.
-13-
<PAGE>
Investment Objectives and Policies of the Funds
The investment objectives and policies of Evergreen Strategic Growth
and CoreFunds Growth are substantially identical.
The investment objective of Evergreen Strategic Growth is to seek
long-term capital appreciation. The Fund invests primarily in the equity
securities of large and mid-cap U.S. companies, which, in the opinion of the
Fund's investment adviser, demonstrate the potential for superior or sustainable
earnings growth.
The investment objective of CoreFunds Growth is to seek capital growth
and an increasing flow of dividends. The Fund invests in the equity securities
of companies, which, in the opinion of the Fund's investment adviser, show the
potential for growth of earnings over time. See "Comparison of Investment
Objectives and Policies" below.
Comparative Performance Information for each Fund
Discussions of the manner of calculation of total return are contained
in the respective Prospectuses and Statement of Additional Information of the
Funds. The following tables set forth the total return of the Institutional and
Institutional Service shares of Evergreen Strategic Growth (including its
predecessor common trust fund) for the one year period ended March 31, 1998, of
the Class Y, Class A and Class B shares of CoreFunds Growth for the one and five
year periods ended March 31, 1998 and for both Funds for the period from
inception through March 31, 1998. The calculations of total return assume the
reinvestment of all dividends and capital gains distributions on the
reinvestment date and the deduction of all recurring expenses (including sales
charges) that were charged to shareholders' accounts.
-14-
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return (1)
1 Year 5 Years From
Ended Ended Inception
March 31, March 31, To March Inception
1998 1998 31, 1998 Date
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Evergreen
Strategic
Growth
Institutional 53.40% N/A 32.44% 12/31/94
shares
Institutional 52.87% N/A 32.07% 12/31/94
Service
shares
CoreFunds
Growth
Class A 45.97% 16.85% 16.91% 1/4/93
shares
Class B N/A N/A 29.40% 11/19/97
shares
Class Y 54.74% 18.40% 15.30% 2/3/92
shares
</TABLE>
- --------------
(1) Reflects waiver of advisory fees and reimbursements and/or waivers of
expenses. Without such reimbursements and/or waivers, the average
annual total returns during the periods would have been lower.
Management of the Funds
The overall management of Evergreen Strategic Growth and of CoreFunds
Growth is the responsibility of, and is supervised by, the Board of Trustees of
Evergreen Select Equity Trust and the Board of Directors of CoreFunds, Inc.,
respectively.
Investment Advisers
The investment adviser to Evergreen Strategic Growth is First Union
National Bank ("FUNB"). FUNB is a subsidiary of First Union, the sixth largest
bank holding company in the United States based on total assets as of September
30, 1997. FUNB and its affiliates manage the Evergreen family of mutual funds
with assets of approximately $46 billion as of March 31, 1998. For further
information regarding FUNB and First Union, see "Fund Details - Fund
-15-
<PAGE>
Organization and Service Providers - Investment Advisers" in the
Prospectuses of Evergreen Strategic Growth.
FUNB manages investments and supervises the daily business affairs of
Evergreen Strategic Growth subject to the authority of the Trustees. FUNB is
entitled to receive from the Fund an annual fee equal to 0.70% of the Fund's
average daily net assets.
CSIA serves as the investment adviser for CoreFunds Growth. As
investment adviser, CSIA has overall responsibility for portfolio management of
the Fund. For its services as investment adviser, CSIA is entitled to receive a
fee at an annual rate of 0.75% of the Fund's average daily net assets.
Each investment adviser may, at its discretion, reduce or waive its fee
or reimburse a Fund for certain of its other expenses in order to reduce its
expense ratios. Each investment adviser may reduce or cease these voluntary
waivers and reimbursements at any time.
Administrators
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
Evergreen Strategic Growth. As administrator, EIS provides facilities, equipment
and personnel to Evergreen Strategic Growth and is entitled to receive an
administration fee from the Fund based on the aggregate average daily net assets
of all the mutual funds advised by FUNB and its affiliates, calculated in
accordance with the following schedule: 0.050% on the first $7 billion, 0.035%
on the next $3 billion, 0.030% on the next $5 billion, 0.020% on the next $10
billion, 0.015% on the next $5 billion and 0.010% on assets in excess of $30
billion.
SEI Fund Resources ("SEI") acts as the administrator for CoreFunds
Growth and provides the Fund with certain administrative personnel and services
including certain legal and accounting services. SEI is entitled to receive a
fee for such services at the annual rate of 0.25% of the Fund's average daily
net assets.
Portfolio Management
The portfolio managers of Evergreen Strategic Growth are W. Shannon Reid,
CFA and Timothy M. Stevenson, CFA. Shannon Reid has over 13 years of investment
experience. His responsibilities include equity analysis and portfolio
management for FUNB's growth style equity products. Mr. Reid has been with First
Union since 1988 as a Vice President and Portfolio Manager. Mr. Stevenson has
over 16 years of investment experience. Before joining First Union in 1994 as a
Senior Vice President and Portfolio Manager, Mr. Stevenson served as a research
director and portfolio manager for Cedar Hill Associates, Inc. from 1979 to
1984.
-16-
<PAGE>
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services,
acts as underwriter of Evergreen Strategic Growth's shares. EDI distributes the
Fund's shares directly or through broker-dealers, banks (including FUNB), or
other financial intermediaries. Evergreen Strategic Growth offers two classes of
shares: Institutional Service and Institutional. Each class has separate
distribution arrangements. (See "Distribution-Related Expenses" below.) No class
bears the distribution expenses relating to the shares of any other class.
In the proposed Reorganization, Class Y shareholders of CoreFunds
Growth will receive Institutional shares of Evergreen Strategic Growth and Class
A and Class B shareholders of CoreFunds Growth will receive Institutional
Service shares of Evergreen Strategic Growth. The Institutional and
Institutional Service shares of Evergreen Strategic Growth have the same
arrangements with respect to the imposition of Rule 12b-1 distribution and
service fees as the Class Y, Class A and Class B shares of CoreFunds Growth,
except that the Institutional Service shares of Evergreen Strategic Growth bear
substantially less 12b-1 distribution-related fees than Class B shares of
CoreFunds Growth. Because the Reorganization will be effected at net asset value
without the imposition of a sales charge, Evergreen Strategic Growth shares
acquired by shareholders of CoreFunds Growth pursuant to the proposed
Reorganization would not be subject to any initial sales charge or contingent
deferred sales charge as a result of the Reorganization.
The following is a summary description of charges and fees for the
Institutional and Institutional Service shares of Evergreen Strategic Growth
which will be received by CoreFunds Growth shareholders in the Reorganization.
More detailed descriptions of the distribution arrangements applicable to the
classes of shares are contained in the respective Evergreen Strategic Growth
Prospectuses and the CoreFunds Growth Prospectuses and in each Fund's Statement
of Additional Information.
Institutional Shares. Institutional shares are sold at net asset value
without any initial or deferred sales charge and are not subject to
distribution-related fees. Institutional shares are only available to
institutional investors. CoreFunds Growth shareholders who receive Evergreen
Strategic Growth Institutional shares in the Reorganization and who wish to make
subsequent purchases of Evergreen Strategic Growth shares will be able to
purchase Institutional shares.
Institutional Service Shares. Institutional Service shares are sold at
net asset value without any initial sales charge or deferred sales charge and,
as indicated below, are subject to distribution- related fees.
-17-
<PAGE>
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectuses and Statement of Additional Information.
Distribution-Related Expenses. Evergreen Strategic Growth has adopted a
Rule 12b-1 plan with respect to its Institutional Service shares under which the
Class may pay for personal services rendered to shareholders and/or the
maintenance of accounts at an annual rate of 0.25% of average daily net assets
attributable to the Class.
CoreFunds Growth has adopted a Rule 12b-1 plan with respect to its
Class A and Class B shares under which Class A shares may pay for
distribution-related expenses at an annual rate of 0.25% of average daily net
assets attributable to the Class and Class B shares may pay a fee of 1.00% of
average daily net assets attributable to the Class. This fee consists of a
shareholder servicing fee of 0.25% and an asset-based distribution fee of 0.75%.
CoreFunds Growth has not adopted a Rule 12b-1 plan with respect to its Class Y
shares.
Additional information regarding the Rule 12b-1 plans adopted by each
Fund is included in its respective Prospectuses and Statement of Additional
Information.
Purchase and Redemption Procedures
Information concerning applicable sales charges and
distribution-related fees is provided above. Investments in the Funds are not
insured. The minimum initial purchase requirement for Evergreen Strategic Growth
is $1,000,000. The minimum initial purchase requirement for Class A, Class B and
Class Y shares of CoreFunds Growth is $500, $500 and $1,000,000, respectively.
There is no minimum for subsequent purchases of shares of either Fund. Each Fund
provides for telephone, mail or wire redemption of shares at net asset value as
next determined after receipt of a redemption request on each day the New York
Stock Exchange ("NYSE") is open for trading. Additional information concerning
purchases and redemptions of shares, including how each Fund's net asset value
is determined, is contained in the respective Prospectuses for each Fund.
CoreFunds Growth may involuntarily redeem shareholders' accounts that have less
than $500 of invested funds in Class A or Class B shares. All funds invested in
each Fund are invested in full and fractional shares. The Funds reserve the
right to reject any purchase order.
-18-
<PAGE>
Exchange Privileges
CoreFunds Growth currently permits holders of Class A and Class B
shares to exchange such shares for the same class of shares of another
CoreFunds, Inc. portfolio. Exchanges of Class Y shares are generally not
permitted. Holders of shares of a class of Evergreen Strategic Growth generally
may exchange their shares for shares of the same class of any other Evergreen
Select fund. CoreFunds Growth shareholders will be receiving Institutional and
Institutional Service shares of Evergreen Strategic Growth in the Reorganization
and, accordingly, with respect to shares of Evergreen Strategic Growth received
by CoreFunds Growth shareholders in the Reorganization, the exchange privilege
is limited to the Institutional and Institutional Service shares, as applicable,
of other Evergreen Select funds. Evergreen Strategic Growth limits exchanges to
five per calendar year and three per calendar quarter. An exchange which
represents an initial investment in another Evergreen Select fund must amount to
at least $1,000,000. The current exchange privileges, and the requirements and
limitations attendant thereto, are described in each Fund's respective
Prospectuses and Statement of Additional Information.
Dividend Policy
Evergreen Strategic Growth distributes its investment company taxable
income monthly and CoreFunds Growth distributes such income quarterly.
Distributions of any net realized gains of a Fund will be made at least
annually. Shareholders begin to earn dividends on the first business day after
shares are purchased unless shares were not paid for, in which case dividends
are not earned until the next business day after payment is received. Dividends
and distributions are reinvested in additional shares of the same class of the
respective Fund, or paid in cash, as a shareholder has elected. See the
respective Prospectuses of each Fund for further information concerning
dividends and distributions.
After the Reorganization, shareholders of CoreFunds Growth who have
elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Evergreen Strategic Growth
reinvested in shares of Evergreen Strategic Growth. Shareholders of CoreFunds
Growth who have elected to receive dividends and/or distributions in cash will
receive dividends and/or distributions from Evergreen Strategic Growth in cash
after the Reorganization, although they may, after the Reorganization, elect to
have such dividends and/or distributions reinvested in additional shares of
Evergreen Strategic Growth.
Evergreen Strategic Growth intends to qualify, and CoreFunds Growth has
qualified and intends to continue to qualify, to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). While so qualified, so long as each Fund distributes all of its net
investment company taxable
-19-
<PAGE>
income and any net realized gains to shareholders, it is expected that a Fund
will not be required to pay any federal income taxes on the amounts so
distributed. A 4% nondeductible excise tax will be imposed on amounts not
distributed if a Fund does not meet certain distribution requirements by the end
of each calendar year. Each Fund anticipates meeting such distribution
requirements.
Risks
Since the investment objectives and policies of each Fund are
comparable, the risks involved in investing in each Fund's shares are similar.
There is no assurance that investment performances will be positive and that the
Funds will meet their investment objectives. For a discussion of each Fund's
objectives and policies, see "Comparison of Investment Objectives and Policies."
Both CoreFunds Growth and Evergreen Strategic Growth may invest in the
securities of small and mid-cap companies.
Investing in companies with medium market capitalizations involves
greater risk than investing in larger companies. The stock prices of mid-cap
companies can rise quickly and drop substantially in a short period of time.
This volatility results from a number of factors, including reliance by these
companies on relatively limited product lines, markets, and financial resources.
These and other factors may make mid-cap companies more susceptible to setbacks
or downturns.
Investing in companies with small market capitalizations involves
greater risk than investing in larger companies. Their stock prices can rise
very quickly and drop dramatically in a short period of time. This volatility
results from a number of factors, including reliance by these companies on
limited product lines, markets, and financial and management resources. These
and other factors may make small cap companies more susceptible to setbacks or
downturns. These companies may experience higher rates of bankruptcy or other
failures than larger companies. They may be more likely to be negatively
affected by changes in management. In addition, the stock of small cap companies
may be thinly traded.
REASONS FOR THE REORGANIZATION
On November 18, 1997, First Union entered into an Agreement and Plan of
Merger with CoreStates Financial, which provided, among other things, for the
Merger of CoreStates Financial with and into a wholly-owned subsidiary of First
Union. The Merger was consummated on [April 30, 1998]. As a result of the Merger
it is expected that FUNB and its affiliates will succeed to the investment
advisory and administrative functions currently performed for CoreFunds Growth
by various units of CoreStates Financial and various unaffiliated parties. It is
also expected that CoreStates Financial and its subsidiaries will no longer,
upon completion of the Reorganization
-20-
<PAGE>
and similar reorganizations of other portfolios of CoreFunds, Inc., provide
investment advisory or administrative services to investment companies.
Based on information received from CSIA and FUNB, at a meeting held on
February 6, 1998, all of the Directors present, including the non-interested
Directors, considered and approved the Reorganization as in the best interests
of shareholders of CoreFunds Growth and determined that the interests of
existing shareholders of CoreFunds Growth will not be diluted as a result of the
transactions contemplated by the Reorganization. In addition, the Directors
approved the Interim Advisory Agreement with respect to CoreFunds Growth.
As noted above, CoreStates Financial has merged with and into a
wholly-owned subsidiary of First Union. CoreStates Financial is the parent
company of CSIA, investment adviser to the mutual funds which comprise
CoreFunds, Inc. The Merger caused, as a matter of law, termination of the
investment advisory agreement between each series of CoreFunds, Inc. and CSIA
with respect to the Fund. CoreFunds, Inc. has received an order from the SEC
which permits CSIA to continue to act as CoreFunds Growth's investment adviser,
without shareholder approval, for a period of not more than 150 days from the
date the Merger was consummated [April 30, 1998] to the date of shareholder
approval of a new investment advisory agreement. Accordingly, the Directors
considered the recommendations of CSIA in approving the proposed Reorganization.
In approving the Plan, the Directors reviewed various factors about the
Funds and the proposed Reorganization. There are substantial similarities
between Evergreen Strategic Growth and CoreFunds Growth. Specifically, Evergreen
Strategic Growth and CoreFunds Growth have substantially similar investment
objectives and policies and comparable risk profiles. See "Comparison of
Investment Objectives and Policies" below. At the same time, the Board of
Directors evaluated the potential economies of scale associated with larger
mutual funds and concluded that operational efficiencies may be achieved upon
the combination of CoreFunds Growth with Evergreen Strategic Growth. As of
December 31, 1997, Evergreen Strategic Growth's net assets were approximately
$275 million and CoreFunds Growth's net assets were approximately $168 million.
In addition, assuming that an alternative to the Reorganization would
be to propose that CoreFunds Growth continue its existence and be separately
managed by FUNB or one of its affiliates, CoreFunds Growth would be offered
through common distribution channels with the similar Evergreen Strategic
Growth. CoreFunds Growth would also have to bear the cost of maintaining its
separate existence. CSIA and FUNB believe that the prospect of dividing the
resources of the Evergreen mutual fund organization between two similar funds
could result in each Fund being disadvantaged due to an inability to
-21-
<PAGE>
achieve optimum size, performance levels and greater economies of scale.
Accordingly, for the reasons noted above and recognizing that there can be no
assurance that any economies of scale or other benefits will be realized, CSIA
and FUNB believe that the proposed Reorganization would be in the best interests
of each Fund and its shareholders.
The Board of Directors of CoreFunds, Inc. met and considered the
recommendation of CSIA and FUNB, and, in addition, considered among other
things, (i) the terms and conditions of the Reorganization; (ii) whether the
Reorganization would result in the dilution of shareholders' interests; (iii)
expense ratios, fees and expenses of Evergreen Strategic Growth and CoreFunds
Growth; (iv) the comparative performance records of each of the Funds; (v)
compatibility of their investment objectives and policies; (vi) the investment
experience, expertise and resources of FUNB; (vii) the service and distribution
resources available to the Evergreen funds and the broad array of investment
alternatives available to shareholders of the Evergreen funds; (viii) the
personnel and financial resources of First Union and its affiliates; (ix) the
fact that FUNB will bear the expenses incurred by CoreFunds Growth in connection
with the Reorganization; (x) the fact that Evergreen Strategic Growth will
assume the identified liabilities of CoreFunds Growth; and (xi) the expected
federal income tax consequences of the Reorganization.
The Directors also considered the benefits to be derived by
shareholders of CoreFunds Growth from the sale of its assets to Evergreen
Strategic Growth. In this regard, the Directors considered the potential
benefits of being associated with a larger entity and the economies of scale
that could be realized by the participation in such an entity by shareholders of
CoreFunds Growth.
In addition, the Directors considered that there are alternatives
available to shareholders of CoreFunds Growth, including the ability to redeem
their shares, as well as the option to vote against the Reorganization.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in connection therewith
under certain conditions. One condition is that for three years thereafter, at
least 75% of the board of directors or a surviving investment company are not
"interested persons" of the company's investment adviser or of the investment
adviser of the terminating investment company. Another condition is that no
"unfair burden" is imposed on the investment company as a result of the
understandings applicable thereto. The term "unfair burden" is considered under
the 1940 Act to include any arrangement during the two-year period after the
transaction whereby the investment adviser (or predecessor or successor
adviser), or any "interested person" of any such adviser, receives or is
entitled to
-22-
<PAGE>
receive any compensation, directly or indirectly, from the investment company or
its security holders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than fees for bona fide principal underwriting services). FUNB advised
CoreFunds, Inc. that it intends to comply with conditions set forth in Section
15(f).
During their consideration of the Reorganization the Directors met with
Fund counsel regarding the legal issues involved. The Trustees of Evergreen
Select Equity Trust also concluded at a meeting on February 11, 1998 that the
proposed Reorganization would be in the best interests of shareholders of
Evergreen Strategic Growth and that the interests of the shareholders of
Evergreen Strategic Growth would not be diluted as a result of the transactions
contemplated by the Reorganization.
The Directors of CoreFunds, Inc. have voted to retain their ability to
make claims under their existing Directors and Officers Errors and Omissions
Liability Insurance Policy for a period of three years following the
consummation of the Reorganization. CoreStates Financial and First Union have
agreed to take appropriate steps to insure that the cost of extending such
coverage will not be borne by CoreFunds Growth's shareholders.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF COREFUNDS GROWTH APPROVE
THE PROPOSED REORGANIZATION.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the
Plan (Exhibit A hereto).
The Plan provides that Evergreen Strategic Growth will acquire all of
the assets of CoreFunds Growth in exchange for shares of Evergreen Strategic
Growth and the assumption by Evergreen Strategic Growth of the identified
liabilities of CoreFunds Growth on or about July 27, 1998 or such other date as
may be agreed upon by the parties (the "Closing Date"). Prior to the Closing
Date, CoreFunds Growth will endeavor to discharge all of its known liabilities
and obligations. Evergreen Strategic Growth will not assume any liabilities or
obligations of CoreFunds Growth other than those reflected in an unaudited
statement of assets and liabilities of CoreFunds Growth prepared as of the close
of regular trading on the NYSE, currently 4:00 p.m. Eastern time, on the
business day immediately prior to the Closing Date. The number of full and
fractional shares of each class of Evergreen Strategic Growth to be received by
the shareholders of CoreFunds Growth will be determined by multiplying the
respective outstanding class of shares of CoreFunds Growth by a factor which
shall be computed by dividing the
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<PAGE>
net asset value per share of the respective class of shares of CoreFunds Growth
by the net asset value per share of the respective class of shares of Evergreen
Strategic Growth. Such computations will take place as of the close of regular
trading on the NYSE on the business day immediately prior to the Closing Date.
The net asset value per share of each class will be determined by dividing
assets, less liabilities, in each case attributable to the respective class, by
the total number of outstanding shares.
State Street Bank and Trust Company, the custodian for Evergreen
Strategic Growth, will compute the value of each Fund's respective portfolio
securities. The method of valuation employed will be consistent with the
procedures set forth in the Prospectuses and Statement of Additional Information
of Evergreen Strategic Growth, Rule 22c-1 under the 1940 Act, and with the
interpretations of such Rule by the SEC's Division of Investment Management.
At or prior to the Closing Date, CoreFunds Growth will have declared a
dividend or dividends and distribution or distributions which, together with all
previous dividends and distributions, shall have the effect of distributing to
the Fund's shareholders (in shares of the Fund, or in cash, as the shareholder
has previously elected) all of the Fund's net investment company taxable income
for the taxable period ending on the Closing Date (computed without regard to
any deduction for dividends paid) and all of its net capital gains realized in
all taxable periods ending on the Closing Date (after reductions for any capital
loss carryforward).
As soon after the Closing Date as conveniently practicable, CoreFunds
Growth will liquidate and distribute pro rata to shareholders of record as of
the close of business on the Closing Date the full and fractional shares of
Evergreen Strategic Growth received by CoreFunds Growth. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of the Fund's shareholders on Evergreen Growth's share records of its transfer
agent. Each account will represent the respective pro rata number of full and
fractional shares of Evergreen Strategic Growth due to the Fund's shareholders.
All issued and outstanding shares of CoreFunds Growth, including those
represented by certificates, will be canceled. The shares of Evergreen Strategic
Growth to be issued will have no preemptive or conversion rights. After these
distributions and the winding up of its affairs, CoreFunds Growth will be
terminated. In connection with such termination, CoreFunds, Inc. will file with
the SEC an application for termination as a registered investment company.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by CoreFunds Growth's shareholders,
accuracy of various representations and warranties and receipt of opinions of
counsel, including opinions with respect to those matters referred to in
"Federal Income Tax Consequences" below. Notwithstanding approval of CoreFunds
Growth's
-24-
<PAGE>
shareholders, the Plan may be terminated (a) by the mutual agreement of
CoreFunds Growth and Evergreen Strategic Growth; or (b) at or prior to the
Closing Date by either party (i) because of a breach by the other party of any
representation, warranty, or agreement contained therein to be performed at or
prior to the Closing Date if not cured within 30 days, or (ii) because a
condition to the obligation of the terminating party has not been met and it
reasonably appears that it cannot be met.
The expenses of CoreFunds Growth in connection with the Reorganization
(including the cost of any proxy soliciting agent) will be borne by FUNB whether
or not the Reorganization is consummated. No portion of such expenses will be
borne directly or indirectly by CoreFunds Growth or its shareholders.
If the Reorganization is not approved by shareholders of CoreFunds
Growth, the Board of Directors of CoreFunds, Inc. will consider other possible
courses of action in the best interests of shareholders.
Federal Income Tax Consequences
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code. As a
condition to the closing of the Reorganization, CoreFunds Growth will receive an
opinion of Sullivan & Worcester LLP to the effect that, on the basis of the
existing provisions of the Code, U.S. Treasury regulations issued thereunder,
current administrative rules, pronouncements and court decisions, for federal
income tax purposes, upon consummation of the Reorganization:
(1) The transfer of all of the assets of CoreFunds Growth solely in
exchange for shares of Evergreen Strategic Growth and the assumption by
Evergreen Strategic Growth of the identified liabilities, followed by the
distribution of Evergreen Strategic Growth shares by CoreFunds Growth in
dissolution and liquidation of CoreFunds Growth, will constitute a
"reorganization" within the meaning of section 368(a)(1)(C) of the Code, and
Evergreen Strategic Growth and CoreFunds Growth will each be a "party to a
reorganization" within the meaning of section 368(b) of the Code;
(2) No gain or loss will be recognized by CoreFunds Growth on the
transfer of all of its assets to Evergreen Strategic Growth solely in exchange
for Evergreen Strategic Growth's shares and the assumption by Evergreen
Strategic Growth of the identified liabilities of CoreFunds Growth or upon the
distribution of Evergreen Strategic Growth's shares to CoreFunds Growth's
shareholders in exchange for their shares of CoreFunds Growth;
(3) The tax basis of the assets transferred will be the same to
Evergreen Strategic Growth as the tax basis of such assets to
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<PAGE>
CoreFunds Growth immediately prior to the Reorganization, and the holding period
of such assets in the hands of Evergreen Strategic Growth will include the
period during which the assets were held by CoreFunds Growth;
(4) No gain or loss will be recognized by Evergreen Strategic Growth
upon the receipt of the assets from CoreFunds Growth solely in exchange for the
shares of Evergreen Strategic Growth and the assumption by Evergreen Strategic
Growth of the identified liabilities of CoreFunds Growth;
(5) No gain or loss will be recognized by CoreFunds Growth's
shareholders upon the issuance of the shares of Evergreen Strategic Growth to
them, provided they receive solely such shares (including fractional shares) in
exchange for their shares of CoreFunds Growth; and
(6) The aggregate tax basis of the shares of Evergreen Strategic
Growth, including any fractional shares, received by each of the shareholders of
CoreFunds Growth pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares of CoreFunds Growth held by such shareholder
immediately prior to the Reorganization, and the holding period of the shares of
Evergreen Strategic Growth, including fractional shares, received by each such
shareholder will include the period during which the shares of CoreFunds Growth
exchanged therefor were held by such shareholder (provided that the shares of
CoreFunds Growth were held as a capital asset on the date of the
Reorganization).
Opinions of counsel are not binding upon the Internal Revenue Service
or the courts. If the Reorganization is consummated but does not qualify as a
tax-free reorganization under the Code, a shareholder of CoreFunds Growth would
recognize a taxable gain or loss equal to the difference between his or her tax
basis in his or her Fund shares and the fair market value of Evergreen Strategic
Growth shares he or she received. Shareholders of CoreFunds Growth should
consult their tax advisers regarding the effect, if any, of the proposed
Reorganization in light of their individual circumstances. It is not anticipated
that the securities of the combined portfolio will be sold in significant
amounts in order to comply with the policies and investment practices of
Evergreen Strategic Growth. Since the foregoing discussion relates only to the
federal income tax consequences of the Reorganization, shareholders of CoreFunds
Growth should also consult their tax advisers as to the state and local tax
consequences, if any, of the Reorganization.
Capital loss carryforwards of CoreFunds Growth will be available to
Evergreen Strategic Growth to offset capital gains recognized after the
Reorganization, subject to limitations imposed by the Code. These limitations
provide generally that the amount of loss carryforward which may be used in any
year following the
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<PAGE>
closing is an amount equal to the value of all of the outstanding stock of
CoreFunds Growth immediately prior to the Reorganization, multiplied by a
long-term tax-exempt bond rate determined monthly by the Internal Revenue
Service. The rate for February, 1998 was 5.23%. A capital loss carryforward may
generally be used without any limit to offset gains recognized on sale of assets
transferred by CoreFunds Growth to Evergreen Strategic Growth pursuant to the
Reorganization, to the extent of the excess of the value of any such asset on
the closing date of the Reorganization over its tax basis.
Pro-forma Capitalization
The following table sets forth the capitalizations of Evergreen
Strategic Growth and CoreFunds Growth as of December 31, 1997, and the
capitalization of Evergreen Strategic Growth on a pro forma basis as of that
date, giving effect to the proposed acquisition of assets at net asset value.
The pro forma data reflects an exchange ratio of approximately 0.49650, 0.49478,
and 0.49238 Institutional, Institutional Service and Institutional Service
shares, respectively, of Evergreen Strategic Growth issued for each Class Y,
Class A and Class B share, respectively, of CoreFunds Growth.
<TABLE>
<CAPTION>
Capitalization of CoreFunds Growth,
Evergreen Strategic Growth and Evergreen
Strategic Growth (Pro Forma)
Evergreen
Strategic
Evergreen Growth (After
CoreFunds Strategic Reorgani-
Growth Growth zation)
---------- ---------- ----------
<S> <C> <C> <C>
Net Assets
Institutional.................. N/A $275,398,530 $438,096,634
Institutional
Service........................ N/A $0 $ 5,799,207
Class A........................ $ 5,698,024 N/A N/A
Class B........................ $ 101,183 N/A N/A
Class Y........................ $162,698,104 N/A N/A
------------ ------------ ------------
Total Net Assets . $168,497,311 $275,398,530 $443,895,841
Net Asset Value Per
Share
Institutional.................. N/A $32.89 $32.89
Institutional
Service........................ N/A N/A $32.89
Class A........................ $16.27 N/A N/A
Class B........................ $16.19 N/A N/A
Class Y........................ $16.33 N/A N/A
Shares Outstanding
Institutional.................. N/A 8,372,519 13,318,710
-27-
<PAGE>
Institutional
Service........................ N/A N/A 176,321
Class A........................ 350,144 N/A N/A
Class B........................ 6,248 N/A N/A
Class Y........................ 9,962,047 N/A N/A
---------- --------- ----------
All Classes.................... 10,318,439 8,372,519 13,495,031
</TABLE>
The table set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganization; the actual number of
shares to be received will depend upon the net asset value and number of shares
outstanding of each Fund at the time of the Reorganization.
Shareholder Information
As of May 29, 1998 (the "Record Date"), the following number of each
Class of shares of beneficial interest of CoreFunds Growth were outstanding:
Class of Shares
- ---------------
Class Y........................................
Class A........................................
Class B........................................
All Classes....................................
As of March 31, 1998, the officers and Directors of CoreFunds, Inc.
beneficially owned as a group less than 1% of the outstanding shares of
CoreFunds Growth. To CoreFunds, Inc.'s knowledge, the following persons owned
beneficially or of record more than 5% of CoreFunds Growth's total outstanding
shares as of March 31, 1998:
<TABLE>
<CAPTION>
Percentage Percentage of
of Shares Shares of
of Class Class After
Before Reorgani-
No. of Reorgani- zation
Name and Address Class Shares zation ---------
- ---------------- ----- ------ ---------
<S> <C> <C> <C> <C>
Patterson & Co. Y 9,552,380 94.95% 35.68%
PNB Personal Trust
Accounting
P.O. Box 7829
Philadelphia, PA
19101-7829
-28-
<PAGE>
National Financial
Services Corp. A 150,184 43.14% 40.81%
For Exclusive Use of
Our Customers
200 Liberty Street,
4th Floor
1 World Financial
Center
New York, NY 10281-
1003
Patterson & Co. A 31,314 8.99% 8.51%
PNB Personal Trust
Accounting
P.O. Box 7829
Philadelphia, PA
19101-7829
CoreStates Bank NA B 2,193 27.81% 0.01%
Cust. for the IRA of
Leon W. Robbins Jr.
4814 Windsor Ave.
Philadelphia, PA
19143-3416
NFSCO Febo #0JT-506435 B 1,332 16.89% 0.01%
CoreStates Bank Cust.
IRA of Neil McElroy
1467 Innis Lane
Yardley, PA
19067-4019
CoreStates Bank NA B 613 7.73% 0.00%
Cust. for the Rollover
IRA of Clinton B. Gale
209 E. 18th St.
Chester, PA
19013-5710
Beatrice O. Vanwinkle B 607 7.71% 0.00%
Philip A. Pagliaro JTTEN
7345 E. Hillcrest Ln.
Slatington, PA
18080-2137
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective Prospectuses and Statement of
Additional Information of the Funds. The investment objective, policies and
restrictions of Evergreen Strategic Growth can be found in the Prospectuses of
Evergreen Strategic Growth under the caption "Fund Descriptions - Investment
Objectives" and "Securities and Investment Practices Used by Each Fund."
Evergreen Strategic Growth's Prospectuses also offer additional funds advised by
FUNB or its affiliates. These additional funds are not involved in the
Reorganization, their investment objectives and policies are not discussed in
this Prospectus/Proxy Statement, and their shares are not offered hereby. The
investment objective, policies and restrictions of CoreFunds Growth can be found
in the respective Prospectuses of the Fund under the caption "Information on the
Funds." Unlike the investment objective of CoreFunds Growth, which is
fundamental, the investment objective of Evergreen Strategic Growth is
non-fundamental and can be changed by the Board of Trustees without shareholder
approval.
The investment objective of Evergreen Strategic Income is to seek
long-term capital appreciation. The Fund invests primarily in the equity
securities of large and mid-size U.S. companies, which, in the opinion of the
Fund's adviser, demonstrate the potential for superior and sustainable earnings
growth. With a portion of its assets, the Fund may also invest in the securities
of small capitalization companies. The Fund may also invest in convertible
securities. Convertible securities are corporate securities that can be
exchanged for a different type of corporate security. Convertible securities
normally purchased by the Fund are
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<PAGE>
convertible preferred stocks and convertible bonds, both of which can be
exchanged for common stocks.
The investment objective of CoreFunds Growth is to seek capital growth
and an increasing flow of dividends by investing in common stocks. The Fund
invests in a diversified portfolio which its investment adviser believes shows
the potential for growth of earnings over time including common stocks,
preferred stocks, convertible securities and other equity securities. CoreFunds
Growth invests primarily in the securities of large and mid-sized companies and
may also purchase the securities of small capitalization companies.
Each Fund may invest, for temporary defensive purposes, up to 100% of
its assets in short-term obligations. Such obligations may include U.S.
government securities, master demand notes, commercial paper and notes, bank
deposits and other financial institution obligations. In addition, for temporary
purposes, CoreFunds Growth may invest up to 10% of its assets in long-term or
short-term debt instruments rated A or higher by a nationally recognized
statistical rating organization.
Evergreen Strategic Growth, unlike CoreFunds Growth, may engage in
options and futures transactions. For a description of these transactions and
the risks related thereto, see the Prospectuses of Evergreen Strategic Growth.
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectuses and Statement of Additional
Information. The Funds have other investment policies and restrictions which are
also set forth in the Prospectuses and Statements of Additional Information of
each Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen Select Equity Trust and CoreFunds, Inc. are open-end
management investment companies registered with the SEC under the 1940 Act,
which continuously offer shares to the public. Evergreen Select Equity Trust is
organized as a Delaware business trust and is governed by its Declaration of
Trust, By-Laws and a Board of Trustees. CoreFunds, Inc. is organized as a
Maryland corporation and is governed by its Articles of Incorporation, By-Laws
and a Board of Directors. Each entity is also governed by applicable Delaware,
Maryland and federal law. Evergreen Strategic Growth is a series of Evergreen
Select Equity Trust and CoreFunds Growth is a series of CoreFunds, Inc.
Capitalization
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<PAGE>
The beneficial interests in Evergreen Strategic Growth are represented
by an unlimited number of transferable shares of beneficial interest, $.001 par
value per share. CoreFunds, Inc. authorized shares consist of 30 billion shares
of common stock, par value $.001 per share, of which 100 million are classified
as Class Y shares, 100 million are classified as Class A shares and 100 million
are classified as Class B shares of CoreFunds Growth. Evergreen Select Equity
Trust's Declaration of Trust and CoreFunds, Inc.'s Articles of Incorporation
permit the Trustees or Directors, respectively, to allocate shares into an
unlimited number of series, and classes thereof, with rights determined by the
Trustees or Directors, respectively, all without shareholder approval.
Fractional shares may be issued by either Fund. Each Fund's shares represent
equal proportionate interests in the assets belonging to the Funds. Shareholders
of each Fund are entitled to receive dividends and other amounts as determined
by the Trustees or Directors. Shareholders of each Fund vote separately, by
class, as to matters, such as approval of or amendments to Rule 12b-1
distribution plans, that affect only their particular class and by Fund as to
matters, such as approval of or amendments to investment advisory agreements or
proposed reorganizations, that affect only their particular Fund.
Shareholder Liability
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that Evergreen Select Equity Trust or a shareholder is subject to the
jurisdiction of courts in those states, it is possible that a court may not
apply Delaware law, and may thereby subject shareholders of Evergreen Select
Equity Trust to liability. To guard against this risk, the Declaration of Trust
of Evergreen Select Equity Trust (a) provides that any written obligation of the
Trust may contain a statement that such obligation may only be enforced against
the assets of the Trust or the particular series in question and the obligation
is not binding upon the shareholders of the Trust; however, the omission of such
a disclaimer will not operate to create personal liability for any shareholder;
and (b) provides for indemnification out of Trust property of any shareholder
held personally liable for the obligations of the Trust. Accordingly, the risk
of a shareholder of Evergreen Select Equity Trust incurring financial loss
beyond that shareholder's investment because of shareholder liability is limited
to circumstances in which: (i) the court refuses to apply Delaware law; (ii) no
contractual limitation of liability was in effect; and (iii) the Trust itself is
unable to meet its obligations. In light of Delaware law, the nature of the
Trust's business, and the nature of its assets, the risk of personal liability
to a shareholder of Evergreen Select Equity Trust is remote.
-31-
<PAGE>
Under Maryland law, shareholders of CoreFunds Growth have no personal
liability as such for the acts or obligations of the Fund or CoreFunds, Inc., as
the case may be.
Shareholder Meetings and Voting Rights
Neither Evergreen Select Equity Trust on behalf of Evergreen Strategic
Growth nor CoreFunds, Inc. on behalf of CoreFunds Growth is required to hold
annual meetings of shareholders. However, a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Director must be
called when requested in writing by the holders of at least 10% of the
outstanding shares of Evergreen Select Equity Trust or CoreFunds, Inc. In
addition, each is required to call a meeting of shareholders for the purpose of
electing Trustees or Directors if, at any time, less than a majority of the
Trustees or Directors then holding office were elected by shareholders. Neither
Evergreen Select Equity Trust nor CoreFunds, Inc. currently intends to hold
regular shareholder meetings and neither entity permits cumulative voting.
Except when a larger quorum is required by applicable law, with respect to
Evergreen Strategic Growth, twenty-five percent (25%) of the outstanding shares
entitled to vote, and with respect to CoreFunds Growth, a majority of the
outstanding shares entitled to vote constitutes a quorum for consideration of
such matter. For Evergreen Strategic Growth, a majority of the votes cast and
entitled to vote, and for CoreFunds Growth, a majority of the outstanding
shares, is sufficient to act on a matter (unless otherwise specifically required
by the applicable governing documents or other law, including the 1940 Act).
Under the Declaration of Trust of Evergreen Select Equity Trust, each
share of Evergreen Strategic Growth will be entitled to one vote for each dollar
of net asset value applicable to each share. Under the voting provisions
governing CoreFunds Growth, each share is entitled to one vote. Over time, the
net asset values of the mutual funds which are each a series of CoreFunds, Inc.
have changed in relation to one another and are expected to continue to do so in
the future. Because of the divergence in net asset values, a given dollar
investment in a fund with a lower net asset value will purchase more shares, and
under CoreFunds Growth's voting provisions, have more votes, than the same
investment in a fund with a higher net asset value. Under the Declaration of
Trust of Evergreen Select Equity Trust, voting power is related to the dollar
value of the shareholders' investment rather than to the number of shares held.
Liquidation or Dissolution
In the event of the liquidation of Evergreen Strategic Growth or
CoreFunds Growth, the shareholders are entitled to receive, when and as declared
by the Trustees or Directors, respectively, the excess of the assets belonging
to such Fund or attributable to the
-32-
<PAGE>
class over the liabilities belonging to the Fund or attributable to the class.
In either case, the assets so distributable to shareholders of the Fund will be
distributed among the shareholders in proportion to the number of shares of a
class of the Fund held by them and recorded on the books of the Fund.
Liability and Indemnification of Trustees
The By-Laws of CoreFunds, Inc. provide that a present or former
Director or officer is entitled to indemnification to the full extent
permissible under the laws of the State of Maryland and the 1940 Act against
liabilities and expenses with respect to claims related to his or her position
with CoreFunds, Inc., provided that no indemnification shall be provided to a
Director or officer against any liability to CoreFunds, Inc. or any shareholder
by reasons of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
Under the Declaration of Trust of Evergreen Select Equity Trust, a
Trustee is liable to the Trust and its shareholders only for such Trustee's own
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the office of Trustee or the discharge of such
Trustee's functions. As provided in the Declaration of Trust, each Trustee of
the Trust is entitled to be indemnified against all liabilities against him or
her, including the costs of litigation, unless it is determined that the Trustee
(i) did not act in good faith in the reasonable belief that such Trustee's
action was in or not opposed to the best interests of the Trust; (ii) had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
such Trustee's duties; and (iii) in a criminal proceeding, had reasonable cause
to believe that such Trustee's conduct was unlawful (collectively, "disabling
conduct"). A determination that the Trustee did not engage in disabling conduct
and is, therefore, entitled to indemnification may be based upon the outcome of
a court action or administrative proceeding or by (a) a vote of a majority of
those Trustees who are neither "interested persons" within the meaning of the
1940 Act nor parties to the proceeding or (b) an independent legal counsel in a
written opinion. The Trust may also advance money for such litigation expenses
provided that the Trustee undertakes to repay the Trust if his or her conduct is
later determined to preclude indemnification and certain other conditions are
met.
The foregoing is only a summary of certain characteristics of the
operations of the Declaration of Trust of Evergreen Select Equity Trust,
Articles of Incorporation of CoreFunds, Inc., By-Laws, Delaware and Maryland law
and is not a complete description of those documents or law. Shareholders should
refer to the provisions of such Declaration of Trust, Articles of Incorporation
of CoreFunds,
-33-
<PAGE>
Inc., By-Laws, Delaware and Maryland law directly for more complete information.
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Directors of CoreFunds, Inc. recommends that shareholders of
CoreFunds Growth approve the Interim Advisory Agreement. The Merger became
effective on [April 30, 1998]. Pursuant to an order received from the SEC all
fees payable under the Interim Advisory Agreement will be placed in escrow and
paid to CSIA if shareholders approve the contract within 150 days of its
effective date. The Interim Advisory Agreement will remain in effect until the
earlier of the Closing Date for the Reorganization or two years from its
effective date. The terms of the Interim Advisory Agreement are essentially the
same as the Previous Advisory Agreement (as defined below). The only difference
between the Previous Advisory Agreement and the Interim Advisory Agreement, if
approved by shareholders, is the length of time each Agreement is in effect. A
description of the Interim Advisory Agreement pursuant to which CSIA continues
as investment adviser to CoreFunds Growth, as well as the services to be
provided by CSIA pursuant thereto, is set forth below under "Advisory Services."
The description of the Interim Advisory Agreement in this Prospectus/Proxy
Statement is qualified in its entirety by reference to the Interim Advisory
Agreement, attached hereto as Exhibit B.
CSIA, a Pennsylvania corporation, is an indirect wholly-owned
subsidiary of First Union. CSIA's address is 1500 Market Street, Philadelphia,
Pennsylvania 19102. CSIA has served as investment adviser pursuant to an
Investment Advisory Contract dated April 12, 1996. As used herein, the
Investment Advisory Agreement for CoreFunds Growth is referred to as the
"Previous Advisory Agreement." At a meeting of the Board of Directors of
CoreFunds, Inc. held on February 6, 1998, the Directors, including a majority of
the Independent Directors, approved the Interim Advisory Agreement for CoreFunds
Growth.
The Directors have authorized CoreFunds, Inc., on behalf of CoreFunds
Growth, to enter into the Interim Advisory Agreement with CSIA. Such Agreement
became effective on [April 30, 1998]. If the Interim Advisory Agreement for
CoreFunds Growth is not approved by shareholders, the Directors will consider
appropriate actions to be taken with respect to CoreFunds Growth's investment
advisory arrangements at that time. The Previous Advisory Agreement was last
approved by the Directors, including a majority of the Independent Directors, on
June 5, 1997.
Comparison of the Interim Advisory Agreement and the Previous
Advisory Agreement
-34-
<PAGE>
Advisory Services. The management and advisory services to be provided
by CSIA under the Interim Advisory Agreement are identical to those currently
provided by CSIA under the Previous Advisory Agreement. Under the Previous
Advisory Agreement and Interim Advisory Agreement, CSIA manages the investment
portfolio of CoreFunds Growth, makes decisions about and places orders for all
purchases and sales of the Fund's securities, and maintains certain records
relating to these purchases and sales.
SEI currently acts as administrator of CoreFunds Growth. SEI will continue
during the term of the Interim Advisory Agreement as CoreFunds Growth's
administrator for the same compensation as currently received. See "Summary -
Administrators."
Fees. The investment advisory fees for CoreFunds Growth under the Previous
Advisory Agreement and the Interim Advisory Agreement are identical. See
"Summary - Investment Advisers."
Payment of Expenses and Transaction Charges. Under the Previous
Advisory Agreement, CSIA was required to pay all expenses incurred by it in
connection with its activities under the Agreement other than the cost of
securities (including brokerage commissions, if any) purchased for the Fund and
the cost of obtaining market quotations of portfolio securities held by the
Fund.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Previous Advisory Agreement provided that
CSIA was not liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of the Agreement, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of CSIA in the performance of its duties
or from reckless disregard by it of its obligations and duties under the
Agreement.
The Interim Advisory Agreement contains an identical provision.
Termination; Assignment. The Interim Advisory Agreement provides that
it may be terminated without penalty by vote of a majority of the outstanding
voting securities of CoreFunds Growth (as defined in the 1940 Act) or by a vote
of a majority of CoreFunds, Inc.'s entire Board of Directors on 60 days' written
notice to CSIA or by CSIA on 60 days' written notice to CoreFunds, Inc. Also,
the Interim Advisory Agreement will automatically terminate in the event of its
assignment (as defined in the 1940 Act).
The Previous Advisory Agreement contained identical provisions as to
termination and assignment.
-35-
<PAGE>
Information About CoreFunds Growth's Investment Adviser
CSIA, a registered investment adviser, manages, in addition to the
Fund, other funds of CoreFunds, Inc. The name and address of each executive
officer and director of CSIA is set forth in Appendix A to this Prospectus/Proxy
Statement.
During the fiscal years ended June 30, 1997, 1996 and 1995, CSIA
received from CoreFunds Growth management fees of $1,003,779, $728,921 and
$386,678, respectively, and voluntarily waived fees of $19,771, $84,312 and
$193,333, respectively. CSIA is currently waiving a portion of its management
fee. See "Comparison of Fees and Expenses." CoreStates Bank, N.A. acts without
charge as custodian for CoreFunds Growth.
The Board of Directors considered the Interim Advisory Agreement as
part of its overall approval of the Plan. The Board of Directors considered,
among other things, the factors set forth above in "Reasons for the
Reorganization." The Board of Directors also considered the fact that there were
no material differences between the terms of the Interim Advisory Agreement and
the terms of the Previous Advisory Agreement.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF COREFUNDS GROWTH
APPROVE THE INTERIM ADVISORY AGREEMENT
ADDITIONAL INFORMATION
Evergreen Strategic Growth. Information concerning the operation and
management of Evergreen Strategic Growth is incorporated herein by reference
from the Prospectuses dated November 21, 1997, copies of which are enclosed, and
Statement of Additional Information dated November 17, 1997. A copy of such
Statement of Additional Information is available upon request and without charge
by writing to Evergreen Strategic Growth at the address listed on the cover page
of this Prospectus/Proxy Statement or by calling toll-free 1-800-343-2898.
CoreFunds Growth. Information about the Fund is included in its current
Prospectuses dated November 1, 1997 and in the Statement of Additional
Information of the same date, that have been filed with the SEC, all of which
are incorporated herein by reference. Copies of the Prospectuses and Statement
of Additional Information are available upon request and without charge by
writing to CoreFunds Growth at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-355-2673.
Evergreen Strategic Growth and CoreFunds Growth are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material, and charter
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<PAGE>
documents with the SEC. These items can be inspected and copies obtained at the
Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Seven
World Trade Center, Suite 1300, New York, New York 10048.
The SEC maintains a Web site (http://www.sec.gov) that contains each
Fund's Statement of Additional Information and other material incorporated by
reference together with other information regarding Evergreen Strategic Growth
and CoreFunds Growth.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Directors of CoreFunds, Inc. to be used at the
Special Meeting of Shareholders to be held at 2:00 p.m., July 17, 1998, at the
offices of the Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston,
Massachusetts 02116, and at any adjournments thereof. This Prospectus/Proxy
Statement, along with a Notice of the meeting and a proxy card, is first being
mailed to shareholders of CoreFunds Growth on or about June 8, 1998. Only
shareholders of record as of the close of business on the Record Date will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
The holders of a majority of the outstanding shares at the close of business on
the Record Date present in person or represented by proxy will constitute a
quorum for the Meeting.
If the enclosed form of proxy is properly executed and returned in time
to be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted FOR the proposed Reorganization, FOR the Interim
Advisory Agreement and FOR any other matters deemed appropriate. Proxies that
reflect abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote or (ii) the broker or nominee does not
have discretionary voting power on a particular matter) will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but will have the effect of being counted as votes against
the Plan and the Interim Advisory Agreement which must be approved by a
percentage of the shares present at the Meeting or a majority of the outstanding
voting securities.
A proxy may be revoked at any time on or before the Meeting by written
notice to the Secretary of CoreFunds, Inc. at the address set forth on the cover
of this Prospectus/Proxy Statement. Unless revoked, all valid proxies will be
voted in accordance with the specifications thereon or, in the absence of such
specifications,
-37-
<PAGE>
FOR approval of the Plan and the Reorganization contemplated thereby and FOR
approval of the Interim Advisory Agreement.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares, with all classes voting together as a single class at
the Meeting at which a quorum of the Fund's shares is present. Approval of the
Interim Advisory Agreement will require the affirmative vote of (i) 67% or more
of the outstanding voting securities present at the Meeting if holders of more
than 50% of the outstanding voting securities are present, in person or by
proxy, at the Meeting, or (ii) more than 50% of the outstanding voting
securities, whichever is less, with all classes voting together as one class.
Each full share outstanding is entitled to one vote and each fractional share
outstanding is entitled to a proportionate share of one vote.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal solicitations
conducted by officers and employees of FUNB or CSIA, their affiliates or other
representatives of CoreFunds Growth (who will not be paid for their soliciting
activities). Shareholder Communications Corporation ("SCC") and its agents have
been engaged by CoreFunds Growth to assist in soliciting proxies, and may call
shareholders to ask if they would be willing to authorize SCC to execute a proxy
on their behalf authorizing the voting of their shares in accordance with the
instructions given over the telephone by the shareholders. In addition,
shareholders may call SCC at 1- 800-733-8481 extension 468 between the hours of
9:00 a.m. and 11:00 p.m. Eastern time in order to initiate the processing of
their votes by telephone. SCC will utilize a telephone vote solicitation
procedure designed to authenticate the shareholder's identity by asking the
shareholder to provide his or her social security number (in the case of an
individual) or taxpayer identification number (in the case of an entity). The
shareholder's telephone instructions will be implemented in a proxy executed by
SCC and a confirmation will be sent to the shareholder to ensure that the vote
has been authorized in accordance with the shareholder's instructions. Although
a shareholder's vote may be solicited and cast in this manner, each shareholder
will receive a copy of this Prospectus/Proxy Statement and may vote by mail
using the enclosed proxy card. CoreFunds Growth believes that this telephonic
voting system complies with applicable law and has reviewed an opinion of
counsel to that effect.
If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement, vote by telephone, vote by
fax or attend in person. Any proxy given by you is revocable.
In the event that sufficient votes to approve the Reorganization are
not received by July 17, 1998, the persons named as proxies may propose one or
more adjournments of the Meeting to
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<PAGE>
permit further solicitation of proxies. In determining whether to adjourn the
Meeting, the following factors may be considered: the percentage of votes
actually cast, the percentage of negative votes actually cast, the nature of any
further solicitation and the information to be provided to shareholders with
respect to the reasons for the solicitation. Any such adjournment will require
an affirmative vote by the holders of a majority of the shares present in person
or by proxy and entitled to vote at the Meeting. The persons named as proxies
will vote upon such adjournment after consideration of all circumstances which
may bear upon a decision to adjourn the Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Maryland law or the Articles of Incorporation of
CoreFunds, Inc. to demand payment for, or an appraisal of, his or her shares.
However, shareholders should be aware that the Reorganization as proposed is not
expected to result in recognition of gain or loss to shareholders for federal
income tax purposes and that, if the Reorganization is consummated, shareholders
will be free to redeem the shares of Evergreen Strategic Growth which they
receive in the transaction at their then-current net asset value. Shares of
CoreFunds Growth may be redeemed at any time prior to the consummation of the
Reorganization. Shareholders of CoreFunds Growth may wish to consult their tax
advisers as to any differing consequences of redeeming Fund shares prior to the
Reorganization or exchanging such shares in the Reorganization.
CoreFunds Growth does not hold annual shareholder meetings. If the
Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of CoreFunds, Inc.
at the address set forth on the cover of this Prospectus/Proxy Statement such
that they will be received by the Fund in a reasonable period of time prior to
any such meeting.
The votes of the shareholders of Evergreen Strategic Growth are not
being solicited by this Prospectus/Proxy Statement and are not required to carry
out the Reorganization.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise CoreFunds Growth whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
this Prospectus/Proxy Statement needed to supply copies to the beneficial owners
of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements and financial highlights of CoreFunds Growth
incorporated in this Prospectus/Proxy Statement by reference
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from the Annual Report of CoreFunds, Inc. for the year ended June 30, 1997 have
been audited by Ernst & Young LLP, independent auditors, as stated in their
report, which is incorporated herein by reference and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Evergreen
Strategic Growth will be passed upon by Sullivan & Worcester LLP, Washington,
D.C.
OTHER BUSINESS
The Directors of CoreFunds, Inc. do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND APPROVAL OF THE PLAN AND THE
INTERIM ADVISORY AGREEMENT, AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE
CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN AND THE INTERIM ADVISORY
AGREEMENT.
June 1, 1998
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APPENDIX A
The names and addresses of the principal executive officers and
directors of CoreStates Investment Advisers, Inc. are as follows:
<TABLE>
<CAPTION>
OFFICERS:
Name Address
- ---- -------
<S> <C>
David C. Francis, Chief First Union National Bank
Investment Officer 201 South College Street
Charlotte, North Carolina 28288-
1195
L. Robert Cheshire, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
John E. Gray, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
Dillon S. Harris, Jr., Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
J. Kellie Allen, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-1195
DIRECTORS:
Name Address
- ---- -------
Donald A. McMullen First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
William M. Ennis First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
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Name Address
- ---- -------
William D. Munn First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
</TABLE>
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 15th day of April, 1998, by and between Evergreen Select Equity Trust, a
Delaware business trust, with its principal place of business at 200 Berkeley
Street, Boston, Massachusetts 02116 (the "Trust"), with respect to its Evergreen
Select Strategic Growth Fund series (the "Acquiring Fund"), and CoreFunds, Inc.,
a Maryland corporation, with its principal place of business at 530 East
Swedesford Road, Wayne, Pennsylvania 19087 ("CoreFunds"), with respect to its
Growth Equity Fund series (the "Selling Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Institutional Service and
Institutional shares of beneficial interest, $.001 par value per share, of the
Acquiring Fund (the "Acquiring Fund Shares"); (ii) the assumption by the
Acquiring Fund of the identified liabilities of the Selling Fund; and (iii) the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Selling Fund in liquidation of the
Selling Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest or shares of common stock, as the case may be;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of the identified liabilities of the Selling Fund by the Acquiring
Fund on the terms and conditions hereinafter set forth are in the best interests
of the Acquiring Fund's shareholders;
WHEREAS, based on information furnished by CoreStates Investment
Advisers, Inc. and First Union National Bank, the Directors of CoreFunds have
determined that the Selling Fund should exchange all of its assets and the
identified liabilities for Acquiring Fund Shares and that the interests of the
existing shareholders of the Selling Fund will not be diluted as a result of the
transactions contemplated herein;
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NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of each such class of the Selling Fund by the net
asset value per share of the corresponding class of Acquiring Fund Shares
computed in the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume the identified liabilities of the Selling Fund, as set forth
in paragraph 1.3. Such transactions shall take place at the closing provided for
in paragraph 3.1 (the "Closing Date").
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable period of time prior to
the Closing Date, furnish the Acquiring Fund with a list of its portfolio
securities and other investments. In the event that the
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Selling Fund holds any investments that the Acquiring Fund may not hold, the
Selling Fund, if requested by the Acquiring Fund, will dispose of such
securities prior to the Closing Date. In addition, if it is determined that the
Selling Fund and the Acquiring Fund portfolios, when aggregated, would contain
investments exceeding certain percentage limitations imposed upon the Acquiring
Fund with respect to such investments, the Selling Fund if requested by the
Acquiring Fund will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
Notwithstanding the foregoing, nothing herein will require the Selling Fund to
dispose of any investments or securities if, in the reasonable judgment of the
Selling Fund, such disposition would adversely affect the tax-free nature of the
Reorganization or would violate the Selling Fund's fiduciary duty to its
shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund
will liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling
Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon proceed
to dissolve as set forth in paragraph 1.8 below. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Selling Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in the names of
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<PAGE>
the Selling Fund Shareholders and representing the respective pro rata number of
the Acquiring Fund Shares due such shareholders. All issued and outstanding
shares of the Selling Fund will simultaneously be canceled on the books of the
Selling Fund. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to shareholders of the
Selling Fund as described in paragraph 5.7.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectuses and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information.
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<PAGE>
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of Class A
and Class B shares of the Selling Fund will receive Institutional Service shares
of the Acquiring Fund and holders of Class Y shares of the Selling Fund will
receive Institutional shares of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing (the "Closing") shall take place on or
about July 27, 1998 or such other date as the parties may agree to in writing
(the "Closing Date"). All acts taking place at the Closing shall be deemed to
take place simultaneously immediately prior to the opening of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 9:00
a.m. at the offices of the Evergreen Funds, 200 Berkeley Street, Boston, MA
02116, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. CoreStates Bank, N.A., as custodian for
the Selling Fund (the "Custodian"), shall deliver at the Closing a certificate
of an authorized officer stating that (a) the Selling Fund's portfolio
securities, cash, and any other assets shall have been delivered in proper form
to the Acquiring Fund on the Closing Date; and (b) all necessary taxes including
all applicable federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
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3.4 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund as of the Closing Date, shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Selling Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver or
cause Evergreen Service Company, its transfer agent, to issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of CoreFunds or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund
represents and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Maryland.
(b) The Selling Fund is a separate investment series of a
Maryland corporation that is registered as an investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), is in
full force and effect.
(c) The current prospectuses and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of CoreFunds' Articles of Incorporation or By-Laws
or of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
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(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected in the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The financial statements of the Selling Fund at December
31, 1997 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(h) Since December 31, 1997 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and
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has distributed in each such year all net investment income and
realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund Shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information to be furnished by the Selling Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) The Prospectus and Proxy Statement of the Selling Fund to
be included in the Registration Statement (as defined in paragraph 5.7)(other
than information therein that relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
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4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund
represents and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current prospectuses and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) Since November 21, 1997 there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph
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(f), a decline in the net asset value of the Acquiring Fund shall not constitute
a material adverse change.
(g) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(h) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(i) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(j) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(k) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable.
(l) The information to be furnished by the Acquiring Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(m) The Prospectus and Proxy Statement (as defined in
paragraph 5.7) to be included in the Registration Statement (only insofar as it
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not
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contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
(n) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 APPROVAL OF SHAREHOLDERS. CoreFunds will call a meeting of the
Selling Fund Shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions contemplated
herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by KPMG Peat
Marwick LLP and certified by CoreFunds' President and Treasurer.
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5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Selling Fund
will provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the proxy statement, referred to
in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included
in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act in
connection with the meeting of the Selling Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 CAPITAL LOSS CARRYFORWARDS. As promptly as practicable, but in any
case within sixty days after the Closing Date, the Acquiring Fund and the
Selling Fund shall cause KPMG Peat Marwick LLP to issue a letter addressed to
the Acquiring Fund and the Selling Fund, in form and substance satisfactory to
the Funds, setting forth the federal income tax implications relating to capital
loss carryforwards (if any) of the Selling Fund and the related impact, if any,
of the proposed transfer of all of the assets of the Selling Fund to the
Acquiring Fund and the ultimate dissolution of the Selling Fund, upon the
shareholders of the Selling Fund.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and
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in good standing under the laws of the State of Delaware and has the power to
own all of its properties and assets and to carry on its business as presently
conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's knowledge,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any,
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are accurate and fairly present the information required to be
shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (g) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of the Trust's officers
and other representatives of the Acquiring Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquiring Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Acquiring Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to the Selling Fund, contained in the Prospectus and Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of CoreFunds and the Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Sullivan & Worcester
LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
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6.3 The merger between First Union Corporation and CoreStates Financial
Corp shall be completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by CoreFunds'
President or Vice President and the Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquiring Fund shall
reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer of CoreFunds.
7.3 The Acquiring Fund shall have received on the Closing Date an
opinion of Morgan, Lewis & Bockius LLP, counsel to the Selling Fund, in a form
satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland and has the power to own all of its properties and
assets and to carry on its business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Maryland corporation registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable
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against the Selling Fund in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and to general equity
principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Maryland is required for consummation by the Selling Fund
of the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of CoreFunds' Articles of Incorporation or By-laws, or any provision
of any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Selling Fund is a
party or by which it or any of its properties may be bound or, to the knowledge
of such counsel, result in the acceleration of any obligation or the imposition
of any penalty, under any agreement, judgment, or decree to which the Selling
Fund is a party or by which it is bound.
(f) Only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
government proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings, insofar as they relate to the Selling Fund existing on or before
the date of mailing of the Prospectus and Proxy Statement and the Closing Date,
required to be described in the Prospectus and Proxy Statement or to be filed as
an exhibit to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement.
(i) Assuming that a consideration therefor of not less than
the net asset value thereof has been paid, and assuming that such shares were
issued in accordance with the terms of the Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of
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the Selling Fund are legally issued and fully paid and non-assessable.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Selling Fund at which
the contents of the Prospectus and Proxy Statement and related matters were
discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (f) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of CoreFunds' officers and
other representatives of the Selling Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Selling Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Selling Fund not misleading. Such
opinion may state that they do not express any opinion or belief as to the
financial statements or any financial or statistical data, or as to the
information relating to the Acquiring Fund, contained in the Prospectus and
Proxy Statement or Registration Statement, and that such opinion is solely for
the benefit of the Trust and the Acquiring Fund.
Such opinion shall contain such other assumptions and limitations as
shall be in the opinion of Morgan, Lewis & Bockius LLP appropriate to render the
opinions expressed therein, and shall indicate, with respect to matters of
Maryland law, that as Morgan, Lewis & Bockius LLP are not admitted to the bar of
Maryland, such opinions are based either upon the review of published statutes,
cases and rules and regulations of the State of Maryland or upon an opinion of
Maryland counsel.
In this paragraph 7.3, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
7.4 The merger between First Union Corporation and CoreStates Financial
Corp shall be completed prior to the Closing Date.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its
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option, not be required to consummate the transactions contemplated
by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of CoreFunds' Articles of
Incorporation and By-Laws and certified copies of the resolutions evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Selling Fund Shareholders all of the Selling Fund's net investment
company taxable income for all taxable periods ending on or prior to the Closing
Date (computed without regard to any deduction for dividends paid) and all of
its net capital gains realized in all taxable periods ending on or prior to the
Closing Date (after reduction for any capital loss carryforward).
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8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP addressed to the Acquiring Fund and the Selling Fund substantially
to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund Shares to the Selling Fund in dissolution and liquidation of the
Selling Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code and the Acquiring Fund and the Selling Fund will each
be a "party to a reorganization" within the meaning of Section 368(b) of the
Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
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8.7 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Acquiring Fund, in form and substance satisfactory to
the Acquiring Fund, to the effect that:
(a) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards) consisting of a reading
of any unaudited pro forma financial statements included in the Registration
Statement and Prospectus and Proxy Statement, and inquiries of appropriate
officials of CoreFunds responsible for financial and accounting matters, nothing
came to their attention that caused them to believe that such unaudited pro
forma financial statements do not comply as to form in all material respects
with the applicable accounting requirement of the 1933 Act and the published
rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus and Proxy Statement has
been obtained from and is consistent with the accounting records of the Selling
Fund;
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the pro forma financial
statements that are included in the Registration Statement and Prospectus and
Proxy Statement were prepared based on the valuation of the Selling Fund's
assets in accordance with the Trust's Declaration of Trust and the Acquiring
Fund's then current prospectuses and statement of additional information
pursuant to procedures customarily utilized by the Acquiring Fund in valuing its
own assets; and
(d) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the projected expense ratios appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by Selling Fund's
management and were found to be mathematically correct.
In addition, the Acquiring Fund shall have received from KPMG Peat
Marwick LLP a letter addressed to the Acquiring Fund dated on the Closing Date,
in form and substance satisfactory to the Acquiring Fund, to the effect, that on
the basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards), the
calculation of net asset value per share of the Selling Fund as of the Valuation
Date was determined in accordance with generally
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accepted accounting practices and the portfolio valuation practices
of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Selling Fund, in form and substance satisfactory to the
Selling Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards) consisting of a reading of any
unaudited pro forma financial statements included in the Registration Statement
and Prospectus and Proxy Statement, and inquiries of appropriate officials of
the Trust responsible for financial and accounting matters, nothing came to
their attention that caused them to believe that such unaudited pro forma
financial statements do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder;
(c) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement has been
obtained from and is consistent with the accounting records of the Acquiring
Fund; and
(d) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the projected
expense ratio appearing in the Registration Statement and Prospectus and Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund will be borne by First Union National Bank ("FUNB"). Such
expenses include, without limitation, (a) expenses incurred in connection with
the entering into and the carrying out of the provisions of this Agreement; (b)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and
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filing such forms as are necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection herewith in each
state in which the Selling Fund Shareholders are resident as of the date of the
mailing of the Prospectus and Proxy Statement to such shareholders; (d) postage;
(e) printing; (f) accounting fees; (g) legal fees; and (h) solicitation costs of
the transaction. Notwithstanding the foregoing, the Acquiring Fund shall pay its
own federal and state registration fees. In the event that the merger of First
Union Corporation and CoreStates Financial Corp is not completed, this Agreement
shall terminate. In such event, all expenses of the transactions contemplated by
this Agreement incurred by the Acquiring Fund will be borne by FUNB and all
expenses of the transactions contemplated by this Agreement incurred by the
Selling Fund will be borne by CoreStates Investment Advisers, Inc.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, CoreFunds, the respective Trustees,
Directors or officers, to the other party or its Trustees, Directors or
officers, but each shall
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bear the expenses incurred by it incidental to the preparation and carrying out
of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Selling Fund and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund Shareholders called by the Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof; provided, however, that the due authorization,
execution and delivery of this Agreement, in the case of the Selling Fund, shall
be governed and construed in accordance with the laws of the State of Maryland,
without giving effect to the conflicts of laws provisions thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Trust personally, but shall bind only the
trust property of the
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Acquiring Fund, as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Trust on behalf of the Acquiring Fund and signed by authorized officers of
the Trust, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Acquiring Fund as
provided in the Declaration of Trust of the Trust.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
EVERGREEN SELECT EQUITY TRUST ON
BEHALF OF EVERGREEN SELECT
STRATEGIC GROWTH FUND
By:
Name:
Title:
COREFUNDS, INC.
ON BEHALF OF GROWTH EQUITY FUND
By:
Name:
Title:
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EXHIBIT B
INTERIM INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of __________, 1998 between COREFUNDS, INC., a
Maryland corporation (hereinafter the "Company"), and CORESTATES INVESTMENT
ADVISERS, INC., a Pennsylvania corporation (hereinafter the "Investment
Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate classes representing shares in separate portfolios of securities and
other assets; and
WHEREAS, the Company desires to retain the Investment Adviser to
furnish investment advisory services to the Company and its portfolios, and the
Investment Adviser is willing to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser to
act as investment adviser to the portfolios of the Company for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Fund has furnished the
Investment Adviser with copies properly certified or authenticated
of each of the following:
a. the Company's Articles of Incorporation, as filed with the
Secretary of State of Maryland on September 11, 1984, and all amendments thereto
(such Articles, as presently in effect and as they shall from time to time be
amended or supplemented, are herein called the "Articles of Incorporation");
b. the Company's By-Laws and amendments thereto (such
ByLaws, as presently in effect and as they shall from time to time
be amended, are herein called the "By-Laws");
c. resolutions of the Company's Board of Directors
authorizing the appointment of the Investment Adviser and approving
this Agreement;
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<PAGE>
d. the Company's Notification of Registration on Form N- 8A
under the 1940 Act as filed with the Securities and Exchange Commission on
September 11, 1984 and all amendments thereto;
e. the Company's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 2-93214) and under the
1940 Act as filed with the Securities and Exchange Commission and all amendments
thereto; and
f. the Company's most recent Prospectuses and Statement of
Additional Information (such Prospectuses and Statement of Additional
Information, as presently in effect and all amendments and supplements thereto,
are herein called the "Prospectuses").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Company's Board of
Directors, the Investment Adviser will provide a continuous investment program
for each portfolio of the Company, including investment guidelines and
management with respect to all securities and investments and cash equivalents
held by the existing portfolios and such other portfolios (hereinafter
collectively, the "Portfolios") offered by the Company and identified by the
Company as appropriate. The Investment Adviser will determine from time to time
what securities and other investments will be purchased, retained, or sold by
the Company. The Investment Adviser will provide the services under this
Agreement in accordance with the Company's investment objective, policies, and
restrictions as stated in the Prospectuses and resolutions of the Company's
Board of Directors.
The Investment Adviser further agrees that it:
a. will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with any regulations of the
Comptroller of the Currency pertaining to the investment advisory activities of
national banks;
b. will not make loans to any person to purchase or
carry the Company's shares or make loans to the Company;
c. will place orders pursuant to its investment determinations
for the Company on behalf of its portfolios either directly with the issuer or
with any broker or dealer. In placing orders with brokers and dealers the
primary consideration of the Investment Adviser will be the prompt execution of
orders in an effective manner at the most favorable price. Subject to this
consideration, brokers or dealers who provide supplemental research to the
Investment Adviser may receive orders for transactions with
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<PAGE>
the Company. In no instance will portfolio securities be purchased
from or sold to CoreStates Financial Corp or any affiliated person
of either the Fund or CoreStates Financial Corp;
d. will maintain all books and records with respect to the
Company's portfolio securities transactions and will furnish the Company's Board
of Directors such periodic and special reports as the Board may request;
e. will treat confidentially and as proprietary information of
the Company all records and other information relative to the Company and prior,
present, or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Company;
f. will provide to the Company and the Company's other service
providers, at such intervals as may be reasonably requested by the Company,
information relating to (i) the performance of services by the Investment
Adviser hereunder, and (ii) market quotations of portfolio securities held by
the Company on behalf of its Portfolios;
g. will direct and use its best efforts to cause the broker or
dealer involved in any portfolio transaction with the Company to send a written
confirmation of such transaction to the Company's Custodian and Transfer Agent;
and
h. will not purchase shares of the Company for itself or for
accounts with respect to which it is exercising sole investment discretion in
connection with such transactions.
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Company are the property of the Company and further agrees
to surrender promptly to the Company any of such records upon the Company's
request. The Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
-70-
<PAGE>
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Company and the cost of obtaining market
quotations of portfolio securities held by the Company.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, effective as of the date of this Agreement, the
Company will pay the Investment Adviser and the Investment Adviser will accept
as full compensation for services rendered to the Portfolios therefor, the fees
detailed in Appendix A attached to this Agreement; provided, however, that if
the total expenses borne by any Portfolio of the Company in any fiscal year of
the Company exceeds any expense limitations imposed by applicable state
securities laws or regulations, the Investment Adviser will reimburse the
Portfolio for a portion of such excess equal to the amount of such excess times
the ratio of the fees otherwise payable to the Investment Adviser hereunder to
the aggregate fees otherwise payable to the Investment Adviser hereunder and SEI
Fund Resources pursuant to an Administration Agreement between it and the
Company. The Investment Adviser's obligation to reimburse the Company on behalf
of its Portfolios hereunder is limited in any fiscal year of the Company to the
amount of the Investment Adviser's fee hereunder for such fiscal year; provided,
however, that notwithstanding the foregoing, the Investment Adviser shall
reimburse the Company for such excess regardless of the fees paid to it to the
extent that the securities laws or regulations of any state having jurisdiction
over the Company so require. Any such expense reimbursements will be estimated
daily and reconciled and paid on a monthly basis.
8. Use of Investment Adviser's Name and Logo. The Company agrees that
it shall furnish to the Investment Adviser, prior to any use or distribution
thereof, copies of all prospectuses, statements of additional information, proxy
statements, reports to shareholders, sales literature, advertisements, and other
material prepared for distribution to shareholders of the Portfolios of the
Company or to the public, which in any way refer to or describe the Investment
Adviser or which include any trade names, trademarks, or logos of the Investment
Adviser or any affiliate of the Investment Adviser. The Company further agrees
that it shall not use or distribute any such material if the Investment Adviser
reasonably objects in writing to such use or distribution within ten business
days after the date such material is furnished to the Investment Adviser. The
provisions of this section shall survive the termination of this Agreement.
9. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Company in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a
-71-
<PAGE>
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
10. Duration and Termination. This Agreement will become effective for
each Portfolio as of the date first above written. Subject to the provisions for
termination as provided herein, this Agreement shall remain in effect for each
Portfolio until the earlier of the Closing Date defined in the Agreement and
Plan of Reorganization dated as of April 15, 1998 with respect to each Portfolio
or for two years from the date first above written and from year to year
thereafter, provided such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Company's Board of
Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Company's Board of Directors or by vote
of a majority of the Portfolio's outstanding voting securities. Notwithstanding
the foregoing, this Agreement may be terminated at any time on sixty days
written notice, without the payment of any penalty, by the Company (by vote of
the Board of Directors or by vote of a majority of the Portfolio's outstanding
voting securities) or by the Investment Adviser. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meaning of such terms in the 1940 Act.)
11. Name Protection After Termination. In the event this Agreement is
terminated by either party or upon written notice from the Investment Adviser at
any time, the Company hereby agrees that it will eliminate from its corporate
name any references to the name "CoreFunds." The Company shall have the
nonexclusive use of the name "CoreFunds" in whole or in part so long as this
Agreement is effective or until such notice is given.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved by vote of a majority of the Portfolio's outstanding
voting securities.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to
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<PAGE>
the benefit of the parties hereto and their respective successors and shall be
governed by Pennsylvania law.
-73-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
COREFUNDS, INC.
By ____________________________
CORESTATES INVESTMENT ADVISERS, INC.
By ____________________________
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<PAGE>
APPENDIX A
Portfolio Advisory Fee as a
Percentage of average
daily net assets
Growth Equity Fund .75%
Core Equity Fund .74%
Special Equity Fund 1.50%
Equity Index Fund .40%
International Growth Fund .80%
Balanced Fund .70%
Short-Intermediate Bond Fund .50%
Bond Fund .74%
Short Term Income Fund .74%
Government Income Fund .50%
Intermediate Municipal Bond Fund .50%
Pennsylvania Municipal Bond Fund .50%
New Jersey Municipal Bond Fund .50%
Global Bond Fund .60%
Cash Reserve .40%
Treasury Reserve .40%
Tax-Free Reserve .40%
Elite Cash Reserve .20%
Elite Government Reserve .20%
Elite Treasury Reserve .20%
Elite Tax Free Reserve .20%
-75-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
GROWTH EQUITY FUND
a Series of
COREFUNDS, INC.
530 East Swedesford Road
Wayne, Pennsylvania 19087
(800) 355-2673
By and In Exchange For Shares of
EVERGREEN SELECT STRATEGIC GROWTH FUND
a Series of
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Growth Equity Fund
("CoreFunds Growth"), a series of CoreFunds, Inc., to Evergreen Select Strategic
Growth Fund ("Evergreen Strategic Growth"), a series of Evergreen Select Equity
Trust, in exchange for Institutional Service shares (to be issued to holders of
Class A and Class B shares of CoreFunds Growth) and Institutional shares (to be
issued to holders of Class Y shares of CoreFunds Growth) of beneficial interest,
$.001 par value per share, of Evergreen Strategic Growth, consists of this cover
page and the following described documents, each of which is attached hereto and
incorporated by reference herein:
(1) The Statement of Additional Information of Evergreen
Strategic Growth dated November 17, 1997;
(2) The Statement of Additional Information of CoreFunds
Growth dated November 1, 1997;
(3) Annual Report of CoreFunds Growth for the year ended June
30, 1997;
(4) Semi-Annual Report of CoreFunds Growth for the six month
period ended December 31, 1997;
(5) Semi-Annual Report of Evergreen Strategic Growth for the
period ended December 31, 1997; and
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<PAGE>
(6) Pro-Forma Combining Financial Statements (unaudited) dated
December 31, 1997.
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Evergreen Strategic Growth and CoreFunds Growth dated June 1, 1998.
A copy of the Prospectus/Proxy Statement may be obtained without charge by
calling or writing to Evergreen Strategic Growth or CoreFunds Growth at the
telephone numbers or addresses set forth above.
The date of this Statement of Additional Information is June 1, 1998.
<PAGE>
[SQUARE BULLET]
COREFUND[REGISTERED MARK]
FAMILY OF MUTUAL FUNDS
- -------------------------
1997
ANNUAL REPORT
TO OUR
SHAREHOLDERS
YEAR ENDING JUNE 30, 1997
COREFUNDS...INVESTING OUR EXPERIENCE IN YOUR FUTURE.
<PAGE>
COREFUND
PORTFOLIOS
BY
ASSET
CLASS
[SQUARE BULLET] COREFUND
FUND TRADING SYMBOL
(A/C SHARES) (Y SHARES)
EQUITY FUNDS
<PAGE>
[SQUARE BULLET] Equity Index -- VEIFX
[SQUARE BULLET] Core Equity CVERX CVEAX
[SQUARE BULLET] Growth Equity CRQAX CRGEX
[SQUARE BULLET] Special Equity CSPAX CSEQX
[SQUARE BULLET] International Growth CROAX CFIGX
BALANCED FUNDS
[SQUARE BULLET] Balanced COBAX CBAAX
FIXED INCOME FUNDS
[SQUARE BULLET] Short Term Income -- COSTX
[SQUARE BULLET] Short-Intermediate Bond CSIAX CFBDX
[SQUARE BULLET] Government Income CRIAX CRYIX
[SQUARE BULLET] Bond CBOAX CONIX
[SQUARE BULLET] Global Bond CRGAX CGBIX
TAX-EXEMPT INCOME FUNDS
[SQUARE BULLET] Intermediate Municipal Bond CRMAX CRMYX
[SQUARE BULLET] Pennsylvania Municipal Bond CPAAX CPAYX
[SQUARE BULLET] New Jersey Municipal Bond CNJAX CNJYX
MONEY MARKET FUNDS
[SQUARE BULLET] Treasury Reserve CTRXX CRTXX
[SQUARE BULLET] Cash Reserve -- CRCXX
[SQUARE BULLET] Tax-Free Reserve CXCXX CRXXX
TABLE OF CONTENTS
INVESTING FOR THE LONG TERM
INSIDE COVER
MESSAGE TO OUR SHAREHOLDERS
1
HOW TO USE YOUR
ANNUAL REPORT
2
GLOSSARY OF TERMS
4
CHOOSING THE RIGHT FUNDS
6
FUND DESCRIPTIONS
8
<PAGE>
INVESTMENT ADVISERS' REVIEW
12
MANAGERS' DISCUSSIONS OF
FUND PERFORMANCE
16
REPORT OF INDEPENDENT AUDITORS
44
FINANCIAL STATEMENTS
45
SHAREHOLDER SERVICES
FOR MORE INFORMATION ON OPENING
A NEW ACCOUNT, MAKING CHANGES TO EXISTING ACCOUNTS,
PURCHASING,
EXCHANGING OR REDEEMING SHARES,
OR OTHER INVESTOR SERVICES,
PLEASE CALL
1-800-355-CORE (2673) OR REFER TO YOUR FUND PROSPECTUS.
LIFT THIS FLAP AND
LEARN HOW LONG-TERM INVESTING CAN
HELP YOU REACH
YOUR GOALS.
[GRAPHIC OF POINTER]
<PAGE>
INVESTING FOR THE
LONG TERM
A LITTLE BIT TODAY
CAN TAKE YOU
A LONG WAY.
[GRAPHIC OF POINTER]
Throughout this report, we talk about investing for the long term --
setting financial goals, choosing your funds, and then staying with your plan
over a period of years. Why is this important? Because long-term investing can
truly help you reach your financial goals.
Whether you're investing for your retirement, a child's education, a
<PAGE>
vacation home, or some other goal, the key is to start early. This way, you can
actually reduce the total amount you will need to save. That's because your
money will work for you as it compounds over the years. The more time you have,
the more you will benefit from compounding.
In addition, when you stay with your plan over time, you can minimize
the impact of short-term fluctuations in the market. Historically, the longer an
investment is held, the less it is affected by market ups and downs.
Finally, by investing the same amount each month, you can reduce the
average cost you pay per share. Your money will buy more shares when the price
is low and fewer shares when the price is high. This is a proven technique for
not over paying for your investment.
STOCKS HAVE OUTPERFORMED OVER THE LONG TERM.
HISTORICALLY, STOCKS HAVE EXPERIENCED GREATER SHORT-TERM
VOLATILITY, BUT OVER
THE LONGER TERM, THEY HAVE OUTPERFORMED BONDS AND OTHER
FIXED-INCOME
INVESTMENTS.
TIME CAN SMOOTH THE BUMPS ALONG THE WAY. THE LONGER YOU HOLD YOUR
INVESTMENT, THE LESS IT WILL BE IMPACTED BY SHORT-TERM MARKET FLUCTUATIONS. THIS
CHART ILLUSTRATES THE MAXIMUM AND MINIMUM RETURNS FOR DIFFERENT INVESTMENT
PERIODS. AN INVESTOR WITH A LONGER TIME HORIZON CAN AFFORD TO ASSUME GREATER
RISK IN EXCHANGE FOR POTENTIALLY GREATER LONG-TERM REWARDS.
REGULAR INVESTING IS A SIMPLE STRATEGY THAT WORKS OVER TIME. THIS
HYPOTHETICAL EXAMPLE ASSUMES MONTHLY INVESTMENTS OF $100, $300, AND $500,
RESPECTIVELY, GROWING AT A COMPOUNDED ANNUAL RATE OF RETURN OF 8%.
<PAGE>
[LINE GRAPH DEPICTING GROWTH OF $10,000 SINCE 1973]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON LONG TERM GOV'T BOND INDEX, IBBOTSON 30
DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND DOES
NOT REPRESENT THE PERFORMANCE OF A PARTICULAR COREFUND. PAST PERFORMANCE IS NOT
<PAGE>
INDICATIVE OF FUTURE RESULTS.
[BAR GRAPH DEPICTING REDUCTION OF RISK OVER TIME]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON INTERMEDIATE GOV'T BOND INDEX, IBBOTSON
30 DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT THE PERFORMANCE OF A PARTICULAR COREFUND. PAST PERFORMANCE IS
NOT INDICATIVE OF FUTURE RESULTS.
[CHART DEPICTING REGULAR INVESTING CAN HELP YOU REACH YOUR GOALS]
SOURCE: SEI RESEARCH . THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT THE PERFORMANCE OF A PARTICULAR COREFUND.
<PAGE>
MESSAGE
TO OUR
SHAREHOLDERS
JUNE 30, 1997
[SQUARE BULLET] COREFUND
During the past year, CoreFund shareholders were rewarded with overall
strong performance as a healthy economy supported the funds' strategies. Despite
some early 1997 stock market volatility, we currently have the best of all
possible worlds in terms of market climate. Good economic growth, low inflation,
relatively low interest rates, and encouraging corporate earnings make
conditions ideal for continued market strength.
INVESTING FOR THE LONG TERM Fair weather or stormy, smart investors keep their
heads and resist the temptation to follow the latest hot stock or trendy mutual
fund. Studies have shown that jumping in and out of the market in reaction to
headlines simply doesn't pay off. If you stick with your investment plan, you
won't miss out on upward cycles. Sure, there will be some downward cycles. But
if you follow a consistent investment strategy, you are more likely to reap
market rewards over time.
[PHOTO OF EMIL J. MIKITY]
LEARNING ABOUT YOUR INVESTMENTS The best way to remain confident in your
investment plan is to learn as much as you can. To help make fund information
<PAGE>
easier to read and understand, CoreFunds has created a "plain English"
prospectus. This prospectus explains mutual fund concepts and terms, putting
detailed fund- specific information at your fingertips.
Other good sources for fund information are the mutual fund ratings
services. CoreFunds is proud to have recently received 1-year ratings of A or
higher by Lipper for most of its equity funds and 5-Star Morningstar ratings for
the CoreFund Equity Index Fund.
LOOKING INTO THE NEXT CENTURY With the year 2000 approaching, the CoreFund
Family of Mutual Funds is well positioned to meet your present and future
investment needs. We have a full range of fund alternatives with well-defined
goals and investment strategies. And, we've assembled an exceptional portfolio
management team. As we work to grow our fund assets, we remain committed to
customer service excellence and the enhancement of investor education programs
that will help you meet your financial goals for the long term.
/S/ SIGNATURE
EMIL J. MIKITY
CHAIRMAN
1
<PAGE>
HOW TO USE YOUR
ANNUAL
REPORT
[GRAPHIC OF POINTER]
COREFUND SHARES ARE
CURRENTLY AVAILABLE IN
THREE DIFFERENT CLASSES:
CLASS Y SHARES
ARE FOR INSTITUTIONAL INVESTORS.
CLASS A SHARES
ARE FOR INDIVIDUALS INVESTING IN EQUITY AND FIXED INCOME FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
CLASS C SHARES
ARE FOR INDIVIDUALS INVESTING
IN MONEY MARKET FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
THE COREFUND 1997 ANNUAL REPORT In the pages that follow, you will read about
your specific funds, the economic trends of the past year, and the outlook going
forward. But the most significant message of this 1997 Annual Report has nothing
to do with market conditions or forecasts. Instead, we want to stress the
importance of staying with your sound, long-term investment plan through all
economic cycles.
WHAT YOU NEED TO KNOW
[SQUARE BULLET]
On the inside front cover, we discuss the reasons why investing over a
period of many years can help you reduce the amount of money you will need to
reach your goal, and how long-term investing can limit the impact of short-term
market fluctuations on your investment. Don't underestimate the importance of
starting your investment program early and saving on a regular basis. Take a few
minutes and read this section. It may help you learn about new ways to reach
your financial goals.
Also in this Annual Report, you will find the CoreStates Investment
Advisers' Review which provides insights into current economic conditions and a
global investment outlook. You will find a Manager's Discussion of Fund
Performance for each fund in the CoreFund Family of Funds. Each manager's
commentary presents a snapshot of fund performance for the 12-month period
ending June 30, 1997. The managers offer you insights into the investment
strategies they are employing and examine the current climate of specific
markets, as well as the market forces that are expected to prevail during the
first half of 1997.
2
<PAGE>
[SQUARE BULLET] COREFUND
QUICK FUND FACTS
Accompanying each commentary are boxes highlighting important fund
information:
[SQUARE BULLET] When a fund was opened [SQUARE BULLET] Portfolio size [SQUARE
BULLET] Number of shares outstanding
[SQUARE BULLET] Average weighted maturity of a fund's fixed income holdings
(where applicable)
[SQUARE BULLET] Seven-day effective yield (where applicable)
PORTFOLIO COMPOSITION
For funds with equity holdings, the individual reports include listings
of the top five holdings and the percentage of the total fund invested in these
holdings.
For funds with only fixed income or money market holdings, the reports
include pie charts that show how these holdings are divided according to quality
ratings or maturity.
PERFORMANCE DATA EQUITY AND FIXED INCOME FUNDS
The performance box shows the average annual total returns from
inception, for both the institutional Class Y shares and retail Class A shares,
with and without the sales charge. Also, a line graph shows the change in value
of a hypothetical $10,000 investment over the lifetime of each fund. Performance
of both Y and A classes of each Fund is compared with a commonly used industry
index to show how the Fund's performance stacks up against the index.
For the CoreFund Class A (individual) shares, the performance
information has been adjusted to reflect the 12b-1 fee associated with these
shares. The Class A data has also been divided to show performance with and
without the assessment of a sales charge, also known as the load.
PERFORMANCE DATA MONEY MARKET FUNDS
The performance boxes show the six-month cumulative total return, 7-day
and 30-day yields for both classes Y and C as compared to the industry benchmark
that the fund manager uses to measure performance.
UNDERSTANDING FUND PERFORMANCE
[SQUARE BULLET]
As you review the information in these fund reports, please remember that past
performance of the portfolios does not predict future results. Also, investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
[GRAPHIC OF POINTER]
3
<PAGE>
GLOSSARY
OF TERMS
[GRAPHIC OF POINTER]
Various terms used in the fund reports are defined as follows:
CLASS Y/CLASS A&C CoreFund shares are currently offered in these classes. Class
Y shares are for institutional investors. Class A&C shares are for individuals,
and include added features such as shareholder servicing and automatic
investment plans, as well as some additional fees. Class C shares also offer
checkwriting privileges.
DISTRIBUTIONS are the payments of income and capital gains to shareholders of a
mutual fund. For tax purposes, capital gains distributions are calculated
separately from interest income or dividends.
DIVERSIFICATION is the spreading of investment risk by putting assets in a
wide-ranging portfolio of securities, such as a mutual fund.
DOLLAR-COST AVERAGING is an installment-purchase technique that involves
investing a fixed amount of money in mutual fund shares at regular intervals
rather than all at once. The objective is to buy fewer shares when prices are
high and more shares when prices are low.
EXPENSE RATIO is the amount, expressed as a percentage of average assets, that
shareholders paid in the past year for mutual fund operating expenses and
management fees.
FACE VALUE is the amount the bondholder receives when the bonds are redeemed at
maturity. Interest payments are based on the face value (also called "par
value").
HEDGE is a defensive investment strategy, often involving the buying or selling
of options, to offset possible losses and thereby to reduce risk.
INDEX is a statistical composite of selected stocks or bonds that is used to
measure price fluctuations in these markets. For example, Standard & Poor's 500
Composite Index (S&P 500) is a popular measure of the stock market's performance
based on prices of 500 common stocks listed on the New York and American stock
exchanges or traded over the counter.
4
<PAGE>
[SQUARE BULLET] COREFUND
LOAD refers to sales charges that may be associated with a particular fund.
Where loads are shown, both sales charges (incurred when purchasing shares) and
12b-1 fees have been included. The 12b-1 fee, named after the Securities and
Exchange Commission rule that permits it, is sometimes assessed to recover costs
incurred through advertising, commission payments to brokers, or other expenses
associated with marketing and distributing a fund.
MATURITY refers to the period over which a bond or other fixed income security
must be held to earn the full yield offered by the issuer of the security.
Average weighted maturity describes the average period of maturity in a
portfolio that contains fixed income securities of varying maturities.
NET ASSET VALUE (NAV) reflects the market value of one share of the fund on the
date listed. This figure is determined by taking the fund's total assets --
securities, cash, and any accrued earnings -- and then deducting liabilities and
dividing by the number of shares outstanding.
Money market funds seek to maintain a stable NAV of $1.00, although there
is no guarantee they will always do so. There are three money market portfolios
in the CoreFund Family of Mutual Funds: Cash Reserve, Treasury Reserve, and
Tax-Free Reserve.
TOTAL RETURN shows how the value of an investment has changed from the
beginning to the end of a period, assuming that dividends and capital gains have
been reinvested. In the performance tables for equity and fixed income funds,
total return is shown on an "annualized" basis -- it assumes performance at a
constant rate for each year. In the performance boxes for money market funds,
the six-month total return is shown on a "cumulative" basis -- i.e., the total
return for the period from January 1, 1997 to June 30, 1997.
VOLATILITY is a description of how much the price of securities, such as mutual
funds, moves up or down within a given period.
YIELD refers to the rate of return for an investment portfolio, expressed as a
percentage. Yield for mutual funds is established by a formula set by the
Securities and Exchange Commission. A fund's yield will fluctuate and reflect
the portfolio's net earning power after fund expenses have been paid.
DEFINING THE TERMS
[SQUARE BULLET]
5
<PAGE>
CHOOSING
THE
RIGHT FUNDS
[GRAPHIC OF POINTER]
The CoreFund Family offers a diverse range of high-quality mutual fund
investment options designed to help you reach your financial goals.
These include: the capital appreciation potential of equity and
balanced funds, the income potential of fixed-income funds, the tax advantages
of municipal bond funds, the stability of money market funds, and the expanded
reach and potential of international funds. By allowing free exchange among all
funds, CoreFund makes it easy for you to adapt your individual investment
program to your changing needs.
THE RIGHT CHOICES FOR A WELL-ROUNDED INVESTMENT PLAN.
Each investor has a unique notion of what the "right" mix of risk and
reward should be. You may, for example, be an investor who seeks to maintain the
highest possible degree of stability in your portfolio, and therefore favor
money market securities. Or, you may be at the opposite end of the spectrum --
someone who is willing to accept and tolerate higher degrees of risk in exchange
for the potential of higher returns offered by stocks. Because higher returns
generally mean greater price fluctuations, investment decisions will always
revolve around this tradeoff.
FINDING THE RIGHT MIX OF RISK AND REWARD.
To help you align your portfolio's particular blend of stability and
return with your investment preferences, CoreFunds offers a broad array of
investment options.
DIVERSIFICATION
IS A WAY TO
MODERATE
YOUR RISK.
As illustrated at right, these funds fall into distinct categories that match
up with the various stages of the risk/return spectrum. By taking these factors
into consideration, you can fashion a well-rounded, diversified portfolio that
will help you achieve your individual investment goals while maintaining a
comfortable level of risk. In this way, CoreFunds' expertise and experience can
best be used to shape your investment future.
6
<PAGE>
[SQUARE BULLET] COREFUND
<TABLE>
MUTUAL FUND CATEGORIES
LOWER HIGHER
RISK RISK
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH [SQUARE BULLET] INTERNATIONAL GROWTH
INTERNATIONAL STOCK FUNDS
OFFER POTENTIALLY HIGHER
RETURNS, BUT CARRY SPECIAL
RISKS. THESE RISKS ARE
OUTLINED IN YOUR PROSPECTUS.
GROWTH [SQUARE BULLET] SPECIAL EQUITY
[SQUARE BULLET] GROWTH EQUITY
STOCK AND BALANCED FUNDS [SQUARE BULLET] CORE EQUITY
PURSUE LONG-TERM GROWTH. [SQUARE BULLET] EQUITY INDEX
THEY OFFER THE GREATEST GROWTH [SQUARE BULLET] BALANCED
POTENTIAL, BUT FLUCTUATE MORE
IN PRICE.
INTERNATIONAL INCOME [SQUARE BULLET] GLOBAL BOND
GLOBAL BOND FUNDS SEEK GROWTH AND INCOME
OFFERING POTENTIALLY HIGHER RETURNS THAN
DOMESTIC BONDS, BUT WITH LESS STABILITY OF
PRINCIPAL.
INCOME [SQUARE BULLET] BOND
[SQUARE BULLET] GOVERNMENT INCOME
INTERMEDIATE- AND LONG-TERM TAXABLE BOND [SQUARE BULLET] SHORT-INTERMEDIATE BOND
FUNDS SEEK A MODERATE-TO-HIGH LEVEL OF [SQUARE BULLET] SHORT TERM INCOME
INCOME AND PRESERVATION OF CAPITAL.
TAX-FREE INCOME [SQUARE BULLET] INTERMEDIATE MUNICIPAL BOND
[SQUARE BULLET] PENNSYLVANIA MUNICIPAL BOND
THESE FUNDS SEEK TO PROVIDE INCOME THAT [SQUARE BULLET] NEW JERSEY MUNICIPAL BOND
IS GENERALLY EXEMPT FROM INCOME TAX,
WHILE PRESERVING CAPITAL.
STABILITY [SQUARE BULLET] TREASURY RESERVE
[SQUARE BULLET] CASH RESERVE
MONEY MARKET FUNDS SEEK GREATER SAFETY [SQUARE BULLET] TAX-FREE RESERVE
AND STABILITY OF PRINCIPAL WHILE
PROVIDING INCOME.
LOWER HIGHER
RETURN RETURN
RISK/RETURN SPECTRUM
</TABLE>
7
<PAGE>
FUND
DESCRIPTIONS
JUNE 30, 1997
[SQUARE BULLET] EQUITY (STOCK) FUNDS
INVEST PRIMARILY IN SECURITIES SUCH AS COMMON STOCKS. THESE FUNDS SEEK MAXIMUM
LONG-TERM GAINS THROUGH CAPITAL APPRECIATION.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] EQUITY Seeks to achieve price and yield ...results substantially in line with the performance
INDEX FUND performance similar to the S&P 500 of the stock market as a whole.
Composite Index.
[SQUARE BULLET] CORE EQUITY Seeks growth of capital by investing ...growth of capital and is willing to take higher
FUND primarily in a diversified portfolio risk for potentially higher returns.
of common stocks.
[SQUARE BULLET] GROWTH Seeks growth of capital and an ...capital appreciation and is willing to take higher
EQUITY FUND increasing flow of dividends from risk for potentially higher returns.
a diversified portfolio of common
stocks.
[SQUARE BULLET] SPECIAL Seeks capital growth by investing ...growth of capital and is willing to take higher risk
EQUITY FUND principally in a diversified and experience greater volatility for potentially higher
portfolio of common stocks. returns.
[SQUARE BULLET] INTERNATIONAL Seeks long-term growth of capital
...growth of capital and is willing to assume the GROWTH FUND by
investing in a portfolio of additional risks inherent in foreign
investing in
common stocks diversified by country exchange for potentially higher returns.
and industry.
</TABLE>
8
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
[SQUARE BULLET] BALANCED FUND
INVESTING IN BOTH COMMON STOCKS AND FIXED INCOME. THIS FUND SEEKS TO PROVIDE
TOTAL RETURN WHILE PRESERVING CAPITAL.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] BALANCED FUND Seeks to provide total return while ...participation in a diversified portfolio program
preserving capital. that is continuously and professionally managed and is
willing to take higher risk for potentially higher returns.
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS
INVEST PRIMARILY IN INTEREST-PAYING SECURITIES ISSUED BY THE U.S. GOVERNMENT AND
ITS AGENCIES AS WELL AS CORPORATE BONDS AND COMMERCIAL PAPER. THESE FUNDS SEEK
TO PROVIDE A REGULAR STREAM OF CURRENT INCOME.
[SQUARE BULLET] SHORT TERM Seeks consistent current income ...higher
yield than can be expected from either cash INCOME FUND and
relative stability of principal by management funds or other
short-term investments,
investing primarily in a diversified but with less volatility than most longer-term bond funds.
portfolio of investment-grade debt
securities with remaining maturities
of three years or less.
[SQUARE BULLET] SHORT- Seeks consistent current income by ...higher yield than can be expected from other
INTERMEDIATE investing principally in a short-term investments but without the wide swings
BOND FUND diversified portfolio of debt normally attributable to long-term bond funds.
securities with an average weighted
maturity of two to five years.
</TABLE>
9
<PAGE>
FUND
DESCRIPTIONS
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] GOVERNMENT Seeks to provide current income while
...investment performance and can tolerate the risk INCOME FUND
preserving principal value and from an actively managed
portfolio of taxable fixed-income
maintaining liquidity. securities without credit risk.
[SQUARE BULLET] BOND FUND Seeks to maximize long-term total ...investment performance and can tolerate the associated
return by investing principally in a risk from an actively managed portfolio of taxable fixed
diversified portfolio of debt income securities.
securities.
[SQUARE BULLET] GLOBAL Seeks to provide capital appreciation ...capital
appreciation and current income over the BOND FUND and current
income through investment long term, and is willing to assume
the additional
in fixed income securities of the risks of foreign investing for potentially higher returns,
United States and foreign issuers. and seeks benefits of international diversification.
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS
INVEST IN GENERAL OBLIGATION BONDS, REVENUE BONDS, AND MUNICIPAL NOTES, ALL OF
WHICH FINANCE PUBLIC WORKS AND SERVICES. THESE FUNDS SEEK TO PROVIDE INCOME THAT
IS GENERALLY EXEMPT FROM FEDERAL INCOME TAX AND IN SOME CASES FROM STATE AND
LOCAL TAXES.
[SQUARE BULLET] INTERMEDIATE Seeks a high level of income exempt ...a
conservative investment and seeks after-tax MUNICIPAL from
federal income tax consistent yields while protecting principal.
BOND FUND with the preservation of capital.
[SQUARE BULLET] PENNSYLVANIA Seeks a high level of current income, ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from PA state enhanced investment performance of an actively managed
and local personal income tax. portfolio of tax-free securities.
</TABLE>
10
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] NEW JERSEY Seeks a high level of current income ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from New Jersey enhanced investment performance of an actively managed
state and local personal income tax. portfolio of tax-free securities.
[SQUARE BULLET] MONEY MARKET FUNDS
INVEST PRIMARILY IN QUALITY SHORT-TERM SECURITIES OF THE U.S. GOVERNMENT AND ITS
AGENCIES, COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT, AND REPURCHASE AGREEMENTS.
THESE FUNDS SEEK TO MAINTAIN A CONSTANT SHARE PRICE OF $1.00 WITH INCOME VARYING
ACCORDING TO MARKET CONDITIONS AND INTEREST RATES. HOWEVER, MONEY MARKET FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO
ASSURANCE THAT THESE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00.
[SQUARE BULLET] TREASURY Seeks current income with liquidity ...liquidity of assets, current income, and
RESERVE and stability of principal, with stability of principal.
investments exclusively in U.S.
Treasury obligations.
[SQUARE BULLET] CASH RESERVE Seeks current income with liquidity ...liquidity of assets, current income, and
and stability of principal. stability of principal.
[SQUARE BULLET] TAX-FREE Seeks current income that is exempt ...current income exempt from federal income taxes,
RESERVE from regular income tax with stability of principal, and liquidity of assets.
liquidity and stability of principal.
</TABLE>
11
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
JUNE 30, 1997
ABOUT CORESTATES
INVESTMENT ADVISERS
(CSIA)
[SQUARE BULLET] INVESTMENT MANAGERS FOR THE
COREFUND FAMILY OF MUTUAL
FUNDS.
[SQUARE BULLET] MANAGING MORE THAN $17.6
BILLION IN ASSETS, INCLUDING NEARLY
$4 BILLION IN COREFUNDS.
[SQUARE BULLET] AN AFFILIATE OF CORESTATES
FINANCIAL CORP, ONE OF THE
NATION'S LARGEST AND MOST
RESPECTED BANKING INSTITUTIONS.
[SQUARE BULLET] DEDICATED TO PROVIDING ITS
INVESTORS WITH PROFESSIONAL
INVESTMENT MANAGEMENT.
[SQUARE BULLET] SERVING THE NEEDS OF INSTITUTIONS,
CORPORATIONS, MUNICIPALITIES, AND
INDIVIDUAL INVESTORS.
[SQUARE BULLET] SUPPORTING YOU WITH INVESTMENT
EXPERTISE FOR THE LONG TERM.
COREFUND INVESTMENT REVIEW
We are pleased to report another solid year of investment returns for
the CoreFund Family of Mutual Funds. Taking advantage of a strong U.S. economy
and generally favorable conditions throughout the world, the Fund managers
produced overall positive returns for equity, fixed income, and money market
fund shareholders for the fiscal year ending June 30, 1997.
In the first quarter, real Gross Domestic Product (GDP) grew at an
annual rate of 5.9%, reducing unemployment and raising personal incomes and
corporate profits. Despite market forecasts and Federal Reserve expectations,
inflation remained low. This combination of strong economic growth and low
inflation remains the basis for continued strength in U.S. stock prices.
While long term interest rates rose modestly in the last six months,
they have remained fairly steady in recent quarters. This pattern has provided
investors with adequate, though hardly spectacular returns. After a slight
(.25%) increase in the closely watched Federal funds rate engineered by the
Federal Reserve in March, short-interest rates have been steady. No additional
Federal Reserve actions are expected for some time.
International markets have generally followed the bullish tone set in the
U.S., with equity prices higher in most markets. Interest rates in international
markets were relatively stable, but the stronger U.S. dollar hurt returns for
dollar-based investors.
[BAR GRAPH DEPICTING CAPITAL MARKET RETURNS]
CAPITAL MARKET RETURNS
(% OF TOTAL RETURN)
FULL YEAR (6/96-6/97) FIRST SIX MONTHS `97
DJIA 38.61 20.12
S&P 500 34.68 20.60
SBBI 8.15 3.06
JPMGB 9.28 4.02
EAFE 12.85 11.21
DJIA = DOW JONES INDUSTRIAL AVERAGE
S&P 500 = STANDARD & POOR'S COMPOSITE INDEX
SBBI = SALOMON BROTHERS BROAD BOND INDEX
JPMGB = JP MORGAN GLOBAL BOND INDEX, US$ HEDGED
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
12
<PAGE>
[SQUARE BULLET] COREFUND
EQUITY REVIEW
For the first six months of the calendar year 1997 (the last six months of
the Funds' fiscal year), the U.S. stock market continued to build on one of the
greatest bull markets in history. The large capitalization S&P 500 Index (S&P)
produced a return of 20.6%, after an 11.7% return in the prior six months. For
the full fiscal year ended June 30, 1997, the S&P showed a total return of
34.7%.
Although larger stocks, represented by the S&P, significantly
outperformed the broader market, mid-cap and small cap stocks reported more
modest returns. The Russell 3000 Equal Weighted Index, which includes mid-cap
and small cap stocks, produced returns of 11.2% and 17.0% over the six and
twelve month periods, respectively.
U.S. stock prices continue to benefit from low inflation, stable
interest rates, and strong profit growth. As long as these positive factors
continue, the market should prove resistant to any sustained selling pressure,
as was shown following the market's weakness in March and early April.
[PHOTO OF MARK E. STALNECKER, CHAIRMAN CSIA]
[LINE GRAPH DEPICTING CHANGES IN THE YIELD CURVE]
BOND AND MONEY MARKET REVIEW
After falling slightly in the first six months of the Funds' fiscal year,
long-term Treasury rates rose modestly in the first half of 1997. The increase
in the target Federal funds rate from 5.25% to 5.5% in March was a response by
Federal Reserve policy makers to the strong economic growth experienced in the
first quarter of 1997 and fears of accelerating inflation.
(CONTINUED)
13
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
(CONCLUDED)
JUNE 30, 1997
However, subsequent slowing in growth and subdued inflation reassured investors,
and long-term rates fell from their early 1997 levels to end June only slightly
higher than they had been at the end of 1996.
For the Funds' full year, longer-term rates declined. The total return
for fixed income assets, as measured by the Salomon Brothers Broad Bond Index,
was 8.1%. Returns for the Index for the last half of the Funds' fiscal year were
3.1%. With the positive current inflation trends, interest rates should remain
relatively stable, and some further decline in long-term rates is possible.
[BAR GRAPH DEPICTING STOCKS -- INTERNATIONAL VS. DOMESTIC]
STOCKS -- INTERNATIONAL VS. DOMESTIC
(% OF TOTAL RETURN AS OF 6/30/97)
S&P 500 EAFE
1 YR. 34.68 12.85
2 YR. 30.26 13.06
3 YR. 28.83 9.13
4 YR. 21.34 11.05
5 YR. 19.75 12.83
S&P 500 = STANDARD & POOR'S 500 COMPOSITE INDEX
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
INTERNATIONAL REVIEW
International markets continue to underperform the United States. For the
Funds' full fiscal year ended June 30, 1997, international equity returns
(measured in U.S. dollars) on the Morgan Stanley EAFE Index were 12.9%. Most of
this return (11.2%) was generated in the last six months, following weaker
returns in 1996.
Foreign markets were generally strong in local currency terms and the
Japanese market, while weak over the full year, began to show signs of strength
late in the period amid uncertainties regarding European common currency
developments. However, strength in the dollar certainly had a negative impact on
equity returns for dollar-based investors.
OVERALL MARKET OUTLOOK
Consistent strong economic fundamentals are cause for optimism about
the overall investment outlook, although with stock prices at current
valuations, the market is vulnerable to negative surprises. The surprise could
be higher inflation or possibly lower growth, led by earnings disappointments.
But even with this note of caution, longer-term demographic trends and worldwide
economic competition continue to provide an excellent backdrop for investors.
14
<PAGE>
[SQUARE BULLET] CORE FUND
[GRAPHIC OF POINTER]
As we have always recommended, the best course of action is to stay
with your long-term investment plan. Although future returns may not match the
returns seen in the past decade, this approach should reward investors with
solid long-term real returns that approximate historical averages.
Thank you for investing in the CoreFund Family of Mutual Funds. As
always, we are committed to providing you with strong returns as we work to help
you meet your investment objective.
/S/ SIGNATURE
MARK E. STALNECKER
CHAIRMAN, CSIA
15
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
JUNE 30, 1997
COREFUND EQUITY MANAGERS
LARY AASHEIM
EQUITY INDEX
STEPHEN DALTON
GROWTH EQUITY AND BALANCED
(MANAGERS NOT SHOWN)
JOSEPH STOCKE
CORE EQUITY & SPECIAL EQUITY
MICHAEL GIBSON
MARTIN CURRIE, INC.
AND
BEVERLY HENDRY
ABERDEEN MANAGERS
INTERNATIONAL GROWTH
[PHOTO OF LARY AASHEIM AND STEPHEN DALTON]
16
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] EQUITY INDEX FUND
[GRAPHIC OF POINTER]
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 34.44% after expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Composite Index (S&P
500), returned 34.68% for the same period.
[SQUARE BULLET] Assets in the Fund grew 47.9% from $166.3 million to
$245.9 million during the year.
COMMENTARY
The CoreFund Equity Index Fund is a good alternative for investors who want to
invest in stocks, but don't want the risks associated with a specific equity
management style. The Fund strives to be a pure mirror of the S&P 500 Index.
Working toward this goal, we invest in approximately 430 of the stocks included
in the Index.
The factors that influence the Fund's ability to track index
performance are cash management and transaction cost management. We tightly
manage the Fund's cash portion to greatly increase its ability to track the
index.
We take advantage of opportunities to keep transaction costs as low as
possible at all times because they can have a negative impact on performance.
Over the past year, we have improved the Fund's ability to track the index, and
produce positive returns for investors. As an index fund, the Fund is not
managed in terms of market conditions. However, our outlook for the coming
months is for a stable, low interest rate environment and reasonable economic
growth. These conditions should prove to be healthy for the S&P 500 Index and
therefore encouraging for the Fund's performance. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
----------------------------------------
1 YEAR 5 YEAR 10 YEAR
----------------------------------------
CLASS A SYNTHETIC YIELDS
CLASS Y 34.44% 18.90% 13.43%
CLASS A W/O LOAD 34.37% 18.89% 13.42%
CLASS A W/LOAD 26.97% 17.55% 12.79%
----------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,00 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2/28/95 6/85 6/86 6/87 6/88 6/89
EQUITY INDEX CLASS Y 10,000 10,867 14,507 17,828 16,248 19,238
EQUITY INDEX CLASS A 9,450 10,270 13,709 16,847 15,354 18,180
(SYNTHETIC)
S&P 500 COMPOSITE INDEX 10,000 10,742 14,590 18,262 16,996 20,481
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
EQUITY INDEX CLASS Y 21,906 23,498 26,450 29,727 29,891 37,199 46,755 62,858
EQUITY INDEX CLASS A 20,701 22,206 24,995 28,092 28,247 35,153 44,184 59,369
(SYNTHETIC)
S&P 500 COMPOSITE INDEX 23,852 25,610 29,052 33,005 33,461 42,171 53,127 71,551
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED BEGINNING OCTOBER
9, 1996. THE PERFORMANCE SHOWN FOR EQUITY INDEX PORTFOLIO CLASS A SHARES
(SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF INSTITUTIONAL
CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF 5.50% FOR THE
CLASS A SHARES. CLASS Y SHARES OF THE EQUITY INDEX PORTFOLIO COMMENCED
OPERATIONS ON FEBRUARY 14, 1985, AS A PREDECESSOR FUND WHICH WAS ACQUIRED JUNE
1, 1991, BY COREFUNDS, INC.
</FN>
</TABLE>
EQUITY INDEX FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 14, 1985
PORTFOLIO SIZE:
$245.9 MILLION
SHARES OUTSTANDING:
6,576,837 (Y&A COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
GENERAL ELECTRIC
3.2%
COCA-COLA
2.6%
MICROSOFT
2.3%
EXXON
2.3%
MERCK & COMPANY
1.9%
17
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
CORE EQUITY FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$531.1 MILLION
SHARES OUTSTANDING:
25,155,234 (Y&A COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
WORLDCOM
4.5%
AIRTOUCH COMMUNICATIONS
4.4%
LILLY ELI & COMPANY
3.3%
GENERAL ELECTRIC
2.9%
IBM
2.7%
[SQUARE BULLET] CORE EQUITY FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 33.10% after expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Index, returned 34.68%
for the same period.
[SQUARE BULLET] Assets in the Fund grew 24.7% from $426.0 million to
$531.1 million during the year.
COMMENTARY
Throughout the year, the CoreFund Core Equity Fund produced positive results for
shareholders while slightly underperforming its benchmark. With interest rates
and inflation rates stable, the Fund benefited from overall strong performance
in the technology sector. Although technology experienced a correction in
December of 1996, the Fund gained in this area for the year due to superior
stock selection and the sector's overperformance during the second quarter of
1997.
We continued our overweighting in IBM. Microsoft and Intel were also
strong contributors. And, we benefited from our holdings in Lucent, a company
spun off from AT&T that supplies equipment to telecommunications companies.
Healthcare stocks also contributed to the Fund's performance, as we
benefited from our holdings in Lilly Eli. In contrast, although underweighted in
this area, the Fund was hurt by poor performance in the utilities sector.
AVERAGE ANNUAL TOTAL RETURN1
------------------------------------------------
1 YEAR 5 YEAR INCEPTION
------------------------------------------------
CLASS Y (SYNTHETIC) 33.10% 18.74% 18.03%
CLASS A W/O LOAD 32.74% 18.64% 17.96%
CLASS A W/LOAD 25.41% 17.31% 17.06%
------------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,00 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/90 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
CORE EQUITY CLASS Y 10,000 10,964 11,978 14,285 16,109 16,352 19,814 25,338 33,725
(SYNTHETIC)
CORE EQUITY CLASS A 9,450 10,361 11,319 13,499 15,223 15,453 18,710 23,908 31,735
S&P 500 COMPOSITE INDEX 10,000 10,910 11,714 13,288 15,097 15,305 19,289 24,300 32,727
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS Y SHARES WERE OFFERED
BEGINNING FEBRUARY 21, 1995. THE PERFORMANCE SHOWN FOR CORE EQUITY PORTFOLIO
CLASS Y SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF
INDIVIDUAL CLASS A SHARES, WITHOUT THE MAXIMUM SALES CHARGE OF 5.50% FOR THE
CLASS A SHARES. CLASS A SHARES OF THE CORE EQUITY PORTFOLIO COMMENCED
OPERATIONS ON FEBRUARY 28, 1990.
</FN>
</TABLE>
During the year, we saw positive performance in our consumer cyclical stock
holdings, especially from General Nutrition, although the sector as a whole
underper-
18
<PAGE>
[SQUARE BULLET] CORE FUND
formed. Also, the impact of a strong U.S. dollar on multi-national companies
made us cautious about certain drug and auto companies.
[GRAPHIC OF POINTER]
Looking ahead, we expect the stock market to continue to be strong.
Demographics are working in favor of the market as are low inflation, declining
interest rates, a budget agreement which includes tax cuts, strong mutual fund
cash flows, and robust corporate profits. We will continue our strategy of
creating a diversified portfolio of large and mid-capitalization companies with
strong fundamentals.
[SQUARE BULLET]
[SQUARE BULLET] GROWTH EQUITY FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 21.67% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lipper Growth Fund Index, returned
25.57% for the same period. The S&P 500 Index returned 34.68%
for the twelve months.
[SQUARE BULLET] Assets in the Fund grew 23.7% from $123.2 million to
$152.4 million during the year.
COMMENTARY
The CoreFund Growth Equity Fund, while slightly underperforming its benchmark,
produced positive returns for investors. It was a mixed year of performance in
its sector of the stock market. After turning in strong performance from June
30, 1996 through November of 1996, the Fund ran into difficulty toward the end
of the first half of its fiscal year. Overweighted in technology stocks, it was
impacted by a correction in the technology sector in December of 1996. The first
quarter of 1997 was also volatile, as the market reacted to the first increase
in the Federal Funds rate in two years.
GROWTH EQUITY FUND
------------------
QUICK FUND FACTS
------------------
INCEPTION DATE:
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$152.4 MILLION
SHARES OUTSTANDING:
9,878,488 (Y&A COMBINED)
TOP FIVE HOLDINGS
------------------
(% OF FUND INVESTMENTS)
ORACLE
2.6%
INTEL
2.5%
HOME DEPOT
2.5%
DAYTON HUDSON
2.5%
HALLIBURTON
2.4%
19
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] GROWTH EQUITY (CONTINUED)
[GRAPHIC OF POINTER]
However, we maintained our position and the situation reversed. The
Fund benefited from its positioning in the second quarter of 1997 and
performance has been dynamic. The same overweighting in technology stocks that
hurt the Fund earlier is now responsible for its recent outperformance.
In addition to technology stocks, including such companies as Oracle,
Cisco Systems, Microsoft, Intel, and Motorola, the Fund is well-diversified into
other growth stock sectors. These sectors include healthcare, retail, consumer,
and financial stocks. We remain committed to our strategy of investing in high
quality, large-to-medium capitalization stocks of well-managed growth companies.
Looking ahead, the outlook for the stock market remains very positive.
Therefore, we're maintaining a fully invested position. We expect to see modest
economic growth, almost non-existent inflation, and no need for the Federal
Reserve to raise interest rates. We're also seeing some very strong corporate
profits reports. In short, the current outlook for equities appears to be very
encouraging.
[SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------
1 YEAR 5 YEAR INCEPTION CLASS Y 21.67% 15.86% 11.90% CLASS A
W/O LOAD 21.29% 15.62% 11.69% CLASS A W/ LOAD 14.65% 14.32% 10.53%
-----------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
<TABLE>
2/28/92 6/92 6/93 6/94 6/95 6/96 6/97
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH EQUITY CLASS Y 10,000 8,795 10,093 9,285 11,487 15,090 18,359
GROWTH EQUITY CLASS A
(SYNTHETIC) 9,450 8,311 9,538 8,763 10,817 14,170 17,187
S&P 500 COMPOSITE INDEX 10,000 9,992 11,352 11,508 14,504 18,272 24,608
LIPPER GROWTH FUNDS INDEX 10,000 9,494 11,067 11,254 13,857 16,718 20,993
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING JANUARY 4, 1993. THE PERFORMANCE SHOWN FOR GROWTH EQUITY PORTFOLIO
CLASS A SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF
INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF
5.50% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE GROWTH EQUITY PORTFOLIO
COMMENCED OPERATIONS ON FEBRUARY 3, 1992.
</FN>
</TABLE>
20
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] SPECIAL EQUITY FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 17.94% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Russell 3000 Equal Weighted Index,
returned 17.03% for the same period.
[SQUARE BULLET] Assets in the Fund grew 14.7% from $64.8 million to
$74.3 million during the year.
COMMENTARY
During the last year, CoreFund Special Equity Fund produced positive results for
shareholders while slightly outperforming its benchmark. The approach of this
Fund is very issue-specific, relying on company fundamentals. We work to choose
the very best stocks for the Fund, without concern for sector diversification.
[GRAPHIC OF POINTER]
With interest rates and inflation rates stable, the Fund benefited from
overall strong performance in the technology sector. Although technology
experienced a correction in December of 1996, the Fund gained in this area for
the year due to superior stock selection and the sector's overperformance during
the second quarter of 1997.
We continued our overweighting in IBM. Microsoft and Intel were also
strong contributors. Another stock that has performed well for the Fund is
Teradyne, a supplier of test equipment for the electronics industry. And, we
benefited from our holdings in Lucent, a company spun off from AT&T that
supplies equipment to telecommunications companies.
Healthcare stocks also contributed to the Fund's performance. The Fund
benefited from holdings in Guilford
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y (SYNTHETIC) 17.94% 25.29% 17.31%
CLASS A W/O LOAD 17.73% 25.16% 17.20%
CLASS A W/LOAD 11.25% 22.83% 15.22%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
3/31/94 6/94 6/95 6/96 6/97
SPECIAL EQUITY CLASS Y
(SYNTHETIC) 10,000 9,279 11,363 15,477 18,253
SPECIAL EQUITY CLASS A 9,450 8,769 10,735 14,605 17,194
FRANK RUSSELL 3000 INDEX
(EQUALLY WEIGHTED) 10,000 9,645 11,773 14,711 17,216
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INSTITUTIONAL CLASS Y SHARES WERE OFFERED
BEGINNING FEBRUARY 21, 1995. THE PERFORMANCE SHOWN FOR SPECIAL EQUITY
PORTFOLIO CLASS Y SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE
PERFORMANCE OF INDIVIDUAL CLASS A SHARES, WITHOUT THE MAXIMUM SALES CHARGE OF
5.50% FOR THE CLASS A SHARES. CLASS A SHARES OF THE SPECIAL EQUITY PORTFOLIO
COMMENCED OPERATIONS ON MARCH 15, 1994.
SPECIAL EQUITY FUND
-------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MARCH 15, 1994
PORTFOLIO SIZE:
$74.3 MILLION
SHARES OUTSTANDING:
6,594,766 (Y&A COMBINED)
TOP FIVE HOLDINGS
-------------------
(% OF FUND INVESTMENTS)
KUHLMAN
2.2%
SCIOS NOVA
1.9%
VDI MEDIA
1.8%
EVEREST REINSURANCE HOLDINGS
1.7%
INTEL
1.7%
21
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] SPECIAL EQUITY (CONTINUED)
Pharmaceuticals, a biotechnology company focusing on new ways of delivering
cancer drugs directly into tumors.
During the year, we saw positive performance in our consumer cyclical stock
holdings, especially from General Nutrition, although the sector as a whole
underperformed. Also, the impact of a strong U.S. dollar on multi-national
companies made us cautious about certain drug and auto companies.
Looking ahead, we expect the stock market to continue to be strong.
Demographics are working in favor of the market as are low inflation, declining
interest rates, a budget agreement which includes tax cuts, strong mutual fund
cash flows, and robust corporate profits. [SQUARE BULLET]
[SQUARE BULLET] INTERNATIONAL GROWTH FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 15.43% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Morgan Stanley Capital International
EAFE Index, returned 12.85% for the same period.
[SQUARE BULLET] Assets in the Fund grew 17.1% from $141.4 million to $165.6
million during the year.
[GRAPHIC OF POINTER]
COMMENTARY
The CoreFund International Growth Fund outperformed its benchmark and provided
healthy returns for investors. The Fund is co-managed by Martin Currie, Inc.
(80% of Fund Assets) and Aberdeen Managers (20% of Fund Assets), providing the
portfolio with an added level of diversification. Both managers do extensive
research on individual companies throughout the world. By visiting over 2,000
companies a year from their international offices, they learn about each
company's facilities, products, balance sheets, and management within the
context of its local market and economy. A combination of micro and macro
economic factors are considered when making buy and sell decisions for the Fund.
22
<PAGE>
[SQUARE BULLET] COREFUND
INTERNATIONAL MARKET OVERVIEW
The UK market benefited from a stronger currency as the economy began
experiencing an earlier recovery than the rest of Europe. Financial stocks
dominated returns. However, there is concern about the continued strength of the
sterling in the coming months and its impact on forecasts.
The European markets made good progress throughout the period, although
recovery is far behind North America. In spite of uncertainty over the European
Monetary Union, the improved outlook for corporate profits pushed share prices
up. Although this market is benefiting from corporate restructuring and an
emphasis on shareholder value, for U.S. dollar-based investors, returns weren't
as good as they were in local currency terms.
The Japanese market suffered during the first six months of this period,
but began to show signs of improvement at the beginning of 1997. Gains, however,
have been aided greatly by the yen strengthening significantly on the back of
possible interest rate rises. Companies which have already restructured and are
competitive globally, such as in electronics, have performed well with increases
in earnings.
Among the Asia Pacific Region markets, Hong Kong remained the best of the
major markets. Despite Hong Kong's hand over to China, there were many
opportunities for strong returns. In contrast, Thailand, Malaysia, Korea, and
Singapore were consistently disappointing throughout the year.
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 5 YEAR INCEPTION
CLASS Y 15.43% 11.87% 9.57%
CLASS A W/O LOAD 15.09% 11.67% 9.44%
CLASS A W/LOAD 8.78% 10.42% 8.60%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/90 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
INTERNATIONAL EQUITY
CLASS Y 10,000 10,985 10,688 11,210 12,562 14,611 14,581 17,018 19,644
INTERNATIONAL EQUITY
CLASS A (SYNTHETIC) 9,450 10,381 10,100 10,594 11,907 13,824 13,758 16,034 18,453
MORGAN STANLEY MSCI EAFE
INDEX 10,000 9,814 8,682 8,626 10,375 12,138 12,341 13,980 15,776
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING JANUARY 4, 1993. THE PERFORMANCE SHOWN FOR INTERNATIONAL GROWTH
PORTFOLIO CLASS A SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE
PERFORMANCE OF INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM
SALES CHARGE OF 5.50% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE
INTERNATIONAL GROWTH PORTFOLIO COMMENCED OPERATIONS ON FEBRUARY 12, 1990.
</FN>
</TABLE>
INTERNATIONAL GROWTH FUND
-------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 12, 1990
PORTFOLIO SIZE:
$165.6 MILLION
SHARES OUTSTANDING:
11,250,338 (Y&A COMBINED)
TOP FIVE HOLDINGS
-------------------
(% OF FUND INVESTMENTS)
NOVARTIS
2.2%
MANNESMANN
1.6%
ROCHE HOLDINGS
1.6%
ROHM LTD
1.6%
ING GROUP
1.5%
23
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] INT'L GROWTH FUND (CONTINUED)
Latin American markets, in particular Argentina and Brazil, were up
nicely after the first six months of the period. Mexico also gained during the
second half of 1996, but the gain was canceled out by the renewed weakness of
the peso. In the second half of the period, strong rallies in the utility
sectors of Brazil made it the strongest market in its region. Argentine and
Mexican markets were also encouraged by stronger than expected economic growth.
MARTIN CURRIE, INC.
(80% OF FUND ASSETS )
Our investment approach is to invest in growth, but at the right price. During
the year, the largest sector of our asset allocation model has been Europe,
where we've invested more than half of all assets.
Latin America, including Brazil and Mexico, proved to be the best
performing sector for the period producing returns of about 45%. We've seen a
lot of privatization in these countries, particularly in utilities, from which
the Fund has benefited. After a dramatic Latin American recovery, however, we
have taken profits ahead of elections in Mexico and Brazil. We also have a very
small, but strong performing, portion in cash in the Middle East.
Going forward, we are confident of continued favorable conditions in
Hong Kong in spite of its hand over to China. We will continue to underweight or
avoid the markets of Thailand, Korea, and Malaysia due to weak conditions.
Although Japan had a difficult first half of the period, it has been
recovering nicely over the last six months. We've invested in a very focused
group of world class consumer electronics companies in Japan such as Sony,
Hitachi, and Canon, giving us the ability to produce high returns atypical of
the Japanese market as a whole. We will continue to maximize opportunities in
this market.
ABERDEEN MANAGERS
(20% OF FUND ASSETS)
Throughout the year, we remained underweighted in Japan, which benefited the
portfolio due to that country's weak performance during the early part of the
period. We have recently seen volatility in the world markets, and we expect
this trend to increase. We also expect to see volatility in the currency
24
<PAGE>
[SQUARE BULLET] COREFUND
markets as Europe moves toward one currency. We're closely watching Hong Kong
since its hand over to China, looking for opportunities. The Far East should
begin to outperform as conditions there are excellent for growth. Looking ahead,
although the international markets have generally underperformed the U.S. over
the last few years, we believe the cycle is now beginning to turn around.
[SQUARE BULLET]
[SQUARE BULLET] BALANCED FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 16.44% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmarks, the S&P 500 Index returned 34.68% and
the Lehman Brothers Intermediate Government/Corporate Bond Index
returned 7.23% for the same period, respectively.
[SQUARE BULLET] Assets in the Fund grew 11.5% from $105.7 million to
$117.8 million during the year.
COMMENTARY
The CoreFund Balanced Fund produced positive returns for investors for the one
year period ending June 30, 1997. Throughout the year, the Fund had mixed
performance as it shifted its equity sector weightings to a more advantageous
position.
[GRAPHIC OF POINTER]
On the equity side, we began the period by decreasing the Fund's
exposure to financial stocks while increasing its energy holdings. This hurt
performance as a post election rally in the market produced high returns in the
financial sector. Also, volatility in the Fund's technology and communica-
BALANCED FUND
-------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
JANUARY 4, 1993
PORTFOLIO SIZE:
$117.8 MILLION
SHARES OUTSTANDING:
8,717,507 (Y&A COMBINED)
TOP FIVE EQUITY HOLDINGS
-------------------------
(% OF FUND INVESTMENTS)
WARNER LAMBERT
1.3%
HEALTH MANAGEMENT ASSOCIATES
1.3%
PEOPLESOFT
1.2%
ORACLE
1.2%
DAYTON HUDSON
1.2%
25
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] BALANCED FUND (CONTINUED)
tions services holdings had a negative impact late in 1996.
The situation reversed during the first quarter 1997 correction, when the
overweighted technology sector generated superior returns relative to the
market. We then increased the Fund's holdings in the financial sector toward a
market weighting and decreased energy holdings. These trends continued through
the second quarter of 1997. In addition, holdings in the capital goods and
healthcare sectors continued to post strong returns, while large capitalization,
predictable growth stocks resumed market leadership.
On the fixed income side of the portfolio, we shortened duration during
periods of price strength from 10 years to about 51/2 years, bringing it closer
to the index. We also worked to add income during periods of price weakness.
Looking ahead, the Fund is now in a strong position both on the equity
side and the fixed income side in light of current market conditions. We do not
foresee economic conditions changing in the next six months, although we
continue to look for signs to the contrary. We continue to favor stocks of
companies which are generating accelerating earnings momentum and positive
earnings surprises, as well as improved earnings prospects. In contrast, we
intend to avoid new purchases of bonds, as we anticipate stable to gently
falling interest rates through the calendar year end. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 16.44% 17.01% 12.01%
CLASS A W/O LOAD 16.15% 16.70% 11.56%
CLASS A W/LOAD 9.79% 14.51% 10.10%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
1/31/93 6/93 6/94 6/95 6/96 6/97
BALANCED CLASS Y 10,000 10,478 10,309 11,980 14,185 16,517
BALANCED CLASS A
(SYNTHETIC) 9,450 9,899 9,715 11,254 13,294 15,441
S&P 500 COMPOSITE
INDEX 10,000 10,399 10,543 13,287 16,739 22,544
LEHMAN INTERMEDIATE
GOVERNMENT-CORPORATE
INDEX 10,000 10,419 10,392 11,468 12,042 12,912
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING MARCH 16, 1993. THE PERFORMANCE SHOWN FOR BALANCED PORTFOLIO CLASS A
SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF
INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF
5.50% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE BALANCED PORTFOLIO
COMMENCED OPERATIONS ON JANUARY 4, 1993.
26
<PAGE>
[SQUARE BULLET] COREFUND
COREFUND FIXED INCOME MANAGERS
(LEFT TO RIGHT)
JOSEPH BAXTER
INTERMEDIATE, PA & NJ MUNI BONDS
DAN TAYLOR
SHORT-INTERMEDIATE BOND
BRIAN SNYDER
MUNICIPAL BOND SPECIALIST
JOHN ACKLER
SHORT TERM INCOME
WILLIAM LAWRENCE
GOVERNMENT INCOME & BOND
(MANAGER NOT SHOWN)
GEORGE MCNEILL
GLOBAL BOND
[PHOTO OF JOSEPH BAXTER, DAN TAYLOR, BRIAN SNYDER,
JOHN ACKLER, WILLIAM LAWRENCE]
27
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
SHORT TERM INCOME FUND
-----------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 15, 1995
PORTFOLIO SIZE:
$37.5 MILLION
SHARES OUTSTANDING:
3,762,789 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
1.0 YEARS
QUALITY DIVERSIFICATION
[PIE CHART]
AAA 55%
AA 4%
A 19%
BBB 10%
OTHER 12%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.82% net of fees for the year ending
June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-year Treasury
Bill Index, had a gross return of 6.18% for the same period.
[SQUARE BULLET] Assets in the Fund grew 24.6% from $30.1 million to
$37.5 million during the year.
COMMENTARY
Despite slightly underperforming its benchmark, the CoreFund Short Term Income
Fund provided money market investors with positive returns for the year. During
the period, the average weighted maturity of the Fund was about one year, toward
the shorter end of its range of three years or less.
During the first six months of the period, the Federal funds rate remained
unchanged. However, the market experienced some short-term interest rate
volatility as concerns about inflation fueled fears that the Federal Reserve
would raise interest rates. By September, evidence of a softer economy quieted
these fears and rates dropped significantly.
The first quarter of 1997 again found short-term income securities trading
on expectations of an upward interest rate move. In March, the interest rate was
increased followed by the influx of enormous tax receipts in April and May. With
the treasury flush with cash, action was taken to reduce the auction sizes of
several Treasury issuances reducing supply for the remainder of the period.
Throughout this cycle, a laddered maturity approach was maintained,
exposing the portfolio all along the yield curve. This
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR INCEPTION
CLASS Y 5.82% 5.42%
CLASS A W/O LOAD 5.59% 5.07%
CLASS A W/LOAD 2.19% 3.43%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
5/31/95 6/95 6/96 6/97
SHORT-TERM INCOME
FUND CLASS Y 10,000 10,046 10,534 11,147
SHORT-TERM INCOME
FUND CLASS A 9,450 9,718 10,160 10,728
MERRILL LYNCH 1-YEAR
TREASURY BILL INDEX 10,000 10,057 10,615 11,271
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES WERE OFFERED BEGINNING MAY
15, 1995 AND CLASS A SHARES WERE OFFERED BEGINNING MAY 17, 1995. THE MAXIMUM
SALES CHARGE ON CLASS A SHARES IS 3.25%.
28
<PAGE>
[SQUARE BULLET] COREFUND
strategy helps to neutralize interest rate risk and is a great way to achieve
better yields due to representation at the higher end of the yield curve.
In addition, our floater and asset-backed positions were increased
slightly as a hedge against higher interest rates. This technique produces a
more constant yield.
Looking ahead, we intend to keep a disciplined laddered approach to Fund
management. We will continue to work to neutralize interest rate risk and
duration rate risk as we concentrate on yield. We believe that it will take a
while for technical factors, such as treasury supply, to change. In terms of the
economy, although we think there still may be another interest rate hike
somewhere on the horizon, the economic data is simply too good for the market to
change much in the near future. [SQUARE BULLET]
[SQUARE BULLET] SHORT-INTERMEDIATE BOND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.90% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-5 year Treasury
Index, returned 6.70% for the same period.
[SQUARE BULLET] Assets in the Fund grew 1.8% from $162.9 million to $165.9
million during the year.
COMMENTARY
The CoreFund Short-Intermediate Bond Fund provided investors with positive
returns for the year while slightly outperforming its benchmark. The Fund
benefited from overweighted positions in asset-backed securities and Yankee
securities. Underweighting in corporate bonds, treasuries, and a slight
underweighting in mortgages has been the Fund's position throughout the period.
We work to add value through security selection and sector allocation, striving
to invest in the right sectors, as well as the right securities and companies.
Overall, the bond market was surprisingly stable over the past twelve
months. The Federal Reserve Board raised interest
SHORT-INTERMEDIATE BOND FUND
----------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$165.9 MILLION
SHARES OUTSTANDING:
16,882,464 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
4.4 YEARS
QUALITY DIVERSIFICATION
[PIE CHART]
AAA 71%
AA 2%
A 10%
BBB 8%
BB 3%
NOT RATED 2%
OTHER 4%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
29
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] SHORT-INTERMEDIATE (CONTINUED)
rates once during the period, but there was a modest rally across the yield
curve. Volatility was very low in the marketplace.
In terms of the economy, although we think there still may be another
interest rate hike somewhere on the horizon, the economic data is simply too
good for the market to change much in the near future.
In this environment, the Fund will work to add value by continuing to
emphasize its yield advantage with corporate, mortgage-backed, and asset-backed
securities. And we continue to see potential in asset-backed securities and
Yankee securities. Although duration has been somewhat longer than the Fund's
21/2 year target, we anticipate scaling back duration to be neutral with our
benchmarks as we move forward. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 5 YEAR INCEPTION
CLASS Y 6.90% 5.51% 5.56%
CLASS A W/O LOAD 6.64% 5.26% 5.34%
CLASS A W/LOAD 3.15% 4.56% 4.69%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
2/29/92 6/92 6/93 6/94 6/95 6/96 6/97
SHORT-INTERMEDIATE
BOND CLASS Y 10,000 10,249 11,059 11,025 11,931 12,533 13,398
SHORT-INTERMEDIATE
BOND CLASS A
(SYNTHETIC) 9,675 9,916 10,700 10,641 11,487 12,037 12,836
MERRILL 1-5 YEAR SHORT-
INTERMEDIATE TREASURY
INDEX 10,000 10,324 11,189 11,265 12,248 12,883 13,747
MERILL 1-3 YEAR SHORT-
TERM TREASURY INDEX 10,000 10,284 10,961 11,138 11,999 12,651 13,483
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING JANUARY 4, 1993. THE PERFORMANCE SHOWN FOR SHORT-INTERMEDIATE BOND
PORTFOLIO CLASS A SHARES (SYNTHETIC) PRIOR TO THAT DATE IS BASED ON THE
PERFORMANCE OF INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM
SALES CHARGE OF 3.25% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE
SHORT-INTERMEDIATE BOND PORTFOLIO COMMENCED OPERATIONS ON FEBRUARY 3, 1992. WE
HAVE CHANGED THE BENCHMARK FOR THIS FUND BECAUSE WE FEEL THE MERRILL LYNCH 1-5
YR. TREASURY INDEX MORE ACCURATELY REPRESENTS THE HOLDINGS OF THIS FUND.
</FN>
</TABLE>
30
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] GOVERNMENT INCOME FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 8.15% after expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Salomon Brothers Broad
Investment Grade Bond Index, also returned 8.15% for the same
period.
[SQUARE BULLET] Assets in the Fund grew 36.2% from $15.2 million to
$20.7 million during the year.
[GRAPHIC OF POINTER]
COMMENTARY
The CoreFund Government Income Fund produced positive results for its
shareholders while matching its benchmark. The Fund's performance was helped
significantly by an overweighting in mortgage-backed securities. Representing
about 75% of the Fund's assets, mortgage-backed securities were a strong
performing sector of the market. The balance of the Fund was in U.S. Treasury
securities.
Throughout the period, the Fund's duration management has been minimal.
The Fund's average duration is typically 43/4 years. We went a little bit longer
in the second half of 1996 which modestly helped Fund performance. During the
first quarter of 1997, we shortened duration slightly, which helped performance
during that period but took away from performance during the following quarter.
The Fund emphasizes high income as a source of return for its investors,
and it takes on no credit risks.
Overall, the bond market was surprisingly stable over the past twelve
months. The Federal Reserve Board raised interest rates once during the period,
but there was a modest rally across the yield curve. Volatility was very low in
the marketplace.
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 8.15% 7.47% 5.66%
CLASS A W/O LOAD 7.88% 7.25% 5.21%
CLASS A W/LOAD 4.41% 6.07% 4.37%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
4/30/93 6/93 6/94 6/95 6/96 6/97
GOVERNMENT INCOME CLASS Y 10,000 10,235 10,098 11,134 11,589 12,534
GOVERNMENT INCOME CLASS A
(SYNTHETIC) 9,675 9,890 9,735 10,730 11,131 12,008
SOLOMON BROAD INVESTMENT-
GRADE BOND INDEX 10,000 10,196 10,076 11,340 11,905 12,875
LEHMAN BROTHERS AGGREGATE
BOND INDEX 10,000 10,194 10,061 11,324 11,892 12,862
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING MAY 3, 1993. THE PERFORMANCE SHOWN FOR GOVERNMENT INCOME PORTFOLIO
CLASS A SHARES (SYNTHETIC) PRIOR TO THAT DATE IS BASED ON THE PERFORMANCE OF
INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF
3.25% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE GOVERNMENT INCOME
PORTFOLIO COMMENCED OPERATIONS ON APRIL 1, 1993.
GOVERNMENT INCOME FUND
----------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
APRIL 1, 1993
PORTFOLIO SIZE:
$20.7 MILLION
SHARES OUTSTANDING:
2,118,140 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
8.8 YEARS
MATURITY DIVERSIFICATION
[PIE CHART]
UNDER 1 YEAR 2%
1-5 YEARS 22%
6-10 YEARS 66%
OVER 20 YEARS 10%
MATURITY IN YEARS --% OF FUND INVESTMENTS
31
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] GOV'T INCOME (CONTINUED)
Looking ahead, we've shortened duration a bit due to prepayment fears in
the mortgage sector sparked by the second quarter rally. Overall, we plan to
stay duration neutral to the market with an emphasis on yield. We plan to
continue our emphasis on the mortgage sector, but we look to purchase mortgages
with less prepayment exposure to avoid prepayment risk.
We expect the economy to continue with low inflation and good growth
throughout the third quarter of 1997, within the context of a tight labor
market. However, if there is any rebound in retail spending, we believe there
may be another rise in interest rates in the future and the yield curve will
probably flatten. Volatility should remain generally low; therefore, we will
maintain a neutral duration strategy with an emphasis on yield. [SQUARE BULLET]
[SQUARE BULLET] BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 7.43% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Aggregate Bond Index returned
8.16% for the same period.
[SQUARE BULLET] Assets in the Fund declined 8.0% from $199.9 million to
$184.0 million during the year.
COMMENTARY
During the last year, the CoreFund Bond Fund produced positive returns for
investors while slightly underperforming its benchmark. Early in the period, we
had an underweighting in mortgage-backed securities which helped the Fund's
performance as the market rallied. We then added more mortgages, but were still
underweighted when mortgages began to outperform the market in early 1997, which
hurt the Fund's performance.
[GRAPHIC OF POINTER]
An 8% to 10% overweighting in asset-backed securities helped
significantly throughout the Fund's fiscal year. We also had an overall neutral
weighting in the corporate bond sector with an overweight in the Yankee sector.
And, we were overweighted in
32
<PAGE>
[SQUARE BULLET] COREFUND
brokerage firm securities where we benefited from recent consolidations in that
industry.
The Fund performed well during the second half of 1996 with a duration
neutral to the index. During the first half of 1997, we extended duration by
about 3 months in the first quarter. This hurt our performance because when the
market rallied in the second quarter, we were very early on duration. Right now,
we are duration neutral.
Overall, the bond market was surprisingly stable over the past twelve
months. The Federal Reserve Board raised interest rates once during the period,
but there was a modest rally across the yield curve. Volatility was very low in
the marketplace. Lesser-rated corporate bonds were the top performers. Mortgages
performed well in the first half of 1997 after slight underperformance in the
second half of 1996. Asset-backed securities also performed well for the period.
We expect the economy to continue with low inflation and good growth
throughout the third quarter of 1997, within the context of a tight labor
market. However, if there is any rebound in retail spending, we believe there
may be another rise in interest rates in the future and then the yield curve
would probably flatten. However, volatility should remain generally low, and
therefore we will maintain a neutral duration strategy with an emphasis on
yield.
We will continue to overweight the asset-backed securities and the Yankee
sectors. These are the two areas where we are seeing the most innovation from
issuers and, therefore, the most opportunities. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 5 YEAR INCEPTION
CLASS Y 7.43% 6.03% 7.73%
CLASS A W/O LOAD 7.15% 5.91% 7.65%
CLASS A W/LOAD 2.03% 4.88% 6.94%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/90 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
BOND CLASS Y
(SYNTHETIC) 10,000 10,266 11,279 12,883 14,254 13,946 15,403 16,078 17,272
BOND CLASS A 9,525 9,778 10,743 12,271 13,577 13,283 14,674 15,262 16,354
LEHMAN BROTHERS
AGGREGATE BOND
INDEX 10,000 10,373 11,482 13,095 14,639 14,447 16,261 17,076 18,470
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INSTITUTIONAL CLASS Y SHARES WERE OFFERED
BEGINNING FEBRUARY 21, 1995. THE PERFORMANCE SHOWN FOR BOND PORTFOLIO CLASS Y
SHARES (SYNTHETIC) PRIOR TO THAT DATE IS BASED ON THE PERFORMANCE OF
INDIVIDUAL CLASS A SHARES, WITHOUT THE MAXIMUM SALES CHARGE OF 4.75% FOR THE
CLASS A SHARES. CLASS A SHARES OF THE BOND PORTFOLIO COMMENCED OPERATIONS ON
FEBRUARY 28, 1990.
</FN>
</TABLE>
BOND FUND
---------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$184.0 MILLION
SHARES OUTSTANDING:
17,959,624 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
11.0 YEARS
QUALITY DIVERSIFICATION
AAA 77%
AA 1%
A 7%
BBB 10%
NOT RATED 3%
OTHER 2%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
33
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
GLOBAL BOND FUND
----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 15, 1993
PORTFOLIO SIZE:
$34.8 MILLION
SHARES OUTSTANDING:
3,646,453 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
8.7 YEARS
QUALITY DIVERSIFICATION
AAA 68%
AA 25%
A 6%
NOT RATED 1%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] GLOBAL BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.18% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the J.P. Morgan Global Bond Index,
returned 4.48% for the same period.
[SQUARE BULLET] Assets in the Fund grew 4.8% from $33.2 million to $34.8
million during the year.
COMMENTARY
[GRAPHIC OF POINTER]
During the past year, the Global Bond Fund outperformed its benchmark, reporting
positive performance for shareholders. For the year ending in June 1997, bond
markets globally have done quite well. We have an environment where restrained
growth is appearing around the world with seemingly no inflationary
consequences. The bond markets have responded well to this structural change in
the world. However, because of the strength of the dollar, the performance has
not reflected this as well as we would like.
During the first six months of the Fund's fiscal year, investors were
uncertain about the strength of the U.S. economy. This is important because the
performance of U.S. Treasuries has been setting the tone for other world bond
markets.
Also during this period, we saw volatility in parts of Europe in light
of uncertainty about the European Monetary Union (EMU). In response to continued
uneasiness about the EMU, all of the Fund's European
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 6.18% 7.99% 3.92%
CLASS A W/O LOAD 5.92% 7.74% 3.65%
CLASS A W/LOAD 0.92% 6.01% 2.23%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
12/31/93 6/94 6/95 6/96 6/97
GLOBAL BOND CLASS Y 10,000 9,045 9,923 10,729 11,392
GLOBAL BOND CLASS A 9,525 8,595 9,418 10,147 10,748
J.P. MORGAN GLOBAL
BOND INDEX 10,000 9,964 11,704 11,942 12,477
J.. MORGAN GLOBAL
BOND INDEX, HEDGED 10,000 9,489 10,537 11,498 12,565
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING FEBRUARY 15, 1993. THE MAXIMUM SALES CHARGE ON CLASS A
SHARES IS 4.75%.
holdings are now hedged back to the dollar. We believe that European currency
will continue to be weak in the coming months.
The first half of 1997 brought the March interest rate increase in the U.S.
We
34
<PAGE>
[SQUARE BULLET] COREFUND
also saw strong employment numbers and rising average earnings implying the
danger of further interest rate moves for the U.S. and the UK. In Europe, slow
growth and the constraints of the EMU set the stage for higher interest rates.
And, in Japan, while export growth was strengthening, domestic growth was
inhibited.
We see the next six months as a dangerous period for global bonds because
any kick in inflation, no matter how small, may take the market by surprise, and
the risk is that yields will go back up. We expect to see virtually all bond
markets with higher yields over the next six months, and therefore, we are
continuing to keep a short maturity profile. [SQUARE BULLET]
[SQUARE BULLET] INTERMEDIATE MUNI BOND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.62% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers 7-Year Municipal Bond
Index, returned 7.05% for the same period.
[GRAPHIC OF POINTER]
[SQUARE BULLET] Assets in the Fund grew 42.9% from $1.4 million to $2.0
million during the year.
COMMENTARY
During the year, the CoreFund Intermediate Municipal Bond Fund provided
investors with positive returns, even though it underperformed its benchmark.
The municipal bond market experienced slow economic growth during the first
quarter of 1997. After a Federal Funds rate hike of .25% and tax exempt yields
rose 25 to 30 basis points, the municipal market rallied along with the Treasury
market in the second quarter. Yields fell 40 basis points across the municipal
curve.
In April, higher yields, the stock market sell-off, and a slowing economy
drew investors into the muni marketplace. Demand soon outstripped bond supply.
Also, April tax payments increased municipal cash,
INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 3, 1993
PORTFOLIO SIZE:
$2.0 MILLION
SHARES OUTSTANDING:
194,239 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
7.1 YEARS
QUALITY DIVERSIFICATION
AAA 68%
AA 22%
A 3%
NOT RATED 4%
OTHER 3%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
35
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] INTERMEDIATE MUNI (CONTINUED)
decreasing the need for new issues. As a result, a strong technical rally pushed
yields down. Yields rose slightly in June as supply began to increase, creating
a small window of opportunity for investors.
We believe that interest rates will remain unchanged for at least the
near future. We will remain focused on investing in tax-exempt municipal bonds
maintaining an average weighted maturity of three to ten years. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 5.62% 5.31% 4.07%
CLASS A W/O LOAD 5.36% 5.09% 3.81%
CLASS A W/LOAD 1.97% 3.95% 2.98%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
5/31/93 6/93 6/94 6/95 6/96 6/97
INTERMEDIATE TERM MUNI
CLASS Y 10,000 10,124 10,097 10,660 11,165 11,793
INTERMEDIATE TERM MUNI
CLASS A (SYNTHETIC) 9,675 9,782 9,732 10,259 10,719 11,293
LEHMAN 7-YEAR MUNICIPAL
BOND INDEX 10,000 10,183 10,311 11,163 11,781 12,612
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING MAY 3, 1993. THE MAXIMUM SALES CHARGE ON CLASS A SHARES IS
3.25%.
[SQUARE BULLET] PA MUNICIPAL BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 7.92% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers Pennsylvania Bond
Index, returned 8.07% for the same period.
[SQUARE BULLET] Assets in the Fund grew 23.2% from $9.9 million to $12.2
million during the year.
COMMENTARY
The CoreFund Pennsylvania Municipal Bond Fund almost equaled its benchmark
performance for the year, providing investors with positive tax-free returns.
The Fund benefited from an increase in AA rated bonds which added yield with
minimal additional risk exposure. Also, by increasing the Fund's average
maturity to the upper end of its 9-11 year range, we've enhanced returns.
After outperforming their treasury counterparts during the second half
of 1996, the municipal bond market experienced slow economic growth during the
first quarter of 1997. After a Federal Funds rate hike of .25% and tax exempt
yields rising 25
36
<PAGE>
[SQUARE BULLET] COREFUND
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 7.92% 7.14% 6.90%
CLASS A W/O LOAD 7.65% 6.88% 6.64%
CLASS A W/LOAD 2.54% 5.15% 4.98%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
5/31/94 6/94 6/95 6/96 6/97
PENNSYLVANIA MUNI BOND
CLASS Y 10,000 9,913 10,656 11,298 12,193
PENNSYLVANIA MUNI BOND
CLASS A 9,525 9,429 10,112 10,695 11,513
LEHMAN BROTHERS MUTUAL
FUND PA INDEX 10,000 9,946 10,828 11,505 12,433
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING MAY 16, 1994. THE MAXIMUM SALES CHARGE ON CLASS A SHARES
IS 4.75%.
to 30 basis points, the municipal market rallied along with the Treasury market
in the second quarter. Yields fell 40 basis points across the municipal curve.
In April, higher yields, the stock market sell-off, and a slowing
economy drew investors into the muni marketplace. Demand soon outstripped bond
supply. Also, April tax payments increased municipal cash decreasing the need
for new issues. As a result, a strong technical rally pushed yields down. Yields
rose slightly in June as supply began to increase, creating a small window of
opportunity for investors. Looking ahead, we believe that interest rates will
remain unchanged for at least the near future. [SQUARE BULLET]
PENNSYLVANIA MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 16, 1994
PORTFOLIO SIZE:
$12.2 MILLION
SHARES OUTSTANDING:
1,162,752 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.7 YEARS
QUALITY DIVERSIFICATION
AAA 65%
AA 19%
A 6%
OTHER 10%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
37
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
NEW JERSEY MUNICIPAL BOND FUND
------------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 16, 1994
PORTFOLIO SIZE:
$1.9 MILLION
SHARES OUTSTANDING:
184,608 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
9.9 YEARS
QUALITY DIVERSIFICATION
AAA 37%
AA 27%
NOT RATED 31%
OTHER 5%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] NJ MUNICIPAL BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.70% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers New Jersey Bond Index,
returned 7.88% for the same period.
[SQUARE BULLET] Assets in the Fund grew 18.8% from $1.6 to $1.9 million
during the year.
COMMENTARY
The CoreFund NJ Municipal Bond Fund provided investors with positive tax-free
returns for the year despite underperforming its benchmark. The Fund benefited
from an extension of its average maturity which enhanced returns.
After outperforming their treasury counterparts during the second half of
1996, the municipal bond market experienced slow economic growth during the
first quarter of 1997. After a Federal Funds rate hike of .25% and tax exempt
yields rising 25 to 30 basis points, the municipal market rallied along with the
Treasury market in the second quarter. Yields fell 40 basis points across the
municipal curve.
In April, higher yields, the stock market sell-off, and a slowing economy
drew investors into the muni market place. Demand soon outstripped bond supply.
Also, April tax payments increased municipal cash, decreasing the need for new
issues. As a result, a strong technical rally pushed yields down. Yields rose
slightly in June as supply began to increase, creating a small window of
opportunity for investors. Looking ahead, we believe that interest rates will
remain unchanged for at least the near future. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 6.70% 6.41% 6.15%
CLASS A W/O LOAD 6.44% 6.07% 5.85%
CLASS A W/LOAD 1.40% 4.35% 4.21%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
5/31/94 6/94 6/95 6/96 6/97
NEW JERSEY MUNI BOND
CLASS Y 10,000 9,930 10,650 11,212 11,963
NEW JERSEY MUNI BOND
CLASS A 9,525 9,466 10,113 10,612 11,295
LEHMAN BROTHERS MUTUAL
FUND NEW JERSEY INDEX 10,000 9,939 10,783 11,443 12,344
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING MAY 16, 1994. THE MAXIMUM SALES CHARGE ON CLASS A SHARES
IS 4.75%.
38
<PAGE>
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET MANAGERS
(LEFT TO RIGHT)
JOHN ACKLER
CASH RESERVE
FOLU ABIONA
TAX-FREE RESERVE
RONALD BRASTEN
TREASURY RESERVE
[PHOTO OF JOHN ACKLER, FOLU ABIONA, RONALD BRASTEN]
39
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
TREASURY RESERVE
-----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
NOVEMBER 21, 1988
PORTFOLIO SIZE:
$847.5 MILLION
AVERAGE WEIGHTED MATURITY:
55 DAYS
SEVEN DAY YIELD:
5.01% (CLASS Y)
4.76% (CLASS C)
QUALITY DIVERSIFICATION
AAA 36%
NOT RATED 2%
OTHER 62%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] TREASURY RESERVE
ANNUAL RESULTS
[GRAPHIC POINTER]
[SQUARE BULLET] This Fund returned 4.97% net of expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC/Donoghue Treasury & REPO
Index, returned 4.78% for the same period. The IBC/Donoghue 100%
Treasury Fund Index returned 4.72%, net of expenses, for the
year.
[SQUARE BULLET] Assets in the Fund declined 7.1% from $911.9 million to
$847.5 million during the year.
COMMENTARY
The average weighted maturity of the CoreFund Treasury Reserve decreased from 58
to 55 days during the year. The Fund slightly outperformed its benchmark for the
year. The drop in Fund assets was primarily due to investors moving money out of
money market funds and into longer-term coupon securities.
During the first six months of the period, the Federal Funds rate
remained unchanged. However, the market experienced some short-term interest
rate volatility as concerns about inflation fueled fears that the Federal
Reserve would raise interest rates. By September, evidence of a softer economy
quieted these fears and rates dropped significantly.
The first quarter of 1997 again found money market securities trading
on expectations of an upward interest rate move. In March, there was an interest
rate increase followed by the influx of enormous tax receipts in April and May.
With the Treasury flush with cash, the supply of Treasury bills was reduced for
the remainder of the period.
As the market began to anticipate the interest rate increase, we began
lowering the Fund's average maturity to take advantage of market opportunities.
The Fund's primary consideration is yield, so we look for value as we invest.
Throughout this cycle, a laddered maturity approach was maintained, exposing the
portfolio all along the yield curve. This strategy helps to neutralize interest
rate risk and is a great way to achieve better yields due to representation at
the higher end of the yield curve.
Over the last few months, we've seen expensive Treasury bills and an
inverted yield curve in which overnight yields are higher than longer
maturities. To take advantage of
40
<PAGE>
[SQUARE BULLET] COREFUND
this scenario, we've increased our position in overnight repurchase agreements.
This position also helps us to maintain complete liquidity.
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)(COMPOUNDED)
- ------------------------------------------
CLASS Y 2.45% 5.01% 4.98%
CLASS C 2.32% 4.76% 4.73%
IBC DONOGHUE 2.36% 4.83% 4.81%
TREASURY &
REPO INDEX
- ------------------------------------------
Looking forward, we continue to anticipate another interest rate
increase. However the timing of the move is unclear. Economic growth remains
slow and inflation benign, but the economy is expected to rebound in the third
or fourth quarters.
The Treasury bill remains very rich. Decreased supply and other technical
factors have caused the 3-month sector to trade well below the Federal Funds
target. For this reason, the investment in other Treasury sectors, including
overnight repurchase agreements, will continue to increase until the Treasury
bill market cheapens up. [SQUARE BULLET]
[SQUARE BULLET] CASH RESERVE
ANNUAL RESULTS
[GRAPHIC OF POINTER]
[SQUARE BULLET] This Fund returned 5.09% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC/Donoghue All-Taxable Money Fund
Average, returned 4.97% for the same period.
[SQUARE BULLET] Assets in the Fund grew 12.8% from $809.9 million to $913.9
million during the year.
COMMENTARY
Outperforming its benchmark, the Cash Reserve provided money market investors
with positive returns for the year. During the period, the average weighted
maturity of the Fund was increased to over 70 days.
During the first six months of the period, the Federal Funds rate
remained unchanged. However, the market experienced some short-term interest
rate volatility as concerns about inflation fueled fears that the Federal
Reserve would raise interest rates. By September, evidence of a softer economy
quieted these fears and rates dropped significantly.
CASH RESERVE
-----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
AUGUST 16, 1985
PORTFOLIO SIZE:
$913.9 MILLION
AVERAGE WEIGHTED MATURITY:
73 DAYS
SEVEN DAY YIELD:
5.20% (CLASS Y)
4.96% (CLASS C)
QUALITY DIVERSIFICATION
AAA 2%
AA 9%
A 4%
NOT RATED 6%
OTHER 79%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
41
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] CASH RESERVE (CONTINUED)
The first quarter of 1997 again found money market securities trading
on expectations of an upward interest rate move. In March, there was an interest
rate increase followed by the influx of enormous tax receipts in April and May.
With the Treasury flush with cash, the supply of Treasury bills was reduced for
the remainder of the period.
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)(COMPOUNDED)
- ------------------------------------------
CLASS Y 2.53% 5.20% 5.12%
CLASS C 2.40% 4.96% 4.88%
IBC DONOGHUE 2.46% 5.04% 5.02%
ALL-TAXABLE
MONEY MARKET
- ------------------------------------------
Throughout this cycle, a laddered maturity approach was maintained
exposing the portfolio all along the yield curve. This strategy helps to
neutralize interest rate risk and is a great way to achieve better yields due to
representation at the higher end of the yield curve.
In addition, we swapped some of the Fund's fixed-rate debt into
floating rate debt as a hedge against higher interest rates. This technique
produces a more constant yield.
Looking ahead, we intend to keep a disciplined laddered approach to
Fund management. We will continue to work to neutralize interest rate risk and
duration rate risk as we concentrate on yield. We believe that it will take a
while for technical factors, such as Treasury bill supply, to change. In terms
of the economy, although we think there still may be another interest rate hike
somewhere on the horizon, the economic data is simply too good for the market to
change much in the near future. [SQUARE BULLET]
42
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] TAX-FREE RESERVE
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 3.08% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC/Donoghue Tax-Free Average,
returned 3.03% for the same period.
[SQUARE BULLET] Assets in the Fund grew 14.8% from $107.0 million to
$122.8 million during the year.
COMMENTARY
The average weighed maturity of the Tax-Free Reserve was 51 days during the
year. And, the Fund's one year effective yield was 3.08%, as the Fund
outperformed its benchmark.
During the first six months of this period we experienced normal
patterns in the tax-free money market securities market. The market is driven by
seasonality in terms of the amount of cash in the market. Typically during
January, June, and July, yields fall due to an abundance of cash in the market.
However, in January of 1997, a new pattern emerged as a strong decline in
pre-refinanced bonds took cash out of the market. As a result, supply was
adequate and yields were fabulous.
Throughout the first half of 1997, conditions have remained positive for
the Fund. In June, the tax-exempt rate was equal to the taxable rate. We're
seeing changes to
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)(COMPOUNDED)
- ------------------------------------------
CLASS Y 1.53% 3.61% 3.35%
CLASS C 1.40% 3.36% 3.10%
IBC DONOGHUE 1.52% 3.45% 3.28%
TAX-FREE
AVERAGE
- ------------------------------------------
the fundamentals of the market that are resulting in higher yields. And, the
trend should continue. It appears that supply should remain strong and, with
more availability comes higher yields.
Our strategy will remain steady as we keep the average maturity of the Fund
between 50 and 60 days. We will extend out on the yield curve when we see an
issue of high value. We will also continue to utilize commercial paper and
smaller note deals as appropriate. Our challenge will be to research and
identify new cash flow patterns and take advantage of them in the coming months.
[SQUARE BULLET]
TAX-FREE RESERVE
-----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE:
APRIL 16, 1991
PORTFOLIO SIZE:
$122.8 MILLION
AVERAGE WEIGHTED MATURITY:
51 DAYS
SEVEN DAY YIELD:
3.61% (CLASS Y)
3.36% (CLASS C)
QUALITY DIVERSIFICATION
AAA 9%
AA 8%
A 22%
NOT RATED 17%
OTHER 44%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
43
<PAGE>
REPORT
OF
INDEPENDENT
AUDITORS
[SQUARE BULLET] COREFUND
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statements of net assets of the Equity Index
Fund, Core Equity Fund, Growth Equity Fund, Special Equity Fund, International
Growth Fund, Balanced Fund, Short Term Income Fund, Short-Intermediate Bond
Fund, Government Income Fund, Bond Fund, Global Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Treasury Reserve, Cash Reserve, and Tax-Free Reserve of CoreFunds, Inc.
(the "Fund") as of June 30, 1997, and the related statements of operations for
the year then ended, and the statements of changes in net assets for the periods
presented herein. We have also audited the financial highlights for each of the
periods presented herein for the Equity Index Fund, Growth Equity Fund,
International Growth Fund, Balanced Fund, Short-Intermediate Bond Fund,
Government Income Fund, Global Bond Fund, Intermediate Municipal Bond Fund,
Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund, Treasury
Reserve, Cash Reserve, and Tax-Free Reserve, and for the periods ended June 30,
1996 and June 30, 1997 presented herein for the Core Equity Fund, Special Equity
Fund, Short Term Income Fund, and Bond Fund. 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. The financial highlights for the
periods ended October 31, 1990 through October 31, 1995 for the Core Equity
Fund, Special Equity Fund, Short Term Income Fund, and Bond Fund were audited by
other auditors whose report dated December 8, 1995 expressed an unqualified
opinion on those statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. 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 verification by examination of securities
held by the custodian as of June 30, 1997 and confirmation of securities not
held by the custodian by correspondence with 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 1997 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Equity Index Fund, Core Equity Fund, Growth Equity Fund, Special
Equity Fund, International Growth Fund, Balanced Fund, Short Term Income Fund,
Short-Intermediate Bond Fund, Government Income Fund, Bond Fund, Global Bond
Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, Treasury Reserve, Cash Reserve, and Tax-Free Reserve
at June 30, 1997 and the results of their operations for the year then ended,
and the changes in their net assets for the periods presented herein and for the
Equity Index Fund, Growth Equity Fund, International Growth Fund, Balanced Fund,
Short-Intermediate Bond Fund, Government Income Fund, Global Bond Fund,
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund, Treasury Reserve, Cash Reserve, and Tax-Free Reserve, the
financial highlights for each of the periods presented herein, and for the Core
Equity Fund, Special Equity Fund, Short Term Income Fund, and Bond Fund, the
financial highlights for the periods ended June 30, 1996 and June 30, 1997
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997
/S/ SIGNATURE
ERNST & YOUNG LLP
44
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND EQUITY FUNDS
EQUITY INDEX FUND
[PIE CHART]
MISCELLANEOUS 8%
UTILITIES 8%
TRANSPORTATION 1%
RETAIL 5%
METALS & MINING 1%
FINANCE 16%
CHEMICALS & DRUGS 15%
CONSUMER PRODUCTS 11%
DURABLE GOODS 28%
ENERGY 7%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 99.6%
AEROSPACE & DEFENSE -- 0.5%
Lockheed Martin 6,800 $ 704
Raytheon 8,900 454
TRW 3,000 170
----------
1,328
----------
AGRICULTURE -- 0.1%
Pioneer Hi-Bred International 3,000 240
----------
AIR TRANSPORTATION -- 0.4%
AMR* 2,800 259
Delta Air Lines 2,500 205
Federal Express* 4,000 231
US Air Group* 7,800 273
----------
968
----------
AIRCRAFT -- 1.9%
Allied Signal 9,100 764
Boeing 24,810 1,316
McDonnell Douglas 8,200 562
Northrop Grumman 1,700 149
Parker Hannifin 2,850 173
Rockwell International 8,763 517
Textron 8,000 531
United Technologies 8,600 714
----------
4,726
----------
APPAREL/TEXTILES -- 0.3%
Liz Claiborne 5,000 233
Nike, Class B 8,800 514
Russell 3,100 92
----------
839
----------
APPLIANCES -- 0.1%
Allegheny Teledyne 8,300 224
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
AUTOMOTIVE -- 1.8%
Chrysler 26,200 $ 860
Echlin 8,300 299
Ford Motor 43,400 1,638
General Motors 27,600 1,537
Paccar 3,000 139
----------
4,473
----------
BANKS -- 8.0%
Banc One 18,444 893
Bank of New York 13,000 566
BankAmerica 25,600 1,653
BankBoston 4,500 324
Bankers Trust New York 3,800 331
Barnett Banks of Florida 6,800 357
Chase Manhattan 15,766 1,530
Citicorp 16,800 2,025
Comerica 3,700 252
Fifth Third Bancorp 3,000 246
First Bank System 3,800 324
First Chicago 12,701 768
First Union 10,530 974
Fleet Financial Group 9,801 620
Golden West Financial 3,300 231
Great Western Financial 3,000 161
H.F. Ahmanson 2,400 103
J.P. Morgan 8,300 866
Keycorp 7,800 436
MBNA 11,925 437
Mellon Bank 11,400 514
National City 6,800 357
NationsBank 27,000 1,742
Norwest 15,300 861
PNC Bank 13,900 579
Providian Financial* 2,300 74
Suntrust Banks 8,400 463
U.S. Bancorp 4,300 276
UST 13,600 377
Wachovia 7,100 414
Wells Fargo 3,433 925
----------
19,679
----------
BEAUTY PRODUCTS -- 2.0%
Avon Products 3,200 226
Colgate Palmolive 10,492 685
Ecolab 3,300 158
International Flavors &
Fragrances 2,500 126
Procter & Gamble 25,400 3,588
----------
4,783
----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 0.6%
Comcast, Class A 14,200 304
Interpublic Group 2,200 135
Tele-Communications, Class A* 18,900 281
US West Media Group* 21,800 441
Viacom, Class B* 10,526 316
----------
1,477
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
EQUITY INDEX FUND (CONTINUED)
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.3%
Centex 2,400 $ 98
Fluor 1,900 105
Foster Wheeler 3,300 134
Halliburton 4,600 365
McDermott International 3,400 99
----------
801
----------
BUILDING MATERIALS -- 0.1%
Owens Corning 2,800 121
----------
CHEMICALS -- 2.7%
Air Products & Chemical 3,100 252
B.F. Goodrich 4,200 182
Dow Chemical 8,150 710
E.I. DuPont de Nemours 40,000 2,515
Eastman Chemical 5,700 362
FMC* 3,400 270
Great Lakes Chemical 300 16
Hercules 2,700 129
Monsanto 19,500 840
Morton International 10,300 311
Nalco Chemical 5,700 220
Praxair 3,500 196
Sigma Aldrich 10,600 372
Union Carbide 3,400 160
W.R. Grace & Company 3,100 171
----------
6,706
----------
COMMUNICATIONS EQUIPMENT -- 2.5%
Cabletron Systems* 5,800 164
Cisco Systems* 24,600 1,651
Lucent Technologies 23,300 1,679
Motorola 20,600 1,566
Northern Telecom 8,300 755
Tellabs* 6,200 346
----------
6,161
----------
COMPUTERS, SOFTWARE, & SERVICES -- 8.0%
3COM* 12,000 540
Autodesk 6,300 241
Automatic Data Processing 9,400 442
Ceridian* 3,400 144
Compaq Computer* 9,700 963
Computer Associates
International 12,050 671
Computer Sciences* 1,900 137
CUC International* 13,350 345
Dell Computer* 6,200 728
Digital Equipment* 3,900 138
EMC* 7,100 277
Equifax 6,000 223
First Data 15,400 677
Harris Computer Systems 1,600 134
Hewlett Packard 35,300 1,977
International Business Machines 37,800 3,409
Microsoft* 44,300 5,598
Novell* 29,300 203
Oracle Systems* 24,575 1,238
Parametric Technology* 5,000 213
Pitney Bowes 5,000 356
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Seagate Technology* 7,200 $ 253
Shared Medical Systems 2,400 130
Silicon Graphics* 4,600 69
Sun Microsystems* 11,200 417
Tandy 2,000 112
----------
19,635
----------
CONTAINERS & PACKAGING -- 0.1%
Bemis 3,500 152
Crown Cork & Seal 3,700 198
----------
350
----------
DRUGS -- 8.3%
Abbott Labs 28,000 1,869
Allergan 4,300 137
American Home Products 22,800 1,744
Amgen* 9,600 558
Baxter International 7,800 408
Bristol-Myers Squibb 37,040 3,000
Eli Lilly 19,900 2,175
Merck 44,400 4,595
Pfizer 24,100 2,880
Pharmacia & Upjohn 16,255 565
Schering Plough 27,200 1,302
Warner Lambert 9,400 1,168
----------
20,401
----------
ELECTRICAL EQUIPMENT -- 3.7%
Emerson Electric 14,600 804
General Electric 120,900 7,904
Westinghouse Electric 21,500 497
----------
9,205
----------
ELECTRICAL SERVICES -- 2.1%
American Electric Power 5,300 223
Baltimore Gas & Electric 4,700 125
Carolina Power & Light 3,600 129
Central & South West 5,400 115
Cinergy 4,600 160
Consolidated Edison of New York 5,300 156
Dominion Resources of Virginia 5,500 201
DTE Energy 4,200 116
Duke Power 12,984 622
Edison International 13,400 333
Entergy 5,200 142
FPL Group 6,100 281
GPU 4,200 151
Niagara Mohawk Power* 26,200 224
Northern States Power 3,700 191
Pacificorp 6,400 141
PECO Energy 16,000 336
PG&E 11,500 279
PP&L Resources 5,500 110
Public Service Enterprise Group 5,500 138
Southern 20,100 440
Texas Utilities 7,300 251
Unicom 4,800 107
Union Electric Power 4,300 162
----------
5,133
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
ENTERTAINMENT -- 0.9%
King World Productions* 6,600 $ 231
Walt Disney 24,926 2,000
----------
2,231
----------
ENVIRONMENTAL SERVICES -- 0.4%
Browning Ferris Industries 5,900 196
Laidlaw Incorporated, Class B 14,000 193
Waste Management 15,200 488
----------
877
----------
FINANCIAL SERVICES -- 3.3%
Allstate 15,700 1,146
American Express 16,600 1,237
Beneficial 2,400 171
Charles Schwab 6,400 260
Countrywide Credit Industries 6,000 187
FHLMC 30,200 1,038
FNMA 38,800 1,693
Green Tree Financial 5,900 210
Household International 4,100 482
Merrill Lynch 11,200 668
Morgan Stanley, Dean Witter,
Discover 19,330 832
Salomon 2,500 139
----------
8,063
----------
FOOD, BEVERAGE & TOBACCO -- 8.6%
Anheuser Busch 16,400 688
Archer Daniels Midland 16,455 387
Brown Forman, Class B 2,700 132
Campbell Soup 16,200 810
Coca Cola 91,600 6,389
ConAgra 7,300 468
Coors, Adolph, Class B 5,600 149
CPC International 5,400 499
Fortune Brands 700 26
General Mills 5,900 384
H.J. Heinz 16,650 768
Hershey Foods 4,000 221
Kellogg 7,600 651
Pepsico 56,800 2,134
Philip Morris 89,400 3,967
Quaker Oats 5,800 260
Ralston-Purina Group 3,900 321
Sara Lee 16,900 703
Seagram 12,300 495
Unilever 5,900 1,263
Whitman 5,100 129
Wrigley, William Jr. 4,000 268
----------
21,112
----------
GAS/NATURAL GAS -- 1.0%
Coastal 2,500 133
Columbia Gas Systems 3,500 228
Consolidated Natural Gas 6,600 355
Enron 7,300 298
Nicor 3,700 133
Noram Energy 17,800 271
Oneok 5,900 190
Pacific Enterprises 3,800 128
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Peoples Energy 4,100 $ 154
Sonat 6,800 349
Williams 3,750 164
----------
2,403
----------
GLASS PRODUCTS -- 0.3%
Corning 7,300 406
PPG Industries 7,300 424
----------
830
----------
HOTELS & LODGING -- 0.4%
HFS* 4,100 238
Hilton Hotels 8,500 226
ITT Corporation* 3,600 220
Marriott International 2,900 178
----------
862
----------
HOUSEHOLD FURNITURE & FIXTURES-- 0.4%
Armstrong World Industries 1,600 117
Masco 3,500 146
Newell 3,600 143
Sherwin Williams 4,600 142
Snap-On Tools 4,050 159
Stanley Works 3,600 144
----------
851
----------
HOUSEHOLD PRODUCTS -- 1.1%
Clorox 2,900 383
Gillette 20,500 1,942
National Service Industries 3,000 146
Whirlpool 5,700 311
----------
2,782
----------
INSURANCE -- 4.2%
Aetna 5,308 543
American General 9,716 464
American International Group 17,000 2,539
AON 5,250 272
Chubb 6,600 441
Cigna 2,900 515
Conseco 5,600 207
General Re 2,400 437
Hartford Financial
Services Group 3,100 257
Lincoln National 2,100 135
Loews 3,400 340
Marsh and McLennan 7,400 528
MBIA 1,900 214
MGIC Investment 5,000 240
Safeco 2,800 131
St. Paul 2,827 216
Torchmark 5,400 385
Transamerica 1,600 150
Travelers 21,866 1,379
United Healthcare 5,100 265
Unum 6,000 252
USF&G 13,500 324
----------
10,234
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
EQUITY INDEX FUND (CONTINUED)
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.1%
Georgia Pacific 2,700 $ 231
Potlatch 2,100 95
----------
326
----------
MACHINERY -- 1.7%
Baker Hughes 1,000 39
Black & Decker 3,500 130
Briggs & Stratton 3,800 190
Brunswick 9,500 297
Case 3,000 207
Caterpillar 6,900 741
Crane 4,650 194
Deere 7,800 428
Dover 2,800 172
Eaton 2,700 236
General Instrument* 5,800 145
Illinois Tool Works 8,200 410
Ingersoll Rand 2,400 148
Tenneco 5,000 226
Timken 5,000 178
Tyco International 5,300 369
----------
4,110
----------
MEASURING DEVICES -- 0.5%
Honeywell 4,400 334
Johnson Controls 3,000 123
Millipore 3,400 150
Perkin Elmer 2,000 159
Tektronix 3,500 210
Thermo Electron* 5,100 173
----------
1,149
----------
MEDICAL PRODUCTS & SERVICES-- 3.0%
Becton Dickinson 4,600 233
Beverly Enterprises* 19,600 319
Biomet* 7,400 138
Boston Scientific* 5,800 356
Cardinal Health 4,000 229
Columbia/HCA Healthcare 22,850 898
Guidant 3,000 255
Healthsouth* 11,000 274
Humana* 10,800 250
Johnson & Johnson 48,000 3,090
Manor Care 3,900 127
Medtronic 8,000 648
Tenet Healthcare* 12,900 381
U.S. Surgical 6,000 224
----------
7,422
----------
METALS & MINING -- 0.9%
Alcan Aluminum 7,700 267
Aluminum Company of America 5,200 392
Asarco 3,300 101
Cyprus AMAX Minerals 7,400 181
Freeport-McMoran Copper
and Gold, Class B 6,000 187
Inco 7,600 228
Newmont Mining 10,770 420
Phelps Dodge 1,600 136
Reynolds Metals 3,500 249
----------
2,161
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
MISCELLANEOUS CHEMICAL PRODUCTS-- 0.1%
Raychem 1,900 $ 141
----------
MISCELLANEOUS CONSUMER SERVICES-- 0.2%
Gallaher Group PLC* 7,600 140
H & R Block 7,000 226
Service International 5,800 191
----------
557
----------
MISCELLANEOUS MANUFACTURING-- 0.3%
Hasbro 3,600 102
ITT Industries* 10,500 270
Mattel 8,250 279
----------
651
----------
PAPER & PAPER PRODUCTS -- 1.9%
Avery Dennison 4,600 185
Champion International 2,200 122
International Paper 12,035 584
James River 3,200 118
Kimberly Clark 23,704 1,179
Minnesota Mining &
Manufacturing 14,600 1,489
Stone Container 3,800 54
Temple Inland 2,400 130
Union Camp 4,750 238
Westvaco 3,150 99
Weyerhaeuser 6,006 312
Willamette Industries 1,900 133
----------
4,643
----------
PETROLEUM REFINING -- 8.6%
Amerada Hess 2,100 117
Amoco 17,500 1,521
Ashland 4,300 199
Atlantic Richfield 12,000 846
Burlington Resources 2,900 128
Chevron 23,300 1,723
Enserch 6,600 147
Exxon 90,900 5,590
Helmerich and Payne 6,600 380
Mobil 28,800 2,012
Occidental Petroleum 9,900 248
Oryx Energy* 8,400 177
Phillips Petroleum 7,200 315
Rowan Companies* 10,000 282
Royal Dutch Petroleum ADR 76,800 4,176
Santa Fe Energy Resources* 7,300 107
Schlumberger 8,900 1,113
Sun 8,200 254
Texaco 7,800 848
Union Pacific Resources Group 8,629 215
Unocal 8,900 345
USX Marathon Group 9,500 274
Western Atlas* 3,000 220
----------
21,237
----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES-- 0.8%
Eastman Kodak 11,300 867
Polaroid 6,100 339
Xerox 10,800 852
----------
2,058
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
PRECIOUS METALS -- 0.2%
Barrick Gold 12,000 $ 264
Echo Bay Mines 9,100 51
Placer Dome Group 5,400 88
----------
403
----------
PRINTING & PUBLISHING -- 1.2%
Deluxe 2,500 85
Donnelly R.R. & Sons 9,200 337
Dow Jones 5,600 225
Gannett 4,800 474
Knight-Ridder 3,000 147
McGraw-Hill 2,200 129
Meredith 6,000 174
New York Times, Class A 3,200 162
Time Warner, Class A 19,800 955
Times Mirror, Class A 3,900 222
Tribune 3,000 144
----------
3,054
----------
PROFESSIONAL SERVICES -- 0.2%
Cognizant 11,000 446
Dun & Bradstreet 4,700 123
----------
569
----------
RAILROADS -- 0.8%
Burlington Northern Santa Fe 5,464 491
CSX 8,200 455
Norfolk Southern 4,600 463
Union Pacific 8,300 585
----------
1,994
----------
RETAIL -- 5.1%
Albertson's 8,400 307
American Stores 3,200 158
Autozone* 10,000 236
Charming Shoppes* 35,000 183
Circuit City Stores 3,000 107
Costco Companies* 10,900 358
CVS 6,400 328
Darden Restaurants 11,800 107
Dayton-Hudson 7,800 415
Dillards, Class A 9,700 336
Federated Department Stores* 5,700 198
Gap 9,600 373
Giant Food, Class A 3,900 126
Harcourt General 2,300 110
Home Depot 17,066 1,177
J.C. Penney 8,600 449
K Mart* 10,000 123
Kroger* 6,200 180
Limited 9,500 192
Lowes 5,500 204
May Department Stores 6,900 326
McDonald's 24,900 1,203
Mercantile Stores 2,500 157
Rite Aid 3,700 185
Sears Roebuck 13,500 726
TJX Companies 13,400 353
Toys R Us* 9,800 343
Wal Mart Stores 82,600 2,793
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Walgreen 7,600 $ 408
Wendy's International 5,900 153
Winn Dixie Stores 3,400 127
Woolworth* 7,500 180
----------
12,621
----------
RUBBER & PLASTIC -- 0.5%
Goodyear Tire & Rubber 5,380 341
Reebok International 7,300 341
Rubbermaid 8,500 253
Tupperware 5,700 208
----------
1,143
----------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.7%
Advanced Micro Devices* 7,500 270
AMP 6,200 259
Applied Materials* 6,600 467
Intel 30,100 4,269
LSI Logic* 4,000 128
Micron Technology 5,900 236
National Semiconductor* 5,600 172
Texas Instruments 6,600 555
Thomas & Betts 5,000 263
----------
6,619
----------
SPECIALTY MACHINERY -- 0.1%
Cooper Industries 2,600 129
----------
STEEL & STEEL WORKS -- 0.1%
Bethlehem Steel* 5,900 62
Nucor 2,000 115
USX U.S. Steel Group 1,900 67
Worthington Industries 4,600 84
----------
328
----------
TELEPHONES & TELECOMMUNICATION-- 6.1%
AT&T 58,736 2,059
Airtouch Communications* 19,100 523
Alltel 5,500 184
Ameritech 21,800 1,481
Bell Atlantic 17,400 1,320
Bellsouth 36,100 1,674
GTE 33,600 1,474
MCI Communications 26,658 1,021
NYNEX 14,600 841
SBC Telecommunications 33,586 2,078
Sprint 14,000 737
US West 17,600 663
Worldcom* 33,500 1,072
----------
15,127
----------
TRUCKING -- 0.1%
Ryder System 5,000 165
----------
WHOLESALE -- 0.3%
Genuine Parts 4,200 142
Ikon Office Solutions 11,600 289
Sysco 4,100 150
W.W. Grainger 2,000 156
----------
737
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
EQUITY INDEX FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $146,336) $244,839
----------
REPURCHASE AGREEMENTS -- 0.1%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price
$183,030 (collateralized by U.S. Treasury Note, par value $145,000, 11.875%,
11/15/03; market
value $188,152) $183 183
Swiss Bank
5.875%, dated 06/30/97, matures 07/01/97, repurchase price $183,030
(collateralized by U.S. Treasury Note, par value $190,000, 5.625%, 11/30/00;
market value
$187,397) 183 183
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $366) 366
----------
TOTAL INVESTMENTS -- 99.7%
(Cost $146,702) 245,205
----------
OTHER ASSETS AND LIABILITIES,
NET -- 0.3% 715
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 500 million authorized shares)
based on 6,456,231 outstanding shares of beneficial interest 139,806
Portfolio Shares -- Class A ($0.001 par value -- 500 million authorized shares)
based on 120,606 outstanding shares of beneficial interest 4,032
Accumulated Net Realized Gain
on Investments 3,579
Net Unrealized Appreciation
on Investments 98,503
----------
TOTAL NET ASSETS -- 100.0% $245,920
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $37.39
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $37.37
==========
* NON INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
PLC -- PUBLIC LIMITED COMPANY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CORE EQUITY FUND
MISCELLANEOUS 7%
UTILITIES 12%
TRANSPORTATION 2%
RETAIL 5%
HEALTHCARE SERVICES 2%
FINANCE 13%
CHEMICALS & DRUGS 7%
CONSUMER PRODUCTS 10%
DURABLE GOODS 37%
ENERGY 5%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 100.1%
AIRCRAFT -- 2.4%
Boeing 120,000 $ 6,367
McDonnell Douglas 35,000 2,397
Textron 60,000 3,982
----------
12,746
----------
APPAREL/TEXTILES -- 0.1%
Burlington Industries* 49,771 597
----------
AUTOMOTIVE -- 1.6%
Allied Signal 60,000 5,040
Ford Motor 91,900 3,469
----------
8,509
----------
BEAUTY PRODUCTS -- 0.1%
USA Detergents* 56,500 579
----------
BROADCASTING, NEWSPAPERS
& ADVERTISING -- 0.6%
Emmis Broadcasting* 77,500 3,381
----------
BUILDING & CONSTRUCTION -- 1.2%
Clayton Homes 250,000 3,563
Foster Wheeler 62,500 2,531
----------
6,094
----------
CHEMICALS -- 4.4%
Hercules 20,000 958
IMC Global 120,000 4,200
Monsanto 99,000 4,263
Praxair 128,000 7,168
3COM* 147,500 6,638
----------
23,227
----------
50
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.2%
Cabletron Systems* 86,000 $ 2,435
ITT Industries 47,500 1,223
Lucent Technologies 51,853 3,737
Motorola 53,700 4,081
----------
11,476
----------
COMPUTERS & SERVICES -- 6.9%
America Online* 35,000 1,947
Computer Associates
International 125,000 6,961
International Business
Machines 160,000 14,430
Microsoft* 70,000 8,846
Storage Technology* 100,000 4,450
----------
36,634
----------
CONTAINERS & PACKAGING -- 0.4%
Ball 67,500 2,029
----------
DRUGS -- 8.6%
Biogen* 210,000 7,114
Eli Lilly & Co. 160,900 17,588
General Electric 235,000 15,363
Ivax 126,900 1,428
Mylan Laboratories 275,200 4,059
----------
45,552
----------
ELECTRICAL SERVICES -- 2.0%
FPL Group 55,000 2,533
Pinnacle West Capital 125,000 3,758
Unicom 196,500 4,372
----------
10,663
----------
ENVIRONMENTAL SERVICES -- 1.5%
Browning Ferris Industries 240,000 7,980
----------
FINANCIAL SERVICES -- 1.1%
Equity Residential
Properties Trust 108,000 5,130
Mercury Finance 330,000 804
----------
5,934
----------
FOOD, BEVERAGE & TOBACCO -- 8.0%
Canandaigua Wine, Class A* 195,005 6,630
Chiquita Brands International 460,000 6,325
Nabisco Holdings, Class A 330,000 13,159
Philip Morris 150,500 6,678
RJR Nabisco Holdings 288,200 9,511
----------
42,303
----------
HEALTHCARE SERVICES -- 2.1%
Medpartners* 525,572 11,365
----------
HOTELS & LODGING -- 3.5%
Felcor Suite Hotels 110,000 4,098
HFS* 180,000 10,440
Hilton Hotels 150,000 3,984
----------
18,522
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
INSURANCE -- 12.2%
Conseco 200,000 $ 7,400
Equitable 225,800 7,508
Everest Reinsurance Holdings 287,000 11,372
General Re 67,500 12,285
Hartford Financial
Services Group 96,900 8,018
Sunamerica 75,000 3,656
Travelers 166,000 10,468
Travelers Property Casualty 100,000 3,988
----------
64,695
----------
MACHINERY -- 1.6%
Case 45,000 3,099
Cummins Engine 75,000 5,292
----------
8,391
----------
MEASURING DEVICES -- 1.0%
Thermo Electron* 150,000 5,100
----------
MEDICAL PRODUCTS & SERVICES-- 2.7%
Alza* 189,300 5,478
Human Genome Sciences* 24,700 821
United States Surgical 220,000 8,195
----------
14,494
----------
METALS & MINING -- 1.2%
Freeport-McMoran Copper
and Gold, Class B 75,000 2,334
Potash of Saskatchewan 54,000 4,053
----------
6,387
----------
PETROLEUM & FUEL PRODUCTS -- 3.5%
Louisiana Land & Exploration 23,000 1,314
Reading & Bates* 105,000 2,809
Repsol ADR 85,000 3,607
Tidewater 114,300 5,029
Triton Energy, Class A* 70,000 3,207
USX Marathon Group 95,000 2,743
----------
18,709
----------
PETROLEUM REFINING -- 5.0%
British Petroleum ADR 136,218 10,199
Mobil 195,000 13,626
Texaco 27,500 2,991
----------
26,816
----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.7%
Xerox 50,000 3,944
----------
PRINTING & PUBLISHING -- 0.3%
News ADR 110,000 1,719
----------
RAILROADS -- 0.8%
CSX 45,000 2,498
Union Pacific 25,000 1,763
----------
4,261
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
CORE EQUITY FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
REAL ESTATE -- 0.2%
Kimco Realty 37,500 $ 1,191
----------
RESTAURANTS -- 0.9%
Darden Restaurants 410,000 3,716
Lone Star Steakhouse & Saloon* 45,000 1,170
----------
4,886
----------
RETAIL -- 5.3%
Albertson's 75,000 2,738
CML Group 275,000 498
Corporate Express* 185,000 2,671
General Nutrition* 322,750 9,037
Lowes 58,400 2,168
Pep Boys - Manny,
Moe & Jack 185,000 6,302
Saks Holdings* 60,000 1,500
Staples* 137,600 3,199
----------
28,113
----------
RUBBER & PLASTIC -- 1.4%
Goodyear Tire & Rubber 120,000 7,598
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.7%
Intel 77,500 10,990
VLSI Technology* 135,000 3,189
----------
14,179
----------
STEEL & STEEL WORKS -- 0.3%
USX U.S. Steel Group 45,000 1,578
----------
TELEPHONES &
TELECOMMUNICATION -- 12.8%
Airtouch Communications* 860,000 23,543
Bellsouth 76,000 3,525
Mcleod, Class A* 185,000 6,244
Qualcomm* 170,000 8,649
Qwest Communications Int'l* 70,700 1,927
Worldcom* 754,600 24,147
----------
68,035
----------
WATER TREATMENT -- 0.8%
U.S. Filter* 150,000 4,088
----------
TOTAL COMMON STOCKS
(Cost $420,376) 531,775
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price $66,011
(collateralized by U.S. Treasury Note, par value $50,000, 11.875%,
11/15/03; market value $67,320) $66 $ 66
Sanwa Bank
5.85%, dated 06/30/97, matures
07/01/97, repurchase price $66,011
(collateralized by U.S. Treasury Note,
par value $65,000, 6.625%, 06/30/01;
market value $67,320) 66 66
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $132) 132
----------
TOTAL INVESTMENTS -- 100.2%
(Cost $420,508) 531,907
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.2%) (849)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 50 million authorized) based on
24,395,839 outstanding shares 363,289
Portfolio Shares -- Class A ($0.001 par value -- 50 million authorized) based on
759,395 outstanding shares 10,067
Accumulated Net Realized Gain
on Investments 46,302
Net Unrealized Appreciation
on Investments 111,399
Undistributed Net Investment Income 1
----------
TOTAL NET ASSETS -- 100.0% $531,058
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $21.11
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $21.13
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
GROWTH EQUITY FUND
MISCELLANEOUS 3%
UTILITIES 1%
RETAIL 11%
FINANCE 14%
ENERGY 5%
CASH EQUIVALENTS 5%
CHEMICAL & DRUGS 15%
CONSUMER PRODUCTS 8%
DURABLE GOODS 39%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMON STOCKS -- 98.4%
AIRCRAFT -- 2.0%
Allied Signal 20,000 $ 1,680
Boeing 26,000 1,380
----------
3,060
----------
BANKS -- 6.9%
Barnett Banks of Florida 50,000 2,625
Citicorp 24,643 2,971
J.P. Morgan 28,000 2,922
Norwest 35,000 1,969
----------
10,487
----------
BEAUTY PRODUCTS -- 2.4%
Colgate Palmolive 56,000 3,654
----------
CHEMICALS -- 1.9%
Monsanto 66,600 2,868
----------
COMMUNICATIONS EQUIPMENT -- 4.0%
Cisco Systems* 43,900 2,947
Motorola 41,600 3,162
----------
6,109
----------
COMPUTERS, SOFTWARE & SERVICES-- 13.6%
Compaq Computer* 32,000 3,176
Computer Associates
International 53,926 3,003
Microsoft* 25,032 3,163
Oracle Systems* 81,124 4,087
Parametric Technology* 56,200 2,392
Paychex 36,787 1,398
Peoplesoft* 66,000 3,481
----------
20,700
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
DRUGS -- 9.0%
Johnson & Johnson 49,000 $ 3,154
Merck 15,900 1,646
Schering Plough 40,000 1,915
SmithKline Beecham ADR 38,550 3,532
Warner Lambert 28,000 3,479
----------
13,726
----------
ELECTRICAL EQUIPMENT -- 5.4%
General Electric 47,178 3,084
Illinois Tool Works 70,000 3,496
Westinghouse Electric 70,400 1,628
----------
8,208
----------
ENTERTAINMENT -- 1.8%
Walt Disney 34,300 2,753
----------
FINANCIAL SERVICES -- 4.0%
FHLMC 85,000 2,922
FNMA 74,656 3,257
----------
6,179
----------
FOOD, BEVERAGE & TOBACCO -- 4.3%
Coca Cola 25,600 1,786
ConAgra 25,000 1,603
Hershey Foods 30,000 1,659
Sara Lee 38,500 1,603
----------
6,651
----------
HEALTHCARE SERVICES -- 2.3%
Health Management Associates* 124,025 3,535
----------
HOUSEHOLD PRODUCTS -- 3.7%
Gillette 34,800 3,297
Sunbeam Oster 62,100 2,344
----------
5,641
----------
INSURANCE -- 2.9%
American International Group 18,400 2,748
Oxford Health Plan* 22,300 1,600
----------
4,348
----------
MEASURING DEVICES -- 1.0%
Honeywell 21,000 1,593
----------
MEDICAL INFORMATION SYSTEMS -- 2.2%
HBO 48,000 3,306
----------
MEDICAL PRODUCTS & SERVICES-- 3.6%
Acuson* 112,000 2,576
Cardinal Health 51,600 2,954
----------
5,530
----------
PETROLEUM REFINING -- 4.7%
Baker Hughes 38,000 1,470
Halliburton 48,000 3,804
Schlumberger 15,100 1,887
----------
7,161
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
GROWTH EQUITY FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -------------------------------------------------------
RETAIL -- 10.8%
Costco* 45,000 $ 1,479
Dayton-Hudson 72,000 3,829
Gap 90,000 3,499
Home Depot 56,000 3,861
Walgreen 70,000 3,754
----------
16,422
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 3.6%
Intel 27,400 3,886
Linear Technology 30,000 1,553
----------
5,439
----------
TELEPHONES & TELECOMMUNICATION -- 8.3%
Brooks Fiber Properties* 97,400 3,287
LCI International* 126,834 2,774
McLeod, Class A* 82,000 2,768
Qualcomm* 49,900 2,539
Worldcom* 38,137 1,220
----------
12,588
----------
TOTAL COMMON STOCKS
(Cost $104,982) 149,958
----------
REPURCHASE AGREEMENTS -- 4.0%
Aubrey Lanston
5.90%, dated 06/30/97, matures
07/01/97, repurchase price
$2,048,336 (collateralized by U.S.
Treasury Note, par value $1,610,000,
11.875%, 11/15/03;
market value $2,089,136) $2,048 2,048
Hong Kong Shanghai Bank 5.80%, dated 06/30/97, matures 07/01/97, repurchase
price $2,048,330 (collateralized by U.S. Treasury Note, par value $1,990,000,
7.25%, 05/15/04;
market value $2,100,843) 2,048 2,048
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $2,048,333
(collateralized by U.S. Treasury Note, par value $2,070,000, 6.625%,
06/30/01;
market value $2,094,840) 2,048 2,048
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,144) 6,144
----------
TOTAL INVESTMENTS -- 102.4%
(Cost $111,126) 156,102
----------
OTHER ASSETS AND LIABILITIES,
NET -- (2.4%) (3,709)
----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 100 million authorized) based
on 9,573,636 outstanding shares $ 97,352
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 304,852 outstanding shares 3,280
Accumulated Net Realized Gain
on Investments 6,786
Net Unrealized Appreciation
on Investments 44,976
Distributions in Excess of Net
Investment Income (1)
----------
TOTAL NET ASSETS -- 100.0% $152,393
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $15.43
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $15.39
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
SPECIAL EQUITY FUND
MISCELLANEOUS 13%
UTILITIES 3%
REAL ESTATE 3%
FINANCE 9%
ENERGY 2%
BUILDING & CONSTRUCTION 3%
CASH EQUIVALENTS 1%
CHEMICAL & DRUGS 13%
CONSUMER PRODUCTS 9%
DURABLE GOODS 44%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMON STOCKS -- 99.3%
AIRCRAFT -- 0.7%
McDonnell Douglas 7,500 $ 514
----------
APPAREL/TEXTILES -- 2.1%
Burlington Industries* 5,117 61
Fieldcrest Cannon* 17,400 331
Haggar 20,000 255
Mothers Work* 17,500 127
Oneita Industries* 55,000 22
Oxford Industries 20,000 567
Quaker Fabric* 11,900 196
----------
1,559
----------
AUTOMOTIVE -- 0.4%
Earl Scheib* 4,900 30
Ford Motor 5,000 189
Walbro 3,000 61
----------
280
----------
BUILDING & CONSTRUCTION -- 1.3%
Cavalier Homes 20,483 205
Jacobs Engineering Group* 29,500 793
----------
998
----------
CHEMICALS -- 2.2%
Kinark* 57,500 194
Royal Group Technologies Ltd* 27,500 729
----------
1,733
----------
COMMUNICATIONS EQUIPMENT -- 3.6%
Ciena* 10,700 504
ITT Industries 5,000 129
Scientific-Atlanta 31,000 678
VDI Media* 120,000 1,350
----------
2,661
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMPUTERS & SERVICES -- 4.9%
America Online* 8,000 $ 445
Apex PC Solutions Inc* 36,000 711
Computer Associates
International 7,000 390
Gametek* 10,000 11
International Business
Machines 11,000 992
Mizar* 18,200 66
Mylex* 75,000 712
Pace Health
Management Systems* 43,500 98
Video Lotteries Technologies* 34,200 205
----------
3,630
----------
CONTAINERS & PACKAGING -- 1.2%
Ball 20,000 601
Cronos Group* 31,400 216
Silgan Holdings* 1,000 39
----------
856
----------
DRUGS -- 11.3%
Anesta* 45,200 859
Aphton* 52,500 774
Biogen* 6,500 220
ChiRex* 62,000 736
Collagenex Pharmaceuticals* 46,300 556
Flamel Technologies ADR* 97,700 446
Guilford Pharmaceuticals* 40,500 982
Hybridon* 22,500 112
Ilex Oncology* 31,500 500
Isis Pharmaceutical* 27,300 398
Medpartners* 45,000 973
Pharmaceutical Resources* 105,000 289
Roberts Pharmaceuticals* 12,500 140
Scios Nova* 218,200 1,391
----------
8,376
----------
ELECTRICAL EQUIPMENT -- 1.2%
Magnetek* 54,000 898
----------
ELECTRONICS -- 4.0%
Kuhlman 50,000 1,612
Lam Research* 12,700 471
Smartflex Systems* 2,300 22
Teradyne* 23,000 903
----------
3,008
----------
ENERGY & POWER -- 0.3%
Comfort Systems USA Inc* 14,500 227
----------
ENTERTAINMENT -- 1.0%
Boomtown* 5,700 51
Cinergi Pictures Entertainment* 14,300 18
Meridian Sports* 17,300 22
Mikohn Gaming* 110,000 481
Sports Club* 38,000 204
----------
776
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
SPECIAL EQUITY FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.5%
Harding Lawson
Associates Group* 40,300 $ 281
Philip Services* 52,500 833
----------
1,114
----------
FINANCIAL SERVICES -- 3.6%
Aames Financial 46,500 860
Arm Financial Group* 4,500 90
Delta Financial* 34,700 664
Mercury Finance 75,000 183
Prentiss Properties Trust 34,000 871
----------
2,668
----------
FOOD, BEVERAGE & TOBACCO -- 2.9%
General Nutrition* 36,700 1,028
Philip Morris 10,300 457
RJR Nabisco Holdings 20,200 667
Rymer Foods* 60,100 3
----------
2,155
----------
HOTELS & LODGING -- 3.3%
HFS* 18,500 1,073
John Q. Hammons Hotels* 9,600 89
Prime Hospitality* 64,500 1,274
U.S. Franchise Systems, Class A* 4,500 44
----------
2,480
----------
HOUSEHOLD FURNISHINGS -- 0.6%
Winsloew Furniture* 44,180 483
----------
INSURANCE -- 5.7%
Conseco 18,000 666
Everest Reinsurance Holdings 32,300 1,280
Gryphon Holdings* 36,700 560
Sunamerica 7,500 366
Travelers 9,501 599
Travelers Property Casualty 18,100 722
----------
4,193
----------
MACHINERY -- 3.4%
Case 12,500 861
Cummins Engine 17,000 1,200
First Aviation* 45,000 439
----------
2,500
----------
MEASURING DEVICES -- 0.9%
Rofin-Sinar Technologies* 36,000 688
----------
MEDICAL PRODUCTS & SERVICES-- 5.7%
Acme United* 129,200 791
American Retirement* 23,000 408
Coast Dental Services* 4,500 69
Emeritus* 27,000 398
Harborside Healthcare* 18,000 256
Innovasive Devices* 9,000 106
Metra Biosystems* 6,800 33
Molecular Dynamics* 1,400 20
Possis Medical* 22,600 381
Quest Medical* 9,000 82
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Resound* 47,400 $ 267
Spectranetics* 27,000 86
United States Surgical 22,500 838
Urologix* 26,500 450
Value Health* 5,400 109
----------
4,294
----------
METALS & MINING -- 1.6%
Potash of Saskatchewan 4,300 323
UCAR International* 18,500 846
----------
1,169
----------
MISCELLANEOUS BUSINESS SERVICES-- 0.5%
Mecon* 62,000 194
RMH Teleservices* 27,500 206
----------
400
----------
MISCELLANEOUS MANUFACTURING-- 1.4%
Foster Wheeler 20,000 810
RMI Titanium* 35,000 954
----------
1,764
----------
PETROLEUM & FUEL PRODUCTS -- 3.3%
Cairn Energy USA* 63,200 829
Callon Petroleum* 9,000 144
Shaw Group* 35,000 569
Tidewater 20,000 880
----------
2,422
----------
PETROLEUM REFINING -- 0.7%
USX-U.S. Steel Group 14,000 491
----------
RAILROADS -- 0.7%
Union Pacific 7,000 493
----------
REAL ESTATE -- 2.1%
Agree Realty 9,400 193
Liberty Property Trust 25,800 642
Pacific Gulf Properties 31,400 691
----------
1,526
----------
RESTAURANTS/FOOD SERVICES -- 1.5%
Darden Restaurants 50,000 453
Uno Restaurant* 90,000 636
Vie de France* 21,000 28
----------
1,117
----------
RETAIL -- 4.4%
Bon-Ton Stores* 46,300 370
Chicos* 4,500 24
Corporate Express* 42,500 614
CML Group 92,200 167
Cross-Continent Auto Retailers* 65,000 687
Drug Emporium* 92,100 472
Hot Topic* 4,400 99
Microage* 40,000 735
Sportmart* 14,400 54
Sportmart, Class A* 14,400 40
Strouds* 19,000 33
----------
3,295
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
RUBBER & PLASTIC -- 0.8%
Goodyear Tire & Rubber 4,000 $ 253
O'Sullivan 45,000 377
----------
630
----------
SEMI-CONDUCTORS/INSTRUMENTS-- 3.2%
Ess Technology* 4,600 62
Intel 9,000 1,276
VLSI Technology* 45,000 1,063
----------
2,401
----------
SPECIALTY CONSTRUCTION -- 1.0%
Oakwood Homes 30,000 720
----------
STEEL & STEEL WORKS -- 1.1%
Texas Industries 32,000 850
----------
TECHNOLOGY, SERVICES -- 0.8%
Cabletron Systems* 20,000 566
----------
TELEPHONES & TELECOMMUNICATION -- 13.0%
Aerial Communications* 92,000 782
Airtouch Communications* 41,500 1,136
Amnex* 171,500 418
Clearnet, Class A* 40,000 485
Intermedia Communications
of Florida* 25,000 809
Lucent Technologies 16,500 1,189
Mcleod, Class A* 25,000 844
Metrocall* 25,000 112
Qualcomm* 15,500 789
Qwest Communications Int'l* 19,100 520
Rural Cellular* 92,000 949
Smartalk Teleservices* 65,000 1,008
Viatel* 90,000 608
----------
9,649
----------
TESTING LABORATORIES -- 0.5%
Genome Therapeutics* 45,000 388
----------
WATER TREATMENT -- 0.9%
U.S. Filter* 25,000 681
----------
TOTAL COMMON STOCKS
(Cost $67,323) 73,843
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
REPURCHASE AGREEMENT -- 1.2%
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $870,141
(collateralized by U.S. Treasury Note, par value $880,000, 6.625%, 06/30/01;
market value $890,560) $870 $ 870
----------
TOTAL REPURCHASE AGREEMENT
(Cost $870) 870
----------
TOTAL INVESTMENTS -- 100.5%
(Cost $68,193) 74,713
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.5%) (386)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 1 billion authorized)
based on 6,386,101 outstanding shares 62,238
Portfolio Shares -- Class A ($0.001
par value -- 1 billion authorized)
based on 208,665 outstanding shares 2,199
Accumulated Net Realized Gain
on Investments 3,428
Net Unrealized Appreciation
on Investments 6,520
Distributions in Excess of Net
Investment Income (58)
----------
TOTAL NET ASSETS -- 100.0% $74,327
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $11.27
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $11.25
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
INTERNATIONAL GROWTH FUND
UNITED KINGDOM 18%
SMALLER MARKETS 9%
OTHER PACIFIC RIM 16%
CASH EQUIVALENTS 4%
EUROPE 35%
JAPAN 18%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
FOREIGN STOCKS -- 94.5%
ARGENTINA -- 0.9%
Banco Frances ADR 4,025 $ 131
Irsa GDR 1,440 63
Perez Companc 83,643 668
Telefonica Argentina ADR 18,500 641
----------
1,503
----------
AUSTRALIA -- 1.5%
AGl 80,000 471
Lend Lease 25,000 528
National Australia Bank 44,500 637
QBE Insurance 150,000 906
----------
2,542
----------
AUSTRIA -- 0.9%
VA Technologie 7,800 1,428
----------
BELGIUM -- 0.8%
Generale Banque 3,500 1,347
----------
BRAZIL -- 1.9%
Centrais Electricas GDR* 750 105
Companhia Brasileira de
Distribuicao Grupo de
Acucar ADR 4,400 100
Electrobras ADR 38,500 1,076
Telebras ADR 11,970 1,816
----------
3,097
----------
CHILE -- 0.7%
Compania de Telecom de
Chile ADR 32,000 1,056
Santa Isabel ADR 2,100 68
----------
1,124
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
DENMARK -- 1.7%
Coloplast, Series B 3,100 $ 207
Danske Traelast 2,430 222
Novo-Nordisk, Class B 20,000 2,180
Sydbank 4,824 220
----------
2,829
----------
FINLAND -- 0.4%
Amer Group 20,000 360
Nokia AB, Series A 3,080 230
----------
590
----------
FRANCE -- 7.8%
Air Liquide 11,450 1,816
Alcatel Alsthom 2,500 313
AXA 28,595 1,777
Cie Financiere de Paribas,
Class A 3,865 267
Cie Generale des Eaux 9,248 1,184
Cie Generale des Eaux Warrants 2,000 1
Hermes International 540 50
Michelin `B' 27,900 1,674
Penauille Polyservices 1,000 226
Rhone Poulenc 44,000 1,796
Schneider 32,900 1,750
SGS-Thomson Microelectronics* 2,265 179
Societe Nationale Elf Aquitaine 15,166 1,635
Valeo 3,000 186
----------
12,854
----------
GERMANY -- 9.0%
Bayer 2,500 96
BMW 1,950 1,607
Deutsche Bank AG 34,100 2,002
Eurobike 7,000 197
Fried Krupp 665 131
Hoechst 47,402 2,008
Leica Camera 5,525 136
Mannesmann 5,700 2,545
Puma 5,500 169
SGL Carbon 10,100 1,379
Veba 40,749 2,301
Volkswagen 2,800 2,122
Wella 450 304
----------
14,997
----------
HONG KONG -- 6.7%
Amoy Properties 635,000 701
Cheung Kong Holdings 159,000 1,570
China Light & Power 140,000 793
China Overseas Land &
Investment 950,000 766
Citic Pacific 100,000 625
First Pacific 502,000 642
Giordano 650,000 445
HSBC Holdings 50,481 1,518
Hutchison Whampoa 161,000 1,392
New World Development 182,000 1,085
Swire Pacific, Series A 79,500 716
Swire Pacific, Series B 550,000 834
----------
11,087
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
HUNGARY -- 0.1%
Pannoplast RT 3,200 $ 161
----------
INDIA -- 1.9%
Himilayan Fund* 75,918 1,146
Icici GDR* 60,000 840
Indian Opportunities Fund* 41,981 410
Videsh Sanchar Nigam GDR* 35,000 726
----------
3,122
----------
INDONESIA -- 2.4%
Bank Bali "F" 300,000 802
Bank International
Indonesia "F" 1,100,000 950
Indosat "F" 275,000 823
Telekomunikasi "F" 850,000 1,390
----------
3,965
----------
ISRAEL -- 0.6%
Near East Opportunity Fund* 59,000 878
Tadarin Limited* 4,032 113
----------
991
----------
ITALY -- 1.8%
Banca Popolare
Commercio e Industria 19,650 237
Bulgari 46,000 262
ENI SPA 255,967 1,447
Fila ADR 3,500 117
Finanziaria Autogrill* 188,250 315
Gucci Group ADR 2,400 155
Industrie Natuzzi Spa ADR 17,500 448
----------
2,981
----------
JAPAN -- 17.3%
77th Bank 33,000 320
Canon 79,000 2,152
DDI 145 1,071
Eiden Sakakiya 30,000 251
Hitachi 115,000 1,285
Honda Motor 25,000 753
Hoya 8,000 356
Ito Yokado 24,000 1,393
Kamigumi 95,000 535
Kao 21,000 291
Kyocera 13,000 1,033
Mabuchi Motor 8,000 464
Marui Company 39,000 725
Mitsubishi Heavy Industries 171,000 1,312
Mitsui Fudosan 66,000 910
Nippon Express 80,000 639
Nitto Denko 32,000 623
Nomura Securities 56,000 772
Riso Kagaku Corporation 5,100 419
Rohm Company 24,000 2,472
Secom 16,000 1,175
Shimachu 17,000 511
Shin-Etsu Chemical 56,000 1,486
Sony Corporation 24,000 2,093
Sumitomo Electric 75,000 1,257
Suzuki Motor 24,000 304
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Taisho Pharmaceutical 25,000 $ 674
Tokio Marine & Fire Insurance 63,000 825
Toyota Motor 51,000 1,505
Yamanouchi Pharmaceutical 38,000 1,022
----------
28,628
----------
MALAYSIA -- 1.1%
AMMB Holdings 117,000 728
AMMB Holdings Rights* 100,000 36
AMMB Holdings Warrants* 10,000 13
Edaran Otomobil 63,000 537
Malaysian Oxygen 100,000 507
----------
1,821
----------
MEXICO -- 1.9%
Cifra SA, Series B 550,000 1,011
Corporacion Industrial Alfa 61,945 423
Empresas ICA Sociedad 18,300 294
Grupo Corvi UBL* 120,000 70
Grupo Financiero Banamex 355,000 930
Grupo Modelo, Series C 9,000 62
Grupo Radio Centro ADR 3,300 39
Grupo Televisa GDR 4,000 122
Industrias CH, Series B* 30,000 123
----------
3,074
----------
NETHERLANDS -- 3.0%
Gucci Group NV 1,400 90
ING Groep 51,305 2,364
Phillips Electronics NV 30,000 2,148
Vendex International 4,000 219
Wolters Kluwer 800 97
----------
4,918
----------
NORWAY -- 0.2%
Tomra Systems 13,500 276
----------
PERU -- 0.0%
Credicorp 4,230 93
----------
PHILIPPINES -- 1.5%
Ayala Land, Series B 800,000 736
Belle* 4,000,000 1,169
Philippine Long Distance
Telephone ADR 10,000 643
----------
2,548
----------
SINGAPORE -- 0.5%
Development Bank of Singapore 74,000 932
----------
SOUTH KOREA -- 0.4%
Korea Electric Power ADR 35,000 654
Samsung Electronics 2,463 67
----------
721
----------
SPAIN -- 2.5%
Banco de Santander 71,400 2,200
Corp Financiera Reunida 75,000 316
Telefonica de Espana 55,000 1,590
----------
4,106
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
INTERNATIONAL GROWTH FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
SWEDEN -- 1.6%
ABB AB, Class A 134,200 $ 1,882
Ericsson Telephone ADR 8,360 329
SSAB A 20,000 408
----------
2,619
----------
SWITZERLAND -- 5.3%
Ciba Speciality Chemicals* 557 51
Credit Suisse Group 18,000 2,311
Disetronic 130 263
Novartis AG 2,217 3,542
Oerlikon-Buehrle 790 92
Roche 276 2,495
----------
8,754
----------
TAIWAN -- 0.3%
Standard Foods Taiwan GDR* 50,000 479
----------
THAILAND -- 0.6%
Ruam Pattan Fund II 1,281,000 386
Siam Cement "F" 16,000 277
Siam Commercial Bank 100,000 410
----------
1,073
----------
UNITED KINGDOM -- 18.3%
3i Group 35,130 292
Barclays Bank 14,425 286
Brit-Borneo Petroleum
Syndicate 14,250 336
British Aerospace 14,475 322
British Petroleum 24,320 302
British Sky Broadcasting 30,420 223
British Telecommunications 157,000 1,166
Cable & Wireless 85,000 782
General Electric 158,000 944
GKN 74,500 1,283
Glaxo Wellcome 67,000 1,383
Granada Group 74,750 983
JJB Sports 34,200 280
Ladbroke 374,430 1,465
Lasmo 240,318 1,038
Logica 21,300 246
Manchester United 28,850 292
Marks & Spencer 164,000 1,360
McKechnie 76,500 538
National Power 33,420 290
National Westminster Bank 60,000 807
Next 24,500 277
NFC 333,000 723
Norwich Union PLC 27,200 145
Prudential 28,100 272
Railtrack Group 28,090 292
Reckitt & Coleman 102,500 1,528
Rentokil Group 79,000 276
Royal Bank of Scotland 149,000 1,388
Safeway 158,144 915
Scottish Power 187,000 1,217
Shell Transportation
& Trading 235,500 1,605
SmithKline Beecham Units 15,100 278
SmithKline Beecham, Series A 2,190 40
- -------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -------------------------------------------------------
Smiths Industries 86,782 $ 1,112
Standard Chartered Bank 17,840 272
Tesco 47,900 295
TSB Lloyds Group 170,500 1,748
Unilever 57,200 1,639
Wassall 119,625 615
Wolseley 98,000 764
Zeneca Group 9,600 317
----------
30,336
----------
VENEZUELA -- 0.9%
Cia Anonima Telecom ADR* 33,000 1,423
----------
TOTAL FOREIGN STOCKS
(Cost $128,125) 156,419
----------
FOREIGN PREFERRED STOCKS -- 1.2%
AUSTRALIA -- 0.5%
Newscorp 220 867
----------
BRAZIL -- 0.6%
Petroleo Brasileira ADR 35,000 1,015
----------
GERMANY -- 0.1%
Fresnius 888 202
----------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $1,908) 2,084
----------
CONVERTIBLE BONDS -- 0.9%
JAPAN -- 0.9%
Mitsubishi Bank
3.000%, 11/30/02 $ 900 984
Namco
4.700%, 09/30/98 35,000 434
----------
1,418
----------
MALAYSIA -- 0.0%
AMMB
5.000%, 05/13/02 100 34
----------
TOTAL CONVERTIBLE BONDS
(Cost $1,406) 1,452
----------
DEMAND DEPOSIT -- 3.9%
Morgan Stanley
4.350%, 07/01/97 6,500 6,500
----------
TOTAL DEMAND DEPOSIT
(Cost $6,500) 6,500
----------
TOTAL INVESTMENTS -- 100.5%
(Cost $137,939) 166,455
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.5%) (907)
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION VALUE (000)
- -------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($.001 par
value -- 25 million authorized)
based on 11,084,932 outstanding shares $130,725
Portfolio Shares -- Class A ($.001 par
value -- 25 million authorized) based
on 165,406 outstanding shares 2,133
Accumulated net realized gain
on investments 3,773
Net unrealized depreciation on
forward foreign currency contracts,
foreign currency and translation of
other assets and liabilities in
foreign currency (3)
Net unrealized appreciation
on investments 28,516
Accumulated net investment income 404
----------
TOTAL NET ASSETS -- 100.0% $165,548
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $14.72
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $14.70
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPTS
"F" -- FOREIGN SHARES
GDR -- GLOBAL DEPOSITORY RECEIPTS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
BALANCED FUND
U.S. TREASURY OBLIGATIONS 18%
U.S. GOVERNMENT BACKED BONDS 5%
U.S. AGENCY BACKED BONDS 5%
CORPORATE BONDS 7%
CASH EQUIVALENTS 6%
COMMON STOCK 59%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 59.2%
AIRCRAFT -- 0.8%
Boeing 18,400 $ 976
----------
BANKS -- 1.9%
Citicorp 10,000 1,206
J.P. Morgan 10,000 1,044
----------
2,250
----------
BEAUTY PRODUCTS -- 1.8%
Colgate Palmolive 21,800 1,422
Procter & Gamble 5,000 706
----------
2,128
----------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.0%
Comcast, Class A 50,000 1,069
TCI Satellite Entertainment* 4,300 34
----------
1,103
----------
CHEMICALS -- 0.8%
Monsanto 21,750 937
----------
COMMUNICATIONS EQUIPMENT -- 3.2%
Cisco Systems* 19,600 1,316
Motorola 17,000 1,292
Qualcomm* 23,500 1,196
----------
3,804
----------
COMPUTERS, SOFTWARE & SERVICES-- 5.9%
Compaq Computer* 13,000 1,290
Computer Associates
International 24,000 1,337
Microsoft* 11,000 1,390
Oracle Systems* 29,000 1,461
Peoplesoft* 28,000 1,477
----------
6,955
----------
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPTS
"F" -- FOREIGN SHARES
GDR -- GLOBAL DEPOSITORY RECEIPTS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
BALANCED FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
DRUGS -- 7.2%
Amgen* 20,000 $ 1,162
Bristol-Myers Squibb 12,000 972
Genzyme* 30,000 833
Glaxo ADR 29,400 1,229
Merck 7,000 725
Schering Plough 20,000 958
SmithKline Beecham ADR 11,800 1,081
Warner Lambert 12,000 1,491
----------
8,451
----------
ELECTRICAL EQUIPMENT -- 2.9%
Emerson Electric 17,300 953
General Electric 20,200 1,321
Westinghouse Electric 47,000 1,087
----------
3,361
----------
ENTERTAINMENT -- 0.6%
Walt Disney 8,500 682
----------
FINANCIAL SERVICES -- 2.2%
FHLMC 41,000 1,409
FNMA 28,000 1,222
----------
2,631
----------
FOOD, BEVERAGE & TOBACCO -- 1.8%
Coca Cola 13,400 935
Philip Morris 13,500 599
Sara Lee 15,000 624
----------
2,158
----------
HEALTHCARE SERVICES -- 3.3%
HBO 19,500 1,343
Health Management Associates* 52,299 1,491
Oxford Health Plan* 15,000 1,076
----------
3,910
----------
HOUSEHOLD PRODUCTS -- 1.7%
Gillette 13,800 1,308
Sunbeam Oster 19,000 717
----------
2,025
----------
INSURANCE -- 1.8%
American International Group 8,000 1,195
General Re 5,000 910
----------
2,105
----------
MACHINERY -- 1.7%
Caterpillar 9,500 1,020
Deere 17,500 960
----------
1,980
----------
MEASURING DEVICES -- 1.1%
Honeywell 17,000 1,290
----------
MEDICAL PRODUCTS & SERVICES-- 3.3%
Acuson* 35,000 805
Boston Scientific* 15,000 922
Cardinal Health 22,850 1,308
Johnson & Johnson 13,200 850
----------
3,885
----------
- -------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -------------------------------------------------------
METALS & MINING -- 0.8%
Aluminum Company of America 12,700 $ 957
----------
PETROLEUM REFINING -- 6.4%
Amoco 12,400 1,078
Atlantic Richfield 12,000 846
Chevron 17,100 1,264
Exxon 19,500 1,199
Mobil 16,200 1,132
Schlumberger 7,700 963
Texaco 10,000 1,088
----------
7,570
----------
RETAIL -- 3.9%
Costco* 30,000 986
Dayton-Hudson 27,000 1,436
Gap 30,000 1,166
Home Depot 15,000 1,034
----------
4,622
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 0.9%
Intel 7,500 1,064
----------
TECHNOLOGY, SERVICES -- 0.7%
Paychex 21,000 798
----------
TELEPHONES & TELECOMMUNICATION-- 3.5%
Alltel 30,000 1,003
LCI International* 48,000 1,050
McLeod, Class A* 24,000 810
Worldcom* 39,900 1,277
----------
4,140
----------
TOTAL COMMON STOCKS
(Cost $50,338) 69,782
----------
U.S. TREASURY OBLIGATIONS -- 18.2%
U.S. Treasury Bonds
6.000%, 08/15/99 $1,500 1,496
7.250%, 05/15/16 500 521
8.750%, 05/15/17 665 800
U.S. Treasury Notes
8.500%, 07/15/97 1,215 1,216
8.125%, 02/15/98 1,670 1,694
6.125%, 05/15/98 1,000 1,003
9.250%, 08/15/98 1,620 1,677
8.875%, 11/15/98 1,105 1,146
8.875%, 02/15/99 110 115
6.000%, 06/30/99 2,000 1,999
6.000%, 10/15/99 500 499
5.875%, 11/15/99 2,000 1,987
7.750%, 11/30/99 700 724
6.375%, 01/15/00 500 502
7.500%, 11/15/01 3,235 3,370
6.625%, 03/31/02 1,000 1,008
7.500%, 02/15/05 600 634
6.500%, 08/15/05 500 498
6.875%, 05/15/06 500 510
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $21,553) 21,399
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.6%
FHLB
8.120%, 09/26/06 $1,800 $ 1,801
8.000%, 10/17/11 1,250 1,260
FHLMC
6.440%, 01/28/00 500 501
8.150%, 09/12/06 500 500
8.025%, 09/15/06 1,000 1,025
8.055%, 09/30/11 1,000 1,015
FNMA
5.940%, 12/12/05 500 474
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $6,548) 6,576
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 5.3%
FHLMC
6.000%, 05/01/08 670 646
5.500%, 11/01/08 569 536
FNMA
6.500%, 08/01/10 236 231
6.500%, 09/01/10 307 301
6.500%, 11/01/24 467 447
GNMA
7.500%, 10/15/11 2,365 2,407
9.000%, 10/15/19 161 170
7.500%, 03/15/26 1,479 1,483
----------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $6,245) 6,221
----------
CORPORATE OBLIGATIONS -- 6.8%
BANKING -- 1.5%
First Bank System
6.875%, 09/15/07 500 489
MBNA
7.250%, 09/15/02 185 186
Midland Bank
6.950%, 03/15/11 200 193
Nationsbank
6.500%, 03/15/06 200 192
Provident Bank
6.125%, 12/15/00 25 25
Royal Bank of Scotland
6.375%, 02/01/11 205 188
Santander
7.250%, 11/01/15 100 96
U.S. Bancorp
6.750%, 10/15/05 500 488
----------
1,857
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
FINANCIAL SERVICES -- 2.7%
Chrysler Financial
6.950%, 03/25/02 $ 500 $ 501
CSR Finance
7.700%, 07/21/25 200 202
Donaldson Lufkin & Jenrette
6.875%, 11/01/05 185 180
Ford Motor Credit
6.375%, 04/15/00 500 498
6.250%, 11/08/00 500 494
7.500%, 01/15/03 1,000 1,028
Merrill Lynch
7.000%, 04/27/08 250 248
----------
3,151
----------
INDUSTRIAL -- 2.6%
Arco Chemical
10.250%, 11/01/10 210 266
Bellsouth
7.000%, 02/01/05 500 504
Coca Cola
6.000%, 07/15/03 1,000 960
Dayton Hudson
8.500%, 12/01/22 500 510
ITT
7.375%, 11/15/15 360 335
Laidlaw
8.750%, 04/15/25 75 83
MacMillan Bloedel
7.700%, 02/15/26 215 202
Noranda
8.125%, 06/15/04 195 205
----------
3,065
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $8,166) 8,073
----------
REPURCHASE AGREEMENTS -- 5.9%
Aubrey Lanston
5.90%, dated 06/30/97, matures
07/01/97, repurchase price
$1,728,283 (collateralized by U.S.
Treasury Note, par value $1,360,000,
11.875%, 11/15/03;
market value $1,764,736) 1,728 1,728
Hong Kong Shanghai Bank
5.80%, dated 06/30/97, matures
07/01/97, repurchase price $1,728,278
(collateralized by U.S. Treasury Note,
par value $1,680,000,
7.25%, 05/15/04;
market value $1,773,576) 1,728 1,728
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
BALANCED FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Sanwa Bank
5.85%, dated 06/30/97, matures
07/01/97, repurchase price
$1,728,281 (collateralized by U.S.
Treasury Note, par value $1,745,000,
6.625%, 06/30/01;
market value $1,765,940) $1,728 $ 1,728
Swiss Bank
5.875%, dated 06/30/97, matures 07/01/97, repurchase price $1,728,282
(collateralized by U.S. Treasury Note, par value $1,795,000, 5.625%,
11/30/00;
market value $1,770,409) 1,728 1,728
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,912) 6,912
----------
TOTAL INVESTMENTS -- 101.0%
(Cost $99,764) 118,963
----------
OTHER ASSETS AND LIABILITIES,
NET -- (1.0%) (1,123)
----------
- -------------------------------------------------------
DESCRIPTION VALUE (000)
- -------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 100 million authorized)
based on 8,407,085 outstanding shares $ 90,012
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 310,422 outstanding shares 3,413
Accumulated Net Realized Gain
on Investments 5,216
Net Unrealized Appreciation
on Investments 19,199
----------
TOTAL NET ASSETS -- 100.0% $117,840
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $13.52
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $13.52
==========
*NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
SHORT TERM INCOME FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 42%
CASH EQUIVALENTS 10%
CORPORATE BONDS 48%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 39.6%
U.S. Treasury Notes
5.750%, 10/31/97 $ 500 $ 500
7.375%, 11/15/97 1,000 1,006
6.000%, 12/31/97 575 576
5.625%, 01/31/98 750 750
6.125%, 03/31/98 500 502
5.875%, 04/30/98 2,000 2,002
6.125%, 05/15/98 1,000 1,003
6.000%, 05/31/98 1,000 1,002
6.125%, 08/31/98 1,000 1,003
6.000%, 09/30/98 2,500 2,503
5.875%, 10/31/98 1,000 999
5.750%, 12/31/98 1,000 997
6.375%, 01/15/99 1,000 1,006
5.875%, 01/31/99 1,000 998
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $14,842) 14,847
----------
CORPORATE BONDS -- 35.7%
BANKING -- 4.0%
American Express Centurion Bank
5.738%, 08/21/98 1,000 1,001
Citicorp
6.013%, 11/23/99 500 502
----------
1,503
----------
FINANCIAL SERVICES -- 21.2%
American General Finance
7.000%, 10/01/97 985 988
Associates of North America
6.250%, 03/15/99 525 524
Chrysler Financial
6.375%, 01/28/00 510 507
Credit Suisse
5.628%, 03/13/98 1,000 1,000
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Fleet Mortgage Group
6.500%, 09/15/99 $ 500 $ 501
Lehman Brothers Holdings
6.375%, 06/01/98 500 501
Mellon Financial
7.625%, 11/15/99 255 263
Morgan Stanley Group
5.853%, 02/26/99 1,250 1,250
5.625%, 03/01/99 1,000 991
Salomon
6.500%, 03/01/00 750 745
Sears Roebuck Acceptance
6.380%, 02/16/99 650 652
----------
7,922
----------
INDUSTRIAL -- 10.5%
AT&T Capital
5.970%, 02/27/98 1,000 1,000
Shell Oil
6.950%, 12/15/98 1,000 1,010
Time Warner
7.450%, 02/01/98 735 740
USX
6.650%, 10/09/97 1,200 1,202
----------
3,952
----------
TOTAL CORPORATE BONDS
(Cost $13,375) 13,377
----------
COMMERCIAL PAPER -- 1.3% BANKING -- 1.3% Abn Amro North American Finance
5.392%, 07/28/97 500 498
----------
TOTAL COMMERCIAL PAPER
(Cost $498) 498
----------
TIME DEPOSITS -- 10.0%
BANKING -- 4.7%
First Union Bank
6.000%, 07/01/97 1,752 1,752
----------
FINANCIAL SERVICES -- 5.3%
Allstate
5.745%, 07/01/97 2,000 2,000
----------
TOTAL TIME DEPOSITS
(Cost $3,752) 3,752
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
SHORT TERM INCOME FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 12.4%
Cit Rv Owner Trust,
Series 1995-B, Class A
6.500%, 04/15/11 $258 $ 260
Eqcc Home Equity Loan Trust,
Series 1996-2, Class A2
6.700%, 09/15/08 250 251
Eqcc Home Equity Loan Trust,
Series 1997-1, Class A3
6.840%, 09/15/11 750 753
Independent National Mortgage,
Series 96-A, Class A1
6.710%, 09/25/26 638 642
Money Store Home Equity Loan
Trust, Series 93-B
5.400%, 08/15/05 333 329
Navistar Financial Owner Trust,
Series 1997-A, Class A2
6.350%, 01/15/00 500 502
Student Loan Marketing Association,
Series 1997-1, Class A1 (A)
5.530%, 10/25/05 750 749
Union Acceptance,
Series 1997-A, Class A
6.130%, 07/10/01 404 405
Union Acceptance, Series 96-A
5.400%, 04/07/03 572 567
WFS Financial Owner Trust,
Series 1996-B, Class A2 CMO
6.200%, 05/20/99 203 203
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,655) 4,661
----------
TOTAL INVESTMENTS -- 99.0%
(Cost $37,122) 37,135
----------
OTHER ASSETS AND LIABILITIES,
NET -- 1.0% 369
----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 1 billion authorized)
based on 3,713,316 outstanding shares $37,088
Portfolio Shares -- Class A ($0.001
par value -- 1 billion authorized)
based on 49,473 outstanding shares 492
Accumulated Net Realized Loss
on Investments (89)
Net Unrealized Appreciation
on Investments 13
----------
TOTAL NET ASSETS -- 100.0% $37,504
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $9.97
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $9.96
==========
CMO -- COLLATERALIZED MORTGAGE OBLIGATIONS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
SHORT-INTERMEDIATE BOND FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 52%
CASH EQUIVALENTS 4%
CORPORATE BONDS 42%
U.S. AGENCY BACKED BONDS 2%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 52.7%
U.S. Treasury Notes
6.000%, 08/31/97 $ 1,500 $ 1,501
7.375%, 11/15/97 4,000 4,025
5.125%, 02/28/98 1,500 1,494
6.000%, 05/31/98 12,145 12,169
7.125%, 10/15/98 4,105 4,165
5.625%, 11/30/98 1,630 1,623
8.875%, 02/15/99 1,755 1,830
6.500%, 04/30/99 9,035 9,100
6.000%, 10/15/99 2,200 2,196
7.750%, 12/31/99 2,500 2,588
7.750%, 01/31/00 8 8
7.125%, 02/29/00 6,735 6,880
8.000%, 05/15/01 6,635 7,004
6.625%, 07/31/01 17,355 17,512
6.500%, 08/31/01 3,850 3,867
6.625%, 04/30/02 5,775 5,826
6.250%, 02/15/07 1,675 1,638
6.625%, 05/15/07 4,000 4,030
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $87,474) 87,456
----------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 2.6%
FHLMC
6.750%, 03/15/07 1,755 1,760
FNMA
6.500%, 08/01/10 1,482 1,453
6.500%, 10/01/10 1,120 1,098
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $4,322) 4,311
----------
CORPORATE OBLIGATIONS -- 23.2%
BANKING -- 4.5%
Bank One
7.600%, 05/01/07 1,815 1,865
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
BCH Cayman Islands Limited
7.700%, 07/15/06 $1,630 $ 1,671
Security Pacific
11.500%, 11/15/00 1,955 2,234
Societe Generale
7.400%, 06/01/06 1,755 1,768
----------
7,538
----------
FINANCIAL SERVICES -- 6.7%
Associates Corporation of
North America
6.375%, 08/15/98 1,500 1,504
Dean Witter Discover
6.300%, 01/15/06 1,540 1,463
Ford Motor Credit
6.800%, 08/15/97 1,000 1,002
Lehman Brothers
7.250%, 04/15/03 2,630 2,640
Paine Webber Group
6.500%, 11/01/05 1,745 1,653
Salomon
7.200%, 02/01/04 2,810 2,810
----------
11,072
----------
INDUSTRIALS -- 9.2%
Barrick Gold
7.500%, 05/01/07 1,780 1,816
CSR America
6.875%, 07/21/05 1,670 1,645
Loews
6.750%, 12/15/06 1,705 1,652
Nabisco
6.850%, 06/15/05 1,425 1,388
Noranda
8.125%, 06/15/04 1,770 1,858
Tele-Communications
8.650%, 09/15/04 985 1,027
Time Warner
7.750%, 06/15/05 1,770 1,805
United Air Lines
6.750%, 12/01/97 2,435 2,443
USX
9.625%, 08/15/03 1,490 1,672
----------
15,306
----------
UTILITIES -- 2.8%
Coastal
8.125%, 09/15/02 1,370 1,437
Tosco
7.625%, 05/15/06 1,790 1,832
Penn Power and Light
7.750%, 05/01/02 1,280 1,328
----------
4,597
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $38,388) 38,513
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
SHORT-INTERMEDIATE BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 19.6%
Aames Mortgage Trust,
Series 96-B, Class A1B
7.275%, 05/15/20 $2,100 $ 2,123
Banc One Auto Guarantor Trust,
Series 1997-A, Class A
6.270%, 11/20/03 1,867 1,867
Citicorp Mortgage Securities,
Series 97-1, Class A2
7.250%, 02/25/27 1,775 1,772
Countrywide Mortgage Broker
Services, Series 97-A1, Class A1
7.000%, 03/25/27 1,869 1,866
Eqcc, Series 1996-4, Class A5
6.710%, 07/15/11 1,875 1,868
Equivantage Home Loan Trust,
Series 96-1, Class A1
6.550%, 10/25/25 830 818
General Electric Capital Mortgage
Services, Series 97-3, Class A4
7.500%, 04/25/27 1,800 1,815
Independent National Mortgage,
Series 96-A, Class A1
6.710%, 09/25/26 2,700 2,714
Metlife Captial Equipment Loan
Trust, Series 97-A, Class A
6.850%, 05/20/08 1,600 1,606
Money Store Home Equity Trust,
Series 96-B, Class A7
7.550%, 06/15/20 3,000 3,065
Residential Asset Securization Trust,
Series 97-A3, Class A10
7.250%, 05/25/27 1,770 1,768
Saxon Asset Securities Trust,
Series 96-2, Class A2
6.475%, 11/25/20 1,993 1,979
Sears Credit Account Master Trust,
Series 95-3, Class A
7.000%, 10/15/04 3,000 3,045
Standard Credit Card Master Trust,
Series 95-6, Class A
6.750%, 06/07/00 2,000 2,016
Union Acceptance,
Series 96-A, Class A
5.400%, 04/07/03 1,544 1,531
WFS Financial Owner Trust,
Series 1996-D, Class A3
6.050%, 07/20/01 2,650 2,636
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $32,288) 32,489
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 4.3%
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $7,121,157
(collateralized by U.S. Treasury Note, par value $7,200,000, 6.625%,
06/30/01;
market value $7,286,400) $7,120 $ 7,120
----------
TOTAL REPURCHASE AGREEMENT
(Cost $7,120) 7,120
----------
TOTAL INVESTMENTS -- 102.4%
(Cost $169,592) 169,889
----------
OTHER ASSETS AND LIABILITIES,
NET -- (2.4%) (3,984)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 100 million authorized)
based on 16,602,388 outstanding shares 165,179
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 280,076 outstanding shares 3,380
Accumulated Net Realized Loss
on Investments (2,951)
Net Unrealized Appreciation
on Investments 297
----------
TOTAL NET ASSETS -- 100.0% $165,905
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.83
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $9.83
==========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
[PIE CHART]
GOVERNMENT INCOME FUND
U.S. TREASURY OBLIGATIONS 23%
CASH EQUIVALENTS 2%
U.S. AGENCY BACKED BONDS 12%
U.S. GOVERNMENT BACKED BONDS 63%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 23.1%
U.S. Treasury Bond
6.625%, 02/15/27 $1,250 $ 1,223
U.S. Treasury Notes
6.375%, 05/15/99 970 975
8.000%, 05/15/01 1,200 1,267
6.500%, 08/31/01 1,000 1,004
6.625%, 04/30/02 300 303
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,760) 4,772
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 62.9%
GNMA
8.000%, 09/15/09 668 690
8.000%, 02/15/22 336 344
8.000%, 09/15/22 59 60
8.000%, 10/15/22 257 262
8.000%, 11/15/22 468 479
7.000%, 04/15/23 348 341
7.500%, 08/15/23 1,109 1,112
6.500%, 11/15/23 442 423
7.000%, 01/15/24 805 791
8.000%, 05/15/25 839 858
6.500%, 12/15/25 992 949
7.500%, 02/15/26 469 471
6.500%, 04/15/26 487 465
8.000%, 05/15/26 961 983
8.000%, 06/15/26 694 709
8.000%, 08/15/26 1,987 2,032
8.000%, 09/15/26 1,992 2,038
----------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $12,946) 13,007
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 11.6%
FHLMC
6.000%, 05/01/08 $330 $ 318
FNMA
7.000%, 10/01/22 696 682
7.000%, 11/01/26 401 393
7.500%, 05/01/27 996 999
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $2,415) 2,392
----------
REPURCHASE AGREEMENT -- 1.8%
Sanwa Bank
5.85% dated 06/30/97, matures 07/01/97, repurchase price $375,061
(collateralized by U.S. Treasury Note, par value $380,000, 6.625%, 06/30/01;
market value $384,560) 375 375
----------
TOTAL REPURCHASE AGREEMENT
(Cost $375) 375
----------
TOTAL INVESTMENTS -- 99.4%
(Cost $20,496) 20,546
----------
OTHER ASSETS AND LIABILITIES,
NET -- 0.6% 121
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 100 million authorized)
based on 1,948,080 outstanding shares 19,281
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 170,059 outstanding shares 1,722
Accumulated Net Realized Loss
on Investments (385)
Net Unrealized Appreciation
on Investments 50
Distribution in Excess of Net
Investment Income (1)
----------
TOTAL NET ASSETS -- 100.0% $20,667
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.76
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $9.76
==========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE CORPORATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE CORPORATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
BOND FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 35%
U.S. GOVERNMENT BACKED BONDS 8%
CASH EQUIVALENTS 2%
CORPORATE BONDS 33%
U.S. AGENCY BACKED BONDS 22%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 34.5%
U.S. Treasury Bonds
6.500%, 11/15/26 $2,160 $ 2,069
6.625%, 02/15/27 4,890 4,784
U.S. Treasury Notes
5.625%, 11/30/98 4,075 4,056
8.875%, 02/15/99 12,755 13,302
6.500%, 04/30/99 6,610 6,658
7.750%, 01/31/00 503 521
6.750%, 04/30/00 4,305 4,359
8.000%, 05/15/01 2,795 2,951
6.625%, 07/31/01 4,740 4,783
7.500%, 11/15/01 6,590 6,865
6.250%, 02/28/02 1,335 1,327
7.250%, 05/15/04 3,735 3,894
6.250%, 02/15/07 1,888 1,847
6.625%, 05/15/07 6,025 6,070
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $63,250) 63,486
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 30.0%
FHLMC
6.750%, 03/15/07 2,355 2,361
7.500%, 10/01/10 2,600 2,640
8.000%, 07/01/25 3,413 3,493
FNMA
6.500%, 08/01/10 3,096 3,035
6.500%, 09/01/10 3,489 3,421
7.500%, 06/01/11 2,493 2,529
6.500%, 03/25/19 1,690 1,656
8.500%, 02/01/25 3,439 3,568
7.500%, 08/01/25 3,006 3,012
8.500%, 08/01/26 3,470 3,600
7.000%, 11/01/26 4,012 3,931
8.000%, 12/15/26 1,953 1,997
7.500%, 05/01/27 4,514 4,524
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
GNMA
7.500%, 12/15/25 $5,391 $ 5,408
6.500%, 04/15/26 5,932 5,674
7.000%, 06/15/26 1,885 1,858
7.500%, 06/15/27 2,485 2,493
----------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $54,950) 55,200
----------
ASSET-BACKED SECURITIES -- 9.8%
Aames Mortgage Trust,
Series 96-B, Class A1B
7.275%, 05/15/20 2,489 2,517
EQCC, Series 96-4, Class A5
6.710%, 07/15/11 2,000 1,992
Equivantage Home Equity Loan
Trust, Series 96-1, Class A1
6.550%, 10/25/25 1,473 1,451
First Plus Home Loan Trust,
Series 1997-2, Class A5
6.820%, 04/10/23 2,200 2,201
Independent National Mortgage,
Series 96-A, Class A1
6.710%, 09/25/26 96 96
Metlife Captial Equipment Loan
Trust, Series 97-A, Class A
6.850%, 05/20/08 1,800 1,806
Money Store Home Equity Trust,
Series 96-B, Class A7
7.550%, 06/15/20 3,145 3,213
Saxon Asset Securities Trust,
Series 96-2, Class A2
6.475%, 11/25/20 1,950 1,936
UCFC, Series 96-D, Class A2
6.381%, 07/15/10 1,480 1,476
Vanderbilt Mortgage Finance,
Series 1997-B, Class 1A4
7.190%, 02/07/14 1,404 1,418
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $18,045) 18,106
----------
NON-AGENCY MORTGAGE-BACKED BONDS -- 4.5%
Citicorp Mortgage Securities,
Series 97-1, Class A2 CMO
7.250%, 02/25/27 2,060 2,057
Countrywide Mortgage Broker
Services, Series 97-A1,
Class A1 CMO
7.000%, 03/25/27 2,075 2,071
General Electric Capital Mortgage
Services, Series 97-3,
Class A4 CMO
7.500%, 04/25/27 2,300 2,320
Residential Asset Securization Trust,
Series 97-A3, Class A10 CMO
7.250%, 05/25/27 1,835 1,833
----------
TOTAL NON-AGENCY MORTGAGE-BACKED BONDS
(Cost $8,205) 8,281
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CORPORATE BONDS -- 18.1%
BANKING -- 6.5%
Bank One
8.000%, 04/29/27 $1,980 $ 2,039
First Union Capital I
7.935%, 01/15/27 1,820 1,790
Provident Bank
7.125%, 03/15/03 1,955 1,953
Santander Finance
6.375%, 02/15/11 1,955 1,784
Societe Generale
7.400%, 06/01/06 2,115 2,131
Wells Fargo Capital I
7.960%, 12/15/26 2,210 2,191
----------
11,888
----------
FINANCIAL SERVICES -- 1.9%
CNA Financial
7.250%, 11/15/23 725 681
Fairfax Financial Holdings LP
8.300%, 04/15/26 1,515 1,572
Lehman Brothers Holdings
7.375%, 05/15/04 1,320 1,333
----------
3,586
----------
INDUSTRIAL -- 9.7%
American Stores
8.000%, 06/01/26 2,110 2,128
Barrick Gold
7.500%, 05/01/07 1,855 1,892
Legrand S.A.
8.500%, 02/15/25 2,590 2,862
Loews
6.750%, 12/15/06 1,880 1,821
Nabisco
7.550%, 06/15/15 1,845 1,806
Noranda
8.125%, 06/15/04 1,940 2,037
Tele-Communications
8.650%, 09/15/04 1,000 1,043
Time Warner
7.750%, 06/15/05 1,985 2,025
Tosco
7.625%, 05/15/06 2,185 2,237
----------
17,851
----------
TOTAL CORPORATE BONDS
(Cost $33,313) 33,325
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 2.3%
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $4,194,682
(collateralized by U.S. Note, par value $4,240,000, 6.625%, 06/30/01; market
value $4,290,880) $4,194 $ 4,194
----------
TOTAL REPURCHASE AGREEMENT
(Cost $4,194) 4,194
----------
TOTAL INVESTMENTS -- 99.2%
(Cost $181,957) 182,592
----------
OTHER ASSETS AND LIABILITIES,
NET -- 0.8% 1,394
----------
NET ASSETS:
Portfolio Shares -- Class Y ($.001
par value -- 1 billion authorized)
based on 17,801,308 outstanding shares 183,444
Portfolio Shares -- Class A ($.001
par value -- 1 billion authorized)
based on 158,316 outstanding shares 1,664
Accumulated Net Realized Loss
on Investments (1,757)
Net Unrealized Appreciation
on Investments 635
----------
TOTAL NET ASSETS -- 100.0% $183,986
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.24
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.24
==========
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
LP -- LIMITED PARTNERSHIP
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
GLOBAL BOND FUND
[PIE CHART]
UNITED STATES 28%
UNITED KINGDOM 20%
SWEDEN 5%
AUSTRALIA 6%
CASH EQUIVALENTS 7%
DENMARK 7%
FRANCE 3%
GERMANY 16%
NEW ZEALAND 5%
SPAIN 3%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000)(1) VALUE (000)
- -------------------------------------------------------
FOREIGN BONDS -- 52.3%
AUSTRALIA -- 6.2%
Australian Government
10.000%, 10/15/02 $ 800 $ 697
New South Wales Treasury
12.000%, 12/01/01 1,600 1,466
----------
2,163
----------
DENMARK -- 7.2%
Kingdom of Denmark
7.000%, 11/10/24 16,850 2,509
----------
GERMANY -- 15.4%
Bundesrepublic
6.250%, 01/04/24 9,590 5,348
----------
NEW ZEALAND -- 4.8%
Government of New Zealand
8.000%, 11/15/06 2,320 1,687
----------
SWEDEN -- 4.7%
Government of Sweden
8.000%, 08/15/07 11,500 1,634
----------
UNITED KINGDOM -- 14.0%
Chubu Electric Power
6.750%, 08/10/99 950 1,565
Halifax Building
8.375%, 12/15/99 950 1,616
United Kingdom Treasury
10.500%, 05/19/99 950 1,674
----------
4,855
----------
TOTAL FOREIGN BONDS
(Cost $18,084) 18,196
----------
- -------------------------------------------------------
DESCRIPTION PAR (000)(1) VALUE (000)
- -------------------------------------------------------
COMMERCIAL PAPER -- 18.7%
Banque International Luxembourg
5.58%, 07/21/97 $ 1,000 $ 997
Cargill Financial
5.81%, 07/10/97 1,000 998
Commerical Union
5.58%, 07/10/97 1,000 999
Credit Local
5.56%, 07/07/97 1,000 999
McDonald's
5.61%, 07/07/97 500 499
National Rural Utilities
5.65%, 07/21/97 1,000 997
Santander International
5.67%, 07/28/97 1,000 996
----------
TOTAL COMMERCIAL PAPER
(Cost $6,486) 6,485
----------
DEBT OPTIONS -- 0.6%
FRANCE -- 0.1%
Government of France OAT 7.5%
Put, strike @ 114.68* 23,000,000 52
----------
GERMANY -- 0.4%
Bundesrepublic 7.375% Put,
strike @ 112.45* 7,300,000 40
Bundesrepublic 6.25% Put,
strike @ 96.32* 6,000,000 89
----------
129
----------
SWEDEN -- 0.1%
Government of Sweden 8.00%
Put, strike @ 6.71* 11,500,000 36
----------
TOTAL DEBT OPTIONS
(Cost $382) 217
----------
CURRENCY OPTIONS -- 0.1%
Deutsche Mark Call,
strike 1.7025* 7,000,000 28
----------
TOTAL CURRENCY OPTIONS
(Cost $139) 28
----------
U.S. TREASURY OBLIGATIONS-- 19.3%
U.S. Treasury Notes
4.75%, 09/30/98 6,800 6,705
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,777) 6,705
----------
DEMAND DEPOSIT -- 6.7%
Morgan Stanley
4.35%, 07/01/97 2,347 2,347
----------
TOTAL DEMAND DEPOSIT
(Cost $2,347) 2,347
----------
TOTAL INVESTMENTS -- 97.7%
(Cost $34,215) 33,978
----------
OTHER ASSETS AND LIABILITIES,
NET -- 2.3% 794
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($.001
par value -- 25 million authorized)
based on 3,627,358 outstanding shares $36,004
Portfolio Shares -- Class A ($.001
par value --25 million authorized)
based on 19,095 outstanding shares 189
Accumulated net realized loss
on investments (1,573)
Net unrealized appreciation on forward
foreign currency contracts, foreign
currency and translation of other assets
and liabilities in foreign currency 211
Net unrealized depreciation
on investments (237)
Accumulated net investment income 178
----------
TOTAL NET ASSETS -- 100.0% $34,772
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.54
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $9.52
==========
* NON-INCOME PRODUCING SECURITY
(1) IN LOCAL CURRENCY UNLESS OTHERWISE INDICATED
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INTERMEDIATE MUNICIPAL BOND FUND
[PIE CHART]
REVENUE BONDS 50%
CASH EQUIVALENTS 3%
GENERAL OBLIGATIONS 37%
PRE-REFUNDED SECURITIES 10%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 94.6% COLORADO -- 1.1% El Paso County, Colorado GO
5.200%, 12/01/02 $ 20 $ 21
----------
FLORIDA -- 2.7%
Jacksonville, Florida Electric
Authority Revenue Bond,
Series 3-A
5.200%, 10/01/02 50 52
----------
GEORGIA -- 2.7%
De Kalb County, Georgia Health
Facilities GO
5.300%, 01/01/03 50 52
----------
HAWAII -- 2.6%
Hawaii State GO
5.200%, 06/01/04 50 51
----------
ILLINOIS -- 7.5%
Bloomingdale, Illinois GO
5.450%, 01/01/09 85 87
Illinois State Sales Tax
Revenue Bond, Series S
4.900%, 06/15/07 60 59
----------
146
----------
MARYLAND -- 2.6%
Maryland State Health & Higher
Education Facilities Authority
Revenue Bond for Johns
Hopkins Project
5.125%, 07/01/03 50 51
----------
MASSACHUSETTS -- 2.7%
Massachusetts Bay Transportation
Authority Revenue Bond, Series A
5.300%, 03/01/05 50 52
----------
MICHIGAN -- 5.2%
Grand Haven, Michigan Electric
Revenue Bond MBIA
5.000%, 07/01/04 100 102
----------
73
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
INTERMEDIATE MUNICIPAL BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
NEW JERSEY -- 6.1%
Burlington County, New Jersey
Community Bridge Systems
Revenue Bond, Callable
10/01/03 at 101 CG
5.050%, 10/01/04 $ 50 $ 51
Medford Township, New Jersey
Board of Education FGIC
5.950%, 02/01/03 65 69
----------
120
----------
PENNSYLVANIA -- 61.4%
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Presbyterian
University Hospital, Series B2 (A)
4.200%, 03/01/18 80 80
Allegheny County, Pennsylvania,
Series C-33, GO
7.450%, 02/15/98 50 51
Governor Mifflin, Pennsylvania
School District GO AMBAC
4.850%, 11/15/01 50 51
Lehigh County, Pennsylvania
GO FGIC
5.125%, 11/15/08 110 111
Luzerne County, Pennsylvania,
Series A, GO, Pre-Refunded
09/15/00 at 100 FGIC
5.850%, 09/15/02 50 52
Pennsylvania State Higher Education
Facilities Authority Hospital
Revenue Bond for Thomas
Jefferson University Project,
Pre-Refunded 01/01/98 at 102
8.000%, 01/01/18 85 88
Pennsylvania State Industrial
Development Authority Revenue
Bond AMBAC
5.000%, 07/01/04 100 101
Pennsylvania State Infrastructure
Authority Revenue Bond for
Pennvest Loan Pool Project MBIA
6.000%, 09/01/03 65 70
Pennsylvania State Turnpike
Commission Revenue Bond,
Series 1, Pre-Refunded 12/01/01
at 102 FGIC
7.150%, 12/01/11 50 56
Pennsylvania State Turnpike
Commission Revenue Bond,
Series F, Pre-Refunded 12/01/99
at 102 AMBAC
7.250%, 12/01/17 50 54
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Philadelphia, Pennsylvania Airport
Parking Authority Revenue
Bond AMBAC
5.500%, 09/01/05 $ 80 $ 83
Pittsburgh, Pennsylvania School
District, Series A, GO FGIC
4.850%, 09/01/03 100 101
Reading, Pennsylvania Parking
Authority Revenue Bond MBIA
4.950%, 11/15/02 50 51
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond for Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 50 50
University of Pittsburgh, Pennsylvania
Revenue Bond for University
Capital Projects FGIC
5.050%, 06/01/10 90 89
Wallenpaupack, Pennsylvania Area
School District, Series C, GO,
Callable 09/01/00 at 100 FGIC
6.000%, 09/01/03 50 52
West View, Pennsylvania Municipal
Water Authority Revenue
Bond FGIC
4.800%, 11/15/06 60 59
----------
1,199
----------
TOTAL MUNICIPAL BONDS
(Cost $1,825) 1,846
----------
CASH EQUIVALENT -- 3.4%
SEI Institutional Tax
Free Portfolio
67 67
----------
TOTAL CASH EQUIVALENT
(Cost $67) 67
----------
TOTAL INVESTMENTS -- 98.0%
(Cost $1,892) 1,913
----------
OTHER ASSETS AND LIABILITIES,
NET -- 2.0% 39
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 100 million authorized) based
on 98,840 outstanding shares 1,025
Portfolio Shares -- Class A ($0.001 par value -- 100 million authorized) based
on 95,399 outstanding shares 989
Accumulated Net Realized Loss
on Investments (83)
Net Unrealized Appreciation
on Investments 21
----------
TOTAL NET ASSETS -- 100.0% $1,952
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.05
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.05
==========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
PENNSYLVANIA MUNICIPAL BOND FUND
[PIE CHART]
REVENUE BONDS 72%
GENERAL OBLIGATIONS 27%
PRE-REFUNDED SECURITIES 1%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 98.5%
PENNSYLVANIA -- 96.1%
Allegheny County, Pennsylvania
GO, Series C-43, Callable
09/15/04 at 100 MBIA
5.875%, 09/15/10 $ 60 $ 62
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Mercy Hospital
of Pittsburgh AMBAC
6.450%, 04/01/01 200 213
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Montefiore
Hospital Association
5.800%, 10/01/03 125 129
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Presbyterian
Health Center, Series B, Callable
11/01/02 at 102 MBIA
6.000%, 11/01/12 25 26
Allegheny County, Pennsylvania
Redevelopment Authority
Revenue Bond for Home
Improvement Loan Project,
Series A, Callable 02/01/04
at 102 FHA
5.700%, 02/01/07 10 10
Allegheny County, Pennsylvania
Sanitation Authority Sewer
Revenue Bond, Series B,
Pre-Refunded 06/01/99
at 100 FGIC
7.450%, 06/01/99 130 138
Allegheny County, Pennsylvania
GO, Series C-43, Callable
09/15/04 at 100 MBIA
5.875%, 09/15/13 100 103
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Berks County, Pennsylvania
Revenue Bond for Reading
Hospital & Medical Center,
Series B, Callable 10/01/04
at 102 MBIA
5.600%, 10/01/06 $ 65 $ 68
Bucks County, Pennsylvania Bucks
County Community College
5.500%, 06/15/14 300 301
Center City District, Pennsylvania
Business Improvement
Assessment Bond, Callable
12/01/07 at 100 AMBAC
5.600%, 12/01/08 60 63
Central Bucks, Pennsylvania
School District GO, Callable
02/01/01 at 100
6.600%, 02/01/03 175 187
Crawford, Pennsylvania Central
School District GO FGIC
7.000%, 02/15/05 100 114
Delaware County, Pennsylvania
Revenue Bond for Villanova
University AMBAC
5.400%, 08/01/08 200 206
Delaware County, Pennsylvania GO
7.100%, 12/01/98 170 172
5.500%, 10/01/15 75 75
Dover Township, Pennsylvania
Sewer Authority Revenue Bond
6.250%, 05/01/12 20 22
Hampden Township, Pennsylvania
Sewer Authority Special
Obligation Bond, Callable
10/01/96 at 100
5.350%, 04/01/03 110 112
Lower Burrell, Pennsylvania City
Municipal Sewer Authority
Revenue Bond AMBAC
5.125%, 02/01/16 250 238
Lower Merion Township,
Pennsylvania GO, Callable
08/01/02 at 100
5.625%, 08/01/05 100 104
Manheim, Pennsylvania Central
School District GO, Callable
05/15/04 at 100 FGIC
6.100%, 05/15/14 100 104
Millcreek Township, Pennsylvania
Sewer Authority Revenue Bond,
Callable 11/01/99 at 100 MBIA
6.000%, 11/01/06 150 156
Montgomery County, Pennsylvania
Higher Education and Health
Authority Revenue Bond for
Abington Memorial Hospital,
Series A AMBAC
5.125%, 06/01/14 250 237
Montgomery County, Pennsylvania
GO, Callable 10/15/03 at 100
5.750%, 10/15/11 175 181
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
75
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
PENNSYLVANIA MUNICIPAL BOND FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
North Wales, Pennsylvania Water
Authority Revenue Bond
Pre-Refunded 11/01/04 at 100
6.750%, 11/01/04 $ 100 $ 112
Northampton County, Pennsylvania
Higher Education Authority
Revenue Bond for Lehigh
University, Series A MBIA
5.750%, 11/15/18 150 152
Pennsylvania Housing Finance
Agency Single Family
Mortgage- 55 Revenue Bond
4.700%, 10/01/01 100 100
Pennsylvania State Convention
Center Authority Revenue Bond,
Series A FGIC
6.700%, 09/01/16 75 87
Pennsylvania State General
Obligation Bond
5.125%, 09/15/04 450 460
5.000%, 11/15/12 500 487
Pennsylvania State GO, Series 2
6.000%, 07/01/05 25 27
6.250%, 07/01/11 60 66
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for University of
Pennsylvania, Series B
5.700%, 01/01/11 150 154
Pennsylvania State Higher
Education Facilities Authority
Health Services Revenue Bond
for Allegheny/Delaware Valley,
Series A MBIA
5.500%, 11/15/08 400 413
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for Allegheny General Hospital,
Series A
6.300%, 09/01/97 200 201
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for Health Services, Series A,
Callable 01/01/04 at 102
6.000%, 01/01/10 100 106
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for Thomas Jefferson University,
Series A, Callable 07/01/99 at 102
6.000%, 07/01/19 150 152
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for University of Pennsylvania,
Series B
5.850%, 09/01/13 100 102
Pennsylvania State Higher
Educational Facilities
Authority, University of
Pennsylvania Project, Series B, RB
5.250%, 01/01/07 500 508
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State Housing
Finance Agency Revenue
Bond, Series C
6.400%, 07/01/12 $ 300 $ 310
Pennsylvania State Industrial
Development Authority
Revenue Bond, State
Infrastructure Investment
Authority Revenue Bond for
Pennvest Loan Pool MBIA
6.000%, 09/01/04 400 431
Pennsylvania State Industrial
Development Authority
Revenue Bond AMBAC
5.800%, 07/01/09 250 266
6.000%, 07/01/09 305 329
6.000%, 01/01/12 100 105
Pennsylvania State Industrial
Development Authority Revenue
Bond Economic Development
AMBAC
6.000%, 07/01/08 600 649
Pennsylvania State Turnpike
Commission Revenue Bond,
Series O, Callable 12/01/02
at 102 FGIC
5.900%, 12/01/08 125 132
Pennsylvania State Turnpike
Commission Revenue Bond,
Series P
5.100%, 12/01/99 150 153
5.800%, 12/01/06 75 79
Pennsylvania State University
Revenue Bond
5.200%, 03/01/98 250 252
Pennsylvania State University
Revenue Bond, Callable
03/01/04 at 100
6.150%, 03/01/05 185 198
Pennsylvania State, Third Series,
Callable 09/01/03 at 101 GO
5.000%, 09/01/12 350 337
Philadelphia Pennsylvania Parking
Authority Revenue Bond
5.750%, 09/01/07 400 426
Philadelphia Pennsylvania, Industrial
Authority, Revenue Bond
5.250%, 11/15/09 500 502
Philadelphia, Pennsylvania Hospitals
and Higher Education Facilities
Authority Revenue Bond for
Pennsylvania Hospital,
Series A FGIC
5.250%, 02/15/14 100 96
Pittsburg Pennsylvania General
Obligation Bond Callable
09/01/05 at 100, FGIC
4.900%, 03/01/07 350 350
Pittsburgh, Pennsylvania GO,
Series D, Callable 09/01/02
at 102 AMBAC
6.125%, 09/01/17 25 26
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Pittsburgh, Pennsylvania Higher
Education Authority Revenue
Bond for University Capital
Project, Series A, Callable
06/01/02 at 102 MBIA
6.125%, 06/01/21 $115 $ 119
Radnor Township, Pennsylvania
GO, Callable 05/01/06 at 100
5.250%, 11/01/16 200 196
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 250 251
Scranton-Lackawanna, Pennsylvania
Health and Welfare Authority
Revenue Bond for University of
Scranton, Series A
6.150%, 03/01/03 150 159
Seneca Valley, Pennsylvania GO
5.850%, 02/15/15 105 107
York, Pennsylvania City School
District GO, Callable 03/01/03
at 100 FGIC
5.600%, 03/01/07 75 77
----------
11,698
----------
PUERTO RICO -- 2.4%
University of Puerto Rico, Series M,
Revenue Bond, MBIA
5.250%, 06/01/25 300 291
----------
TOTAL MUNICIPAL BONDS
(Cost $11,731) 11,989
----------
TOTAL INVESTMENTS -- 98.5%
(Cost $11,731) 11,989
----------
OTHER ASSETS AND LIABILITIES,
NET -- 1.5% 186
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 100 million authorized shares)
based on 971,402 outstanding shares 10,037
Portfolio Shares -- Class A ($0.001 par value -- 100 million authorized shares)
based on 191,350 outstanding shares 1,977
Accumulated Net Realized Loss
on Investments (97)
Net Unrealized Appreciation
on Investments 258
----------
TOTAL NET ASSETS -- 100.0% $12,175
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $10.47
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $10.47
==========
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FHA -- FEDERAL HOUSING AGENCY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
NEW JERSEY MUNICIPAL BOND FUND
[PIE CHART]
REVENUE BONDS 40%
CASH EQUIVALENTS 4%
GENERAL OBLIGATIONS 56%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 94.7% NEW JERSEY -- 91.0% Bayonne, New Jersey GO FGIC
5.900%, 05/01/08 $ 150 $ 158
Burlington County, New Jersey GO
5.200%, 10/01/05 80 82
Cherry Hill Township, New Jersey GO
5.900%, 06/01/05 50 53
Evesham Township, New Jersey Board
of Education GO FSA
4.900%, 09/01/02 75 76
Flemington-Raritan, New Jersey
Regional School District GO
5.700%, 05/01/06 50 52
Manalapan Township, New Jersey
Fire District Number 1
5.300%, 12/15/99 80 82
Marlboro Township, New Jersey
Board of Education GO FGIC
5.500%, 07/15/09 40 41
Monmouth County, New Jersey
Improvement Authority
Revenue Bond CG
6.625%, 12/01/05 40 43
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Bridgeton Hospital Association
Project, Series B
6.000%, 07/01/13 50 52
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Burlington County Memorial
Hospital Project
6.000%, 07/01/12 50 52
New Jersey State Economic
Development Authority Revenue
Bond for Peddie School
Project, Series A
5.400%, 02/01/06 50 52
77
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
NEW JERSEY MUNICIPAL BOND FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
New Jersey State Economic
Development Authority Revenue
Bond for Rutgers State
University-Civic Square AMBAC
6.125%, 07/01/24 $ 55 $ 57
New Jersey State Educational
Facilities Authority Revenue
Bond for University of Medicine
and Dentistry, Series B AMBAC
5.250%, 12/01/13 60 60
New Jersey State Educational
Facilities Authority Revenue
Bond for Princeton University
Project, Series A
5.500%, 07/01/04 100 106
New York & New Jersey States
Port Authority Revenue Bond,
Series 81
5.700%, 08/01/07 50 52
North Bergen Township,
New Jersey GO AMBAC
5.000%, 08/15/09 75 74
North Brunswick Township,
New Jersey GO
6.125%, 05/15/04 24 26
North Brunswick Township,
New Jersey Board of
Education GO
6.300%, 02/01/12 150 161
Ocean County, New Jersey GO
5.650%, 07/01/03 75 79
Ocean County, New Jersey
Utilities Authority Wastewater
Revenue Bond
5.125%, 01/01/11 75 74
Secaucus, New Jersey Utilities
Authority Sewer
Revenue Bond, Series A
6.100%, 12/01/10 60 65
South Brunswick Township,
New Jersey GO
5.950%, 08/01/14 100 104
South Monmouth, New Jersey
Regional Sewer Authority
Revenue Bond MBIA
5.550%, 01/15/06 50 52
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
West Windsor Township,
New Jersey Parking Authority
Revenue Bond
6.100%, 12/01/12 $ 50 $ 53
----------
1,706
----------
PENNSYLVANIA -- 3.7%
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project,
Series B2 (A) (B) (C)
4.200%, 03/01/18 70 70
----------
TOTAL MUNICIPAL BONDS
(Cost $1,729) 1,776
----------
CASH EQUIVALENT -- 4.2%
SEI Institutional Tax
Free Portfolio 79 79
----------
TOTAL CASH EQUIVALENT
(Cost $79) 79
----------
TOTAL INVESTMENTS -- 98.9%
(Cost $1,808) 1,855
----------
OTHER ASSETS AND LIABILITIES,
NET -- 1.1% 20
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value --100 million authorized)
based on 145,400 outstanding shares 1,429
Portfolio Shares -- Class A ($0.001
par value --100 million authorized)
based on 39,208 outstanding shares 402
Accumulated Net Realized Loss
on Investments (3)
Net Unrealized Appreciation
on Investments 47
----------
TOTAL NET ASSETS -- 100.0% $1,875
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.16
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.15
==========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSOR OF THE
PUT DEMAND DATE OR MATURITY DATE.
(C) SECURITY IS HELD IN CONNECTION WITH A LETTER OF CREDIT OR STANDBY BOND
PURCHASE AGREEMENT ISSUED BY A MAJOR COMMERCIAL BANK OR OTHER INSTITUTION.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FSA -- FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
TREASURY RESERVE
[PIE CHART]
U.S. TREASURY SECURITIES 38%
CASH EQUIVALENTS 62%
% OF TOTAL PORTFOLIOS INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 38.3%
U.S. Treasury Bills+
5.356%, 08/14/97 $15,000 $ 14,905
5.662%, 08/21/97 10,000 9,924
5.901%, 08/21/97 10,000 9,921
5.328%, 08/28/97 9,000 8,926
5.404%, 09/04/97 15,000 14,859
5.581%, 09/11/97 15,000 14,839
5.539%, 09/18/97 10,000 9,883
5.643%, 10/02/97 10,000 9,860
5.597%, 10/09/97 15,000 14,776
5.589%, 10/16/97 15,000 14,760
5.508%, 11/13/97 10,000 9,804
5.564%, 11/13/97 10,000 9,800
5.361%, 12/11/97 10,000 9,768
5.624%, 01/08/98 8,500 8,260
5.592%, 02/05/98 7,000 6,774
5.648%, 03/05/98 10,000 9,630
5.806%, 04/02/98 10,000 9,579
5.796%, 04/30/98 10,000 9,538
5.587%, 05/28/98 10,000 9,512
U.S. Treasury Notes
5.550%, 07/31/97 8,500 8,499
5.750%, 10/31/97 12,000 12,000
5.375%, 11/30/97 13,000 12,993
5.250%, 12/31/97 12,000 11,985
5.625%, 01/31/98 15,000 15,001
U.S. Treasury STRIPS+
5.400%, 08/15/97 20,000 19,871
5.684%, 11/15/97 15,300 14,985
5.710%, 02/15/98 10,000 9,658
5.725%, 05/15/98 14,600 13,899
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $324,209) 324,209
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENTS -- 62.1%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price
$198,032,450 (collateralized by various U.S. Treasury Notes, ranging in par
value $25,089,000- $49,877,000, 5.125%-8.25%, 04/30/98-06/30/02; total
market value $202,064,598) $198,000 $198,000
First National Bank of Chicago 5.95%, dated 06/30/97, matures 07/01/97,
repurchase price $38,350,337 (collateralized by various U.S. Treasury Notes,
ranging in par value $4,438,000- $26,115,000, 5.75%-8.00%, 10/31/00-05/15/01;
total market
value $39,237,251) 38,344 38,344
Goldman Sachs
5.80%, dated 06/30/97, matures
07/01/97, repurchase price $23,003,706
(collateralized by various U.S. Treasury
Notes, ranging in par value
$2,393,000- $20,607,000, 9.125%,
05/15/99; total market value
$23,548,457) 23,000 23,000
Hong Kong Shanghai Bank 5.80%, 06/30/97, matures 07/01/97, repurchase price
$20,003,222 (collateralized by various U.S. Treasury Notes, ranging in par
value $8,035,000-$11,965,000, 5.75%-7.25%, 08/15/03-05/15/04; total market
value
$20,540,214) 20,000 20,000
Merrill Lynch 5.60%, dated 06/30/97, matures 07/01/97, repurchase price
$30,004,667 (collateralized by U.S. Treasury Note, par value $30,260,000,
6.125%, 05/15/98;
market value $30,580,756) 30,000 30,000
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $197,032,013
(collateralized by various U.S. Treasury Notes, ranging in par value
$19,628,000- $52,052,000, 6.00%-8.875%, 07/15/98-02/15/99; total market
value $200,973,619) 197,000 197,000
Swiss Bank
5.875%, dated 06/30/97, matures 07/01/97, repurchase price $20,003,264
(collateralized by U.S. Treasury Note, par value $20,765,000, 5.625%,
11/30/00;
market value $20,480,520) 20,000 20,000
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $526,344) 526,344
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
TREASURY RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
TOTAL INVESTMENTS -- 100.4%
(Cost $850,553) $850,553
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.4%) (3,023)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 1,250 million authorized) based
on 835,378,664 outstanding shares 835,379
Portfolio Shares -- Class C ($0.001 par value -- 1,250 million authorized) based
on 12,144,618 outstanding shares 12,145
Accumulated Net Realized Gain
on Investments 6
----------
TOTAL NET ASSETS -- 100.0% $847,530
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS C $1.00
==========
+ YIELD TO MATURITY
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL SECURITIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CASH RESERVE
[PIE CHART]
U.S. GOVERNMENT SECURITIES 6%
CASH EQUIVALENTS 15%
CORPORATE SECURITIES 79%
% OF TOTAL INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
COMMERCIAL PAPER -- 48.8%
BANKING -- 9.7%
Abbey National Bank
5.725%, 08/11/97 $10,000 $ 9,936
Abn Amro North
American Finance
5.479%, 07/09/97 15,000 14,982
5.392%, 07/28/97 2,000 1,992
Banc One Funding
5.630%, 07/29/97 10,000 9,957
Banc One Guaranteed Funding
5.688%, 07/30/97 13,000 12,941
Bank of America
5.690%, 08/04/97 15,000 14,921
Deutsche Bank
5.680%, 07/07/97 15,000 14,986
Society Generale
5.900%, 06/16/98 9,000 8,991
----------
88,706
----------
FINANCIAL SERVICES -- 19.1%
Asset Securitization
5.713%, 07/15/97 15,000 14,967
5.722%, 07/21/97 10,000 9,969
5.689%, 08/11/97 7,500 7,452
5.680%, 09/03/97 6,050 5,990
Eureka Securitization
5.711%, 07/31/97 15,000 14,930
5.647%, 09/15/97 11,500 11,365
Goldman Sachs
5.576%, 07/02/97 3,000 3,000
5.533%, 07/22/97 5,000 4,984
5.676%, 08/20/97 10,000 9,922
Merrill Lynch
5.494%, 07/01/97 5,000 5,000
5.726%, 07/22/97 7,000 6,977
5.808%, 10/31/97 10,000 9,808
5.835%, 12/02/97 7,500 7,318
80
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Morgan Stanley
5.518%, 07/15/97 $ 5,000 $ 4,990
5.689%, 07/16/97 10,000 9,977
5.650%, 09/16/97 10,000 9,881
New Center Asset Trust
5.464%, 07/28/97 3,000 2,988
5.707%, 11/25/97 10,000 9,773
Paccar Financial
5.566%, 07/02/97 20,000 19,997
5.563%, 09/23/97 5,000 4,937
----------
174,225
----------
INDUSTRIAL -- 19.2%
Cafco
5.591%, 07/15/97 12,800 12,772
Caisse de Depots En
Consignations
5.600%, 07/08/97 8,000 7,991
5.730%, 08/06/97 18,880 18,773
Campbell Soup
5.617%, 07/15/97 11,900 11,875
Ford Motor
5.689%, 08/05/97 10,000 9,946
Ford Motor Credit
5.560%, 07/08/97 7,000 6,992
5.693%, 07/21/97 17,000 16,947
General Electric Credit
5.707%, 08/12/97 10,000 9,934
General Electric Capital
5.546%, 08/26/97 10,000 9,917
5.665%, 10/21/97 10,000 9,827
Mitsubishi International
5.580%, 07/07/97 15,000 14,986
Mobil Australia
6.201%, 07/01/97 8,097 8,097
Norwest Financial
5.628%, 09/22/97 15,000 14,808
Pitney Bowes Credit
5.643%, 09/26/97 3,600 3,552
5.851%, 10/02/97 4,000 3,941
Southwestern Bell Capital
Communications
5.607%, 07/22/97 5,250 5,233
Swedish Export Credit
5.497%, 07/16/97 10,000 9,978
----------
175,569
----------
UTILITIES -- 0.8%
National Rural Utilities
5.614%, 09/19/97 7,200 7,111
----------
TOTAL COMMERCIAL PAPER
(Cost $445,611) 445,611
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.0%
FHLB
6.000%, 09/24/97 $ 6,500 $ 6,508
5.350%, 12/10/97 18,350 18,347
5.810%, 01/23/98 11,000 11,000
5.805%, 02/13/98 13,400 13,400
5.850%, 03/17/98 5,000 5,000
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $54,255) 54,255
----------
CORPORATE OBLIGATIONS -- 18.0%
BANKING -- 2.2%
Abbey National Bank (A)
5.575%, 02/25/98 20,000 19,983
----------
FINANCIAL SERVICES -- 9.1%
Abbey National Treasury
Services (A)
5.650%, 04/15/98 10,000 9,996
American Express (A)
5.658%, 09/11/97 10,000 10,000
Associates of North America (A)
5.570%, 03/02/98 15,000 14,993
Associates of North America
6.625%, 11/15/97 10,000 10,028
Credit Suisse (A)
5.628%, 03/13/98 10,000 10,000
Goldman Sachs
6.100%, 04/15/98 6,825 6,827
Morgan Stanley (A)
5.638%, 11/07/97 9,375 9,375
Paccar Financial (A)
5.568%, 06/18/98 12,000 11,993
----------
83,212
----------
INDUSTRIAL -- 6.7%
Amex Centurian (A)
5.658%, 09/12/97 6,000 6,000
E.I. DuPont de Nemours
5.590%, 10/08/97 5,000 5,000
8.650%, 12/01/97 5,000 5,061
Ford Motor Credit
8.000%, 12/01/97 3,460 3,486
6.350%, 02/12/98 1,800 1,806
Gannett
5.250%, 03/01/98 10,000 9,959
General Electric Capital
7.620%, 11/18/97 4,500 4,527
Province of Ontario
5.700%, 10/01/97 10,000 10,004
Rabobank Nederland
6.500%, 08/05/97 1,160 1,160
Toyota Motor Credit (A)
5.680%, 09/26/97 10,000 10,000
Wal-Mart Stores
5.500%, 03/01/98 4,000 3,997
----------
61,000
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $164,195) 164,195
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
81
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
CASH RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
TIME DEPOSITS -- 5.5%
First Union Bank
6.000%, 07/01/97 $10,000 10,000
Sumitomo Bank
6.125%, 07/01/97 40,000 40,000
----------
50,000
----------
TOTAL TIME DEPOSITS
(Cost $50,000) 50,000
----------
INSURANCE FUNDING AGREEMENTS -- 4.7%
Allstate (A)
5.745%, 07/01/97 18,000 18,000
Pacific Mutual Insurance (A)
5.721%, 07/01/97 25,000 25,000
----------
INSURANCE FUNDING AGREEMENTS
(Cost $43,000) 43,000
----------
MASTER NOTES -- 1.5%
Associates Corporation of
North America (A)
5.497%, 07/01/97 13,991 13,991
SLMA (A)
5.220%, 07/01/97 3 3
----------
13,994
----------
TOTAL MASTER NOTES
(Cost $13,994) 13,994
----------
CERTIFICATES OF DEPOSIT -- 10.0%
BANKING -- 8.9%
Barclays Bank PLC
5.910%, 03/09/98 14,750 14,747
5.940%, 06/19/98 5,000 4,997
Nat West Bank
5.860%, 03/10/98 10,000 9,995
National Westminster Bank PLC
5.940%, 06/26/98 15,000 14,992
Societe Generale
6.350%, 04/15/98 10,000 10,003
6.080%, 06/09/98 10,000 9,996
Swiss Bank
5.976%, 03/19/98 7,000 6,999
6.020%, 06/12/98 10,000 10,003
----------
81,732
----------
FINANCIAL SERVICES -- 1.1%
Credit Suisse
6.310%, 04/16/98 10,000 10,000
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $91,732) $ 91,732
----------
ASSET-BACKED SECURITIES -- 1.8%
Capita Equipment Receivables
Trust, Series 1996-1, Class A1
5.600%, 10/15/97 $ 2,077 $ 2,078
Goldman Sachs, Investment
Trust Series 1997-C, Class N (A)
5.688%, 02/17/10 15,000 15,000
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $17,078) 17,078
----------
REPURCHASE AGREEMENTS -- 3.8%
First National Bank of Chicago
5.95%, dated 06/30/97, matures 07/01/97,
repurchase price $1,549,256 (collateralized
by U.S. Treasury Note, par value
$1,555,000, 6.25%, 02/28/02; market value
$1,582,990) 1,549 1,549
Swiss Bank
5.95%, dated 06/30/97, matures 07/01/97, repurchase price $33,246,494
(collateralized by U.S. Treasury Note, par value $33,405,000, 6.50%,
04/30/99;
market value $34,039,695) 33,241 33,241
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $34,790) 34,790
----------
TOTAL INVESTMENTS -- 100.1%
(Cost $914,655) 914,655
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.1%) (711)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 1 billion authorized)
based on 886,387,843 outstanding shares 886,388
Portfolio Shares -- Class C ($0.001
par value -- 1 billion authorized)
based on 27,696,662 outstanding shares 27,697
Accumulated Net Realized Loss
on Investments (141)
----------
TOTAL NET ASSETS -- 100.0% $913,944
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS C $1.00
==========
(A) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON JUNE 30, 1997.
FHLB -- FEDERAL HOME LOAN BANK
PLC -- PUBLIC LIMITED COMPANY
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL SECURITIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
TAX-FREE RESERVE
[PIE CHART]
TAX-EXEMPT COMMERCIAL PAPER 38%
ANTICIPATION NOTES 8%
GENERAL OBLIGATIONS 2%
REVENUE BONDS 42%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 102.8%
ALASKA -- 1.6%
City of Valdez Alaska TECP
3.650%, 08/08/97 $1,500 $ 1,500
Valdez, Alaska Exxon Pipeline
Company Project (A) (B)
4.000%, 07/01/97 500 500
----------
2,000
----------
ARIZONA -- 0.6%
Flagstaff Arizona TECP
3.800%, 09/08/97 750 750
----------
CALIFORNIA -- 0.3%
Santa Clara, California Electric
Revenue Bond, Series A (A) (B)
4.000%, 07/01/97 340 340
----------
DELAWARE -- 1.8%
Delaware State Econ TECP
3.800%, 09/08/97 750 750
Wilmington, Delaware Franciscan
Health System (A) (B)
4.100%, 07/01/97 800 800
Wilmington, Delaware Hospital
Revenue Bond for Franciscan
Health Systems Project,
Series A (A) (B) (C)
4.100%, 07/01/97 700 700
----------
2,250
----------
FLORIDA -- 3.1%
Dade County, Florida Capital
Asset Series 1990 (A) (B) (C)
4.450%, 07/01/97 1,000 1,000
Sunshine State Florida TECP
3.600%, 08/14/97 2,800 2,800
----------
3,800
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
ILLINOIS -- 8.6%
Chicago, Illinois Equipment Notes
3.600%, 12/04/97 $2,000 $ 2,000
Chicago, Illinois O'Hare
International Airport Revenue
Industrial Lien, Series C (A) (B)
4.100%, 07/01/97 1,500 1,500
Illinois Development Finance
Authority Revenue Bond
(A) (B) (C)
4.150%, 07/02/97 1,800 1,800
Illinois Development Finance
Authority Illinois Power
Company Project, Series B (A)
4.150%, 07/02/97 1,400 1,400
Illinois State Pollution Control
Authority Amoco Oil Company
Project (A) (B)
4.000%, 07/01/97 100 100
Illinois State Toll Highway
Authority, Series B
MBIA (A) (B)
4.150%, 07/01/97 2,400 2,400
St Charles, Illinois Revenue
Bond (A) (B) (C)
4.200%, 07/01/97 1,300 1,300
----------
10,500
----------
INDIANA -- 5.0%
City of Mount Vernon
Indiana TECP
3.750%, 08/13/97 2,000 2,000
Gary, Indiana Industrial
Environmental Improvement
Authority U.S. Steel
Corporation Project (A) (B)
4.100%, 07/15/97 1,600 1,600
Sullivan, Indiana TECP
3.650%, 08/12/97 2,535 2,535
----------
6,135
----------
IOWA -- 0.3%
Des Moines, Iowa Commercial
Development Revenue Bond
Capitol Center III Project (A) (B)
4.150%, 07/01/97 400 400
----------
KANSAS -- 4.6%
Burlington Kansas Power and
Light TECP
3.750%, 09/12/97 2,000 2,000
Burlington, Kansas TECP
3.900%, 09/05/97 1,500 1,500
3.750%, 09/08/97 600 600
3.750%, 09/10/97 1,450 1,450
Wichita, Kansas Revenue Bond
Wichita Health Systems Project,
Series XXV (A) (B)
4.350%, 07/02/97 100 100
----------
5,650
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
83
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
TAX-FREE RESERVE (CONTINUED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
KENTUCKY -- 1.6%
Mayfield, Kentucky Multi-City
Lease Revenue Bond Kentucky
League of Cities Funding
Project (A)
4.300%, 07/01/97 $2,000 $ 2,000
----------
LOUISIANA -- 5.9%
De Soto Parish, Louisiana Central
Louisiana Electric Company
Pollution Control Revenue
Bond (A) (B)
4.150%, 07/02/97 700 700
Jefferson Parish, Louisiana
Industrial Development Board
George J. Ackel, Sr.
Project (A) (B)
4.200%, 07/01/97 3,750 3,750
Saint Charles Parish, Louisiana
Pollution Control Shell Oil
Company Project,
Series B (A) (B)
4.000%, 07/01/97 750 750
South Louisiana Port Common
Marine Term Revenue Refunding-
Occidental Petroleum (A) (B) (C)
4.150%, 07/01/97 2,000 2,000
----------
7,200
----------
MASSACHUSETTS -- 1.6%
Massachusetts State GO,
Series B (A) (B)
4.000%, 12/01/97 2,000 2,000
----------
MICHIGAN -- 1.2%
Cornell Township, Michigan
Environment Improvement
Authority Escanaba Paper
Company Project (A) (B)
4.000%, 07/01/97 450 450
Delta County, Michigan
Environmental Improvement
Authority Mead Escambia
Paper, Series C (A) (B)
4.100%, 07/01/97 700 700
Michigan State Consumers
Power Project (A) (B)
4.050%, 07/01/97 300 300
----------
1,450
----------
MINNESOTA -- 1.2%
Rochester, Minnesota TECP
3.700%, 08/20/97 1,500 1,500
----------
MISSISSIPPI -- 1.4%
Clairborne County, Mississippi
TECP
3.700%, 07/25/97 1,000 1,000
Jackson County, Mississippi
Chevron USA Incorporated
Project (A) (B)
4.000%, 07/01/97 700 700
----------
1,700
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MISSOURI -- 1.8%
Missouri State Environmental
Improvement & Energy
Pollution Control Revenue
Bond (A) (B)
3.950%, 12/01/97 $1,800 $ 1,800
Missouri State Health and
Educational Facilities Authority
Washington University
Series A (A) (B) (C)
4.100%, 07/01/97 400 400
----------
2,200
----------
MONTANA -- 0.3%
Forsyth, Montana Pollution
Control Revenue Bond Portland
General Electric Project (A) (B)
4.150%, 07/01/97 200 200
Forsyth, Montana Pollution Control
Revenue Bond, Series B Portland
General Electric Project (A) (B)
4.150%, 07/01/97 100 100
----------
300
----------
NEVADA -- 2.1%
Clark County, Nevada Industrial
Development Revenue
Series C (A) (B)
4.200%, 07/01/97 1,000 1,000
Nevada State Housing Division
Multi Unit Park,
Series A (A) (B)
4.250%, 07/01/97 1,500 1,500
----------
2,500
----------
NEW MEXICO -- 0.8%
Albuquerque, New Mexico Gross
Receipts Revenue Bond
(A) (B) (C)
4.200%, 07/02/97 1,000 1,000
----------
NEW YORK -- 1.6%
New York City, New York Municipal
Water Finance Authority Municipal
Water and Sewer Systems,
Series C FGIC (A) (B)
4.150%, 07/15/97 2,000 2,000
----------
NORTH CAROLINA -- 5.4%
Lexington, North Carolina
Lexington Memorial Hospital
Project (A) (B)
4.200%, 07/01/97 4,500 4,500
North Carolina Eastern
Municipal Power (A) (B)
8.000%, 01/01/98 1,305 1,357
Wake County, North Carolina
Carolina Power & Light
Company (A) (B)
4.150%, 07/02/97 800 800
----------
6,657
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
OREGON -- 0.3%
Port of St. Helens Portland,
Oregon Pollution Control
Revenue Bond (A) (B)
4.050%, 07/01/97 $ 400 $ 400
----------
PENNSYLVANIA -- 14.7%
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project, Series B1
(A) (B) (C)
4.200%, 07/01/97 290 290
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project, Series B3 (A) (B)
4.200%, 07/01/97 1,005 1,005
Beaver County, Pennsylvania
Industrial Development
Authority Revenue Bond for
Duquesne Light Company
Project, Series B (A) (B) (C)
4.050%, 07/01/97 100 100
Lehigh County, Pennsylvania
Industrial Development
Authority Pollution
Control (A) (B)
3.800%, 07/01/97 200 200
Montgomery County,
Pennsylvania TECP
3.850%, 08/21/97 1,200 1,200
3.600%, 07/10/97 2,300 2,300
3.650%, 07/28/97 2,000 2,000
Pennsylvania State Higher
Education Authority Carnegie
Mellon University,
Series D (A) (B)
4.150%, 07/01/97 700 700
Pennsylvania State Higher
Educational Facilities Authority
Hospital Revenue Bond for
Thomas Jefferson University
Project Pre-Refunded
@ 102 (D)
8.000%, 01/01/98 1,910 1,988
Pittsburgh, Pennsylvania Water
and Sewer Authority Revenue
Bond Series A FGIC
3.750%, 09/01/97 1,500 1,499
Temple University Pennsylvania GO
4.750%, 05/18/98 1,000 1,007
Washington County, Pennsylvania
Lease Revenue Bond
(A) (B) (C)
4.200%, 07/01/97 2,440 2,440
West Whiteland Township,
Pennsylvania GO
3.400%, 12/01/97 245 245
Wissahickon, Pennsylvania
School District GO
4.500%, 11/15/97 1,125 1,128
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
York, Pennsylvania General
Authority Revenue Bond (A) (B)
4.150%, 07/01/97 $2,000 $ 2,000
----------
18,102
----------
PUERTO RICO -- 1.6%
Puerto Rico Commonwealth
TRAN Series A
4.000%, 07/30/97 2,000 2,001
----------
SOUTH CAROLINA -- 2.5%
Berkley County, South Carolina
Pollution Control Revenue
Bond for Amoco Chemical
Project (A) (B) (C)
4.000%, 07/01/97 200 200
Richland County, South Carolina
Hospital Facilities Revenue
Bond Sunhealth-Orangeburg
Project, Series C-2 (A) (B)
4.450%, 07/02/97 450 450
York County, South Carolina
Pollution Control Revenue Bond
Electric Project, Series
NRU-84N-2 (A) (B)
4.200%, 07/02/97 400 400
York County, South Carolina
Pollution Control Revenue
for Saluda River Project
National Rural
3.500%, 08/15/97 2,000 2,000
----------
3,050
----------
TEXAS -- 17.4%
Camp County, Texas Industrial
Development Corporation
Pollution Control Revenue
Bond Texas Oil and Gas
Project (A) (B)
4.300%, 07/02/97 500 500
Grapevine, Texas Industrial
Development Authority
Revenue Bond for American
Airlines Project, Series B3
(A) (B) (C)
4.100%, 07/01/97 500 500
Grapevine, Texas Industrial
Development Authority
Revenue Bond American
Airlines Project, Series A2 (A) (B)
4.100%, 07/01/97 700 700
Grapevine, Texas Industrial
Development Corporation
American Airlines,
Series A1 (A) (B)
4.100%, 07/01/97 200 200
Grapevine, Texas Industrial
Development Corporation
Revenue Bond American
Airlines Project,
Series B2 (A) (B)
4.100%, 07/01/97 200 200
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
85
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
TAX-FREE RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Hunt County, Texas Industrial
Development Authority Trico
Industries Incorporated
Project (A) (B)
4.100%, 07/01/97 $1,600 $ 1,600
North Central Texas Health
Facilities Development Revenue
Bond Baylor Medical Center
Project, Series A, Pre-Refunded
@ 102 (D)
7.900%, 05/15/98 500 526
Nueces County, Texas Health
Facilities Authority Driscoll
Childrens Foundation (A) (B)
4.200%, 07/01/97 1,675 1,675
Port Corpus Christi Texas
Industrial Development
Corporation Refunding Revenue
Bonds Series A (A) (B)
4.200%, 07/01/97 2,000 2,000
Richardson Texas Independent
School District (A) (B)
3.620%, 09/04/97 3,000 3,000
San Antonio, Texas Electric and
Gas Revenue Bond
Pre-Refunded @ 102 (D)
7.800%, 02/01/98 3,900 4,071
Texas State Higher Education
Authority University and
College Improvement,
Series B FGIC (A) (B)
4.150%, 07/02/97 1,350 1,350
Texas State TAN
4.750%, 08/29/97 5,000 5,006
----------
21,328
----------
VERMONT -- 1.1%
Vermont State Student Loan
Assistance Corporation Student
Loan Revenue Bond (A) (B)
3.800%, 07/01/97 1,335 1,335
----------
VIRGINIA -- 7.5%
Chesapeake, Virginia TECP
3.700%, 07/24/97 1,000 1,000
Penn Ports Virginia TECP
3.800%, 08/07/97 1,500 1,500
Richmond, VA Housing Authority
Old Manchester Project
Series A (A) (B)
4.300%, 07/01/97 3,250 3,250
Virginia State Housing
Revenue Bonds
3.800%, 06/10/98 3,500 3,500
----------
9,250
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
WEST VIRGINIA -- 0.5%
Putnam County, West Virginiarity
Industrial Development Authority
FMC Corporation Project (A) (B)
3.800%, 07/01/97 $ 200 $ 200
West Virginia State Hospital
Finance Authority Revenue
Bond Saint Mary's Hospital
Project (A) (B)
4.200%, 07/01/97 400 400
----------
600
----------
ISCONSIN -- 0.5%
Lac Du Flambeau, Wisconsin Lake
Superior Chippewa Indians
Special Obligation Simpson
Electric Project (A) (B)
4.150%, 07/01/97 600 600
----------
WYOMING -- 5.9%
Converse, Wyoming TECP
3.650%, 07/07/97 2,600 2,600
Gillette County Wyoming TECP
3.800%, 09/10/97 1,400 1,400
Lincoln County, Wyoming
Resource Recovery Revenue
Bond for Exxon Project,
Series C (A) (B) (C)
4.100%, 07/01/97 1,000 1,000
Platte County, Wyoming Pollution
Control Revenue Bond,
Series A (A) (B) (C)
4.200%, 07/01/97 1,400 1,400
Platte County, Wyoming Pollution
Control (A) (B)
4.200%, 07/01/97 500 500
Sublette County, Wyoming Exxon
Project, Series 84 (A) (B)
4.000%, 07/01/97 300 300
----------
7,200
----------
TOTAL MUNICIPAL BONDS
(Cost $126,198) 126,198
----------
TOTAL INVESTMENTS -- 102.8%
(Cost $126,198) 126,198
----------
OTHER ASSETS AND LIABILITIES,
NET -- (2.8%) (3,417)
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 250 million authorized) based
on 119,607,821 outstanding shares $119,608
Portfolio Shares -- Class C ($0.001
par value -- 250 million authorized)
based on 3,203,258 outstanding shares 3,203
Accumulated Net Realized Loss
on Investments (54)
Undistributed Net Investment Income 24
----------
TOTAL NET ASSETS -- 100.0% $122,781
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS C $1.00
==========
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO --GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
TAN -- TAX ANTICIPATION NOTE
TECP -- TAX EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTE
(A) VARIABLE RATE SECURITIES--THE RATE REFLECTED ON THE STATEMENT OF THE NET
ASSETS IS THE RATE IN EFFECT ON JUNE 30, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSOR OF THE
PUT DEMAND OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK OR FINANCIAL INSTITUTION.
(D) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
87
<PAGE>
STATEMENT
OF
OPERATIONS
(000)
FOR THE PERIOD
ENDED
JUNE 30, 1997
COREFUND EQUITY FUNDS [SQUARE BULLET] COREFUND
<TABLE>
<CAPTION>
---------- ----------- -----------
EQUITY CORE EQUITY GROWTH
INDEX FUND FUND(3) EQUITY FUND
---------- ----------- -----------
INVESTMENT INCOME
<S> <C> <C>
Dividends $ 3,973 $ 6,777 $ 1,346
Interest 37 763 371
Less: Foreign taxes withheld -- -- --
------- --------- -------
Total investment income 4,010 7,540 1,717
------- --------- -------
EXPENSES:
Investment advisory fees 800 3,459 1,024
Less: waiver of investment advisory fees (516) -- (20)
Administrative fees 500 1,169 341
Less: waiver of administrative fees (167) (260) (116)
Transfer agent fees & expenses 44 80 30
Custodian fees -- -- --
Professional fees 14 38 10
Registration & filing fees 25 17 12
12b-1 fees-- individual shares -- 32 10
Taxes--other than income 10 -- 5
Printing fees 29 55 18
Organizational costs -- -- --
Miscellaneous 15 23 4
------- --------- -------
Total expenses 754 4,613 1,318
------- --------- -------
NET INVESTMENT INCOME 3,256 2,927 399
------- --------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 3,591 66,598 14,635
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- -- --
Net change in unrealized appreciation on investments 55,389 67,597 12,411
------- --------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $62,236 $137,122 $27,445
======= ========= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 37.39 $ 21.11 $15.43
======= ========= =======
CLASS A
1Net asset value, redemption price 37.37 21.13 15.39
Maximum sales charge of 5.50% 2.17 1.23 0.90
======= ========= =======
2Offering price $ 39.54 $ 22.36 $16.29
======= ========= =======
----------- ------------ --------
SPECIAL INTERNATIONAL BALANCED
EQUITY FUND GROWTH FUND FUND
----------- ------------ --------
INVESTMENT INCOME
<S> <C> <C> <C>
Dividends $ 527 $ 2,650 $ 1,027
Interest 161 225 3,006
Less: Foreign taxes withheld -- (196) --
-------- -------- -------
Total investment income 688 2,679 4,033
-------- -------- -------
EXPENSES:
Investment advisory fees 1,006 1,131 789
Less: waiver of investment advisory fees (609) -- (147)
Administrative fees 168 355 282
Less: waiver of administrative fees (49) (128) (97)
Transfer agent fees & expenses 12 28 19
Custodian fees 8 216 --
Professional fees 11 19 5
Registration & filing fees 7 13 5
12b-1 fees-- individual shares 4 5 9
Taxes--other than income 2 1 6
Printing fees 9 37 14
Organizational costs 2 -- 6
Miscellaneous (4) 33 3
-------- -------- -------
Total expenses 567 1,710 894
-------- -------- -------
NET INVESTMENT INCOME 121 969 3,139
-------- -------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 7,793 3,611 7,717
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- 1,679 --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- (892) --
Net change in unrealized appreciation on investments 3,603 16,581 6,601
-------- -------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,517 $21,948 $17,457
======== ======== =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $11.27 $ 14.72 $ 13.52
======== ======== =======
CLASS A
1Net asset value, redemption price 11.25 14.70 13.52
Maximum sales charge of 5.50% 0.65 0.86 0.79
======== ======== =======
2Offering price $11.90 $ 15.56 $ 14.31
======== ======== =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0
1 NET ASSET VALUE PER SHARE, AS ILLUSTRATED, IS THE AMOUNT WHICH WOULD BE PAID
UPON THE REDEMPTION OR EXCHANGE OF SHARES.
2 THE OFFER PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE OF CLASS A BY 1
MINUS THE MAXIMUM SALES CHARGE OF 5.50%.
3 THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88 & 89
<PAGE>
STATEMENT
OF
OPERATIONS
(000)
FOR THE PERIOD
ENDED
JUNE 30, 1997
COREFUND FIXED INCOME FUNDS [SQUARE BULLET] COREFUND
<TABLE>
<CAPTION>
---------- ------------ ------------ ------
SHORT TERM SHORT-
INCOME INTERMEDIATE GOVERNMENT BOND
FUND BOND FUND INCOME FUND FUND
---------- ------------ ------------ ------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest $ 1,911 $10,913 $1,438 $13,350
------- ------- ------ -------
Total Investment income 1,911 10,913 1,438 13,350
------- ------- ------ -------
EXPENSES
Investment advisory fees 242 843 101 1,441
Less: waiver of investment advisory fees (160) (379) (14) (759)
Administrative fees 82 421 51 487
Less:waiver of administrative fees (29) (138) (17) (175)
Transfer agent fees & expenses 6 29 5 46
Custodian fees (3) -- -- (35)
Professional fees 5 14 2 47
Registration & filing fees 3 12 (5) 18
12b-1 fees-- individual shares -- 7 4 4
Taxes--other than income -- 10 7 2
Printing fees 3 16 2 18
Organizational costs 2 -- 6 --
Miscellaneous 3 4 3 11
------- ------- ------ -------
Total expenses 154 839 145 1,105
------- ------- ------ -------
NET INVESTMENT INCOME 1,757 10,074 1,293 12,245
------- ------- ------ -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized (loss) gain from:
Security transactions (8) (26) (156) (735)
Option transactions -- -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- -- --
Net unrealized appreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- -- -- --
Net change in unrealized appreciation (depreciation)
on investments 91 993 434 2,749
------- ------- ------ -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,840 $11,041 $1,571 $14,259
======= ======= ====== =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.97 $ 9.83 $ 9.76 $10.24
======= ======= ====== =======
CLASS A
1Net asset value, redemption price 9.96 9.83 9.76 10.24
Maximum sales charge of 3.25% or 4.75% 0.33 0.33 0.33 0.51
------- ------- ------ -------
2Offering price $10.29 $ 10.16 $10.09 $10.75
======= ======= ====== =======
------ ------------ ------------ ----------
GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND BOND FUND BOND FUND
------ ------------ ------------ ----------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest $2,067 $ 83 $ 595 $ 85
------ ----- ------ ------
Total Investment income 2,067 83 595 85
------ ----- ------ ------
EXPENSES
Investment advisory fees 207 9 56 8
Less: waiver of investment advisory fees (32) (6) (56) (8)
Administrative fees 86 4 28 4
Less:waiver of administrative fees (31) (2) (28) (4)
Transfer agent fees & expenses 16 (1) 2 --
Custodian fees 8 -- -- --
Professional fees 4 -- 1 --
Registration & filing fees 4 (1) 2 --
12b-1 fees-- individual shares 1 2 3 1
Taxes--other than income -- -- 1 --
Printing fees 9 -- 1 --
Organizational costs 7 5 1 2
Miscellaneous 14 2 1 1
------ ----- ------ ------
Total expenses 293 12 12 4
------ ----- ------ ------
NET INVESTMENT INCOME 1,774 71 583 81
------ ----- ------ ------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized (loss) gain from:
Security transactions 659 (6) 20 (3)
Option transactions (1,242) -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions 1,006 -- -- --
Net unrealized appreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies 138 -- -- --
Net change in unrealized appreciation (depreciation)
on investments (287) 25 240 24
------ ----- ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,048 $ 90 $ 843 $ 102
====== ===== ====== ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.54 $10.05 $10.47 $10.16
====== ===== ====== ======
CLASS A
1Net asset value, redemption price 9.52 10.05 10.47 10.15
Maximum sales charge of 3.25% or 4.75% 0.47 0.34 0.52 0.51
------ ----- ------ ------
2Offering price $ 9.99 $10.39 $10.99 $10.66
====== ===== ====== ======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
1 NET ASSET VALUE PER SHARE, AS ILLUSTRATED, IS THE AMOUNT WHICH WOULD BE PAID
UPON THE REDEMPTION OR EXCHANGE OF SHARES.
2 THE OFFER PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE OF CLASS A BY 1
MINUS THE MAXIMUM SALES CHARGE OF 3.25% FOR THE SHORT TERM INCOME,
SHORT-INTERMEDIATE BOND, GOVERNMENT INCOME AND INTERMEDIATE MUNICIPAL BOND
FUNDS AND 4.75% FOR THE BOND, GLOBAL BOND, PENNSYLVANIA MUNICIPAL BOND AND NEW
JERSEY MUNICIPAL BOND FUNDS.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90 & 91
<PAGE>
STATEMENT
OF
OPERATIONS
(000)
FOR THE PERIOD
ENDED
JUNE 30, 1997
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET FUNDS
-------- ------- --------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------- ------- --------
INVESTMENT INCOME:
Interest $48,486 $48,651 $4,415
------- ------- ------
Total investment income 48,486 48,651 4,415
------- ------- ------
EXPENSES:
Investment advisory fees 3,607 3,542 494
Less: waiver of investment advisory fees (994) (972) (136)
Administrative fees 2,255 2,214 309
Less: waiver of administrative fees (783) (768) (107)
Transfer agent fees & expenses 169 143 20
Professional fees 68 55 4
Registration & filing fees 37 75 7
12b-1 fees 37 57 8
Taxes--other than income 48 49 4
Printing 92 93 12
Miscellaneous 90 36 13
------- ------- ------
Total expenses 4,626 4,524 628
------- ------- ------
NET INVESTMENT INCOME 43,860 44,127 3,787
------- ------- ------
NET REALIZED GAIN
ON INVESTMENTS:
Net realized gain (loss) from security
transactions 8 1 (1)
------- ------- ------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $43,868 $44,128 $3,786
======= ======= ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
92
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS
(000)
FOR THE PERIODS
ENDED
JUNE 30,
[SQUARE BULLET] COREFUND
COREFUND EQUITY FUNDS
<TABLE>
<CAPTION>
------------------ -------------------
EQUITY CORE EQUITY
INDEX FUND(3) FUND(4)
------------------ -------------------
1997 1996 1997 1996(1)
------ ------- ------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $3,256 $ 2,673 $ 2,927 $ 3,058
Net realized gain on investments, forward foreign currency contracts
and foreign currency 3,591 4,702 66,598 43,129
Net unrealized appreciation on investments, forward foreign currency
contracts and translation of assets and liabilites in foreign currencies 55,389 23,222 67,597 23,229
-------- -------- -------- --------
Net increase in net assets resulting from operations 62,236 30,597 137,122 69,416
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Retail Class (a) -- -- -- (35)
Institutional Class (a) -- -- -- (2,133)
Class Y (b) (3,225) (2,677) (2,858) (1,001)
Class A (b) (28) -- (49) (21)
Net realized gains:
Retail Class (a) -- -- -- (1,150)
Institutional Class (a) -- -- -- (57,348)
Class Y (b) (1,484) (3,835) (35,253) --
Class A (b) (6) -- (977) --
-------- -------- -------- --------
Total dividends distributed (4,743) (6,512) (39,137) (61,688)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- --
Proceeds from shares issued -- -- -- 1,033
Reinvestment of cash distributions -- -- -- 1,168
Cost of shares redeemed -- -- -- (674)
-------- -------- -------- --------
Increase (decrease) in net assets from Retail Class transactions -- -- -- 1,527
-------- -------- -------- --------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- --
Proceeds from shares issued -- -- -- 35,302
Reinvestment of cash distributions -- -- -- 58,151
Cost of shares redeemed -- -- -- (92,405)
-------- -------- -------- --------
Increase (decrease) in net assets from Institutional Class transactions -- -- -- 1,048
-------- -------- -------- --------
Class Y (b):
Proceeds from shares issued in merger (c) -- -- -- 34,310
Proceeds from shares issued 43,492 50,936 56,759 16,834
Reinvestment of cash distributions 4,960 6,064 38,110 --
Cost of shares redeemed (30,407) (27,288) (89,855) (23,221)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 18,045 29,712 5,014 27,923
-------- -------- -------- --------
Class A (b):
Proceeds from shares issued in merger (c) -- -- -- 2,807
Proceeds from shares issued 4,101 -- 3,395 575
Reinvestment of cash distributions 34 -- 1,038 --
Cost of shares redeemed (103) -- (2,376) (549)
-------- -------- -------- --------
Increase (decrease) in net assets from Class A transactions 4,032 -- 2,057 2,833
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 22,077 29,712 7,071 33,331
-------- -------- -------- --------
Net increase in net assets 79,570 53,797 105,056 41,059
-------- -------- -------- --------
NET ASSETS:
Beginning of period 166,350 112,553 426,002 384,943
-------- -------- -------- --------
End of period $245,920 $166,350 $531,058 $426,002
======== ======== ======== ========
----------------- ----------------
GROWTH SPECIAL
EQUITY FUND EQUITY FUND
----------------- ----------------
1997 1996 1997 1996(1)
------- ------ ------- ---------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 399 $ 695 $ 121 $ 378
Net realized gain on investments, forward foreign currency contracts
and foreign currency 14,635 10,837 7,793 9,147
Net unrealized appreciation (depreciation) on investments, forward foreign currency
contracts and translation of assets and liabilites in foreign currencies 12,411 17,962 3,603 2,372
-------- -------- ------- -------
Net increase in net assets resulting from operations 27,445 29,494 11,517 11,897
-------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (393) (691) (177) (388)
Class A (b) (3) (11) (2) (6)
Net realized gains:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (13,864) (2,808) (13,011) (8,564)
Class A (b) (404) (63) (307) (113)
-------- -------- ------- -------
Total dividends distributed (14,664) (3,573) (13,497) (9,071)
-------- -------- ------- -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- (984)
Proceeds from shares issued -- -- -- 166
Reinvestment of cash distributions -- -- -- 115
Cost of shares redeemed -- -- -- (29)
-------- -------- ------- -------
Increase (decrease) in net assets from Retail Class transactions -- -- -- (732)
-------- -------- ------- -------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- (58,929)
Proceeds from shares issued -- -- -- 6,660
Reinvestment of cash distributions -- -- -- 8,821
Cost of shares redeemed -- -- -- (12,704)
-------- -------- ------- -------
Increase (decrease) in net assets from Institutional Class transactions -- -- -- (56,152)
-------- -------- ------- -------
Class Y (b):
Proceeds from shares issued in merger (c) -- -- -- 58,929
Proceeds from shares issued 38,807 24,852 13,884 2,827
Reinvestment of cash distributions 12,752 3,081 13,074 --
Cost of shares redeemed (36,303) (24,528) (16,684) (2,083)
-------- -------- ------- -------
Increase in net assets from Class Y transactions 15,256 3,405 10,274 59,673
-------- -------- ------- -------
Class A (b):
Proceeds from shares issued in merger (c) -- -- -- 984
Proceeds from shares issued 1,712 980 1,020 98
Reinvestment of cash distributions 410 71 310 --
Cost of shares redeemed (1,001) (530) (121) (3)
-------- -------- ------- -------
Increase (decrease) in net assets from Class A transactions 1,121 521 1,209 1,079
-------- -------- ------- -------
Increase in net assets derived from capital share transactions 16,377 3,926 11,483 3,868
-------- -------- ------- -------
Net increase in net assets 29,158 29,847 9,503 6,694
-------- -------- ------- -------
NET ASSETS:
Beginning of period 123,235 93,388 64,824 58,130
-------- -------- ------- -------
End of period $152,393 $123,235 $74,327 $64,824
======== ======== ======= =======
----------------- -----------------
INTERNATIONAL BALANCED
GROWTH FUND FUND
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 969 $ 1,286 $ 3,139 $ 2,183
Net realized gain on investments, forward foreign currency contracts
and foreign currency 5,290 11,844 7,717 4,822
Net unrealized appreciation (depreciation) on investments, forward foreign currency
contracts and translation of assets and liabilites in foreign currencies 15,689 5,712 6,601 6,379
-------- -------- -------- --------
Net increase in net assets resulting from operations 21,948 18,842 17,457 13,384
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (3,802) (2,440) (3,056) (2,108)
Class A (b) (53) (38) (92) (69)
Net realized gains:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (8,375) (548) (5,885) (840)
Class A (b) (130) (10) (184) (32)
-------- -------- -------- --------
Total dividends distributed (12,360) (3,036) (9,217) (3,049)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Retail Class transactions -- -- -- --
-------- -------- -------- --------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Institutional Class transactions -- -- -- --
-------- -------- -------- --------
Class Y (b):
Proceeds from shares issued in merger (c) -- 16,130 -- 38,306
Proceeds from shares issued 34,899 17,623 23,565 17,797
Reinvestment of cash distributions 11,015 2,732 8,737 2,494
Cost of shares redeemed (31,528) (23,593) (29,150) (27,174)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 14,386 12,892 3,152 31,423
-------- -------- -------- --------
Class A (b):
Proceeds from shares issued in merger (c) -- 59 -- 95
Proceeds from shares issued 489 421 1,285 678
Reinvestment of cash distributions 178 46 293 96
Cost of shares redeemed (506) (592) (833) (360)
-------- -------- -------- --------
Increase (decrease) in net assets from Class A transactions 161 (66) 745 509
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 14,547 12,826 3,897 31,932
-------- -------- -------- --------
Net increase in net assets 24,135 28,632 12,137 42,267
-------- -------- -------- --------
NET ASSETS:
Beginning of period 141,413 112,781 105,703 63,436
-------- -------- -------- --------
End of period $165,548 $141,413 $117,840 $105,703
======== ======== ======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(A) RETAIL AND INSTITUTIONAL CLASS AMOUNTS FOR THE YEAR ENDED JUNE 30, 1996
REPRESENT ACTIVITY OF THE ACQUIRED CONESTOGA FUND FROM NOVEMBER 1, 1995
THROUGH APRIL 14, 1996.
(B) ON APRIL 22, 1996 SERIES A SHARES WERE REDESIGNATED CLASS Y SHARES, AND
SERIES B SHARES WERE REDESIGNATED CLASS A SHARES.
(C) ON APRIL 15 & 22, 1996 THE CONESTOGA FUNDS WERE ACQUIRED BY COREFUNDS, INC.
(1) AMOUNTS REPRESENT CONESTOGA FUNDS ACTIVITY FROM NOVEMBER 1, 1995 THROUGH
APRIL 14, 1996 AND COREFUND ACTIVITY FROM APRIL 15, 1996 TO JUNE 30, 1996.
(2) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS. (3) ON OCTOBER 9, 1996, THE EQUITY INDEX FUND CLASS A
SHARES COMMENCED OPERATIONS.
(4) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
94 & 95
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS
(000)
FOR THE PERIODS
ENDED
JUNE 30,
[SQUARE BULLET] COREFUND
COREFUND FIXED INCOME FUNDS
<TABLE>
<CAPTION>
------------------- ----------------- -----------------
SHORT-
SHORT TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
------------------- ----------------- -----------------
1997 1996(1) 1997 1996 1997 1996
-------- -------- ------- ------- -------- ------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 1,757 $ 1,174 $10,074 $ 4,696 $ 1,293 $ 892
Net realized (loss) gain on investments, forward foreign
currency contracts and foreign currency (8) (81) (26) (987) (156) 31
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 91 (170) 993 156 434 (414)
------- ------- -------- -------- ------- -------
Net increase in net assets resulting from operations 1,840 923 11,041 3,865 1,571 509
------- ------- -------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (b) (1,748) (1,238) (9,902) (4,567) (1,204) (812)
Class A (b) (9) -- (172) (123) (90) (78)
Net realized gains:
Retail Class (a) -- -- -- -- -- --
Institutional Class (a) -- (32) -- -- -- --
Class Y (b) -- -- -- -- -- --
Class A (b) -- -- -- -- -- --
------- ------- -------- -------- ------- -------
Total dividends distributed (1,757) (1,270) (10,074) (4,690) (1,294) (890)
------- ------- -------- -------- ------- -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- (1) -- -- -- --
Proceeds from shares issued -- -- -- -- -- --
Reinvestment of cash distributions -- -- -- -- -- --
Cost of shares redeemed -- (11) -- -- -- --
------- ------- -------- -------- ------- -------
Decrease in net assets from Retail Class transactions -- (12) -- -- -- --
------- ------- -------- -------- ------- -------
Institutional Class (a):
Exchanged for Class Y Shares -- (29,918) -- -- -- --
Proceeds from shares issued -- 5,788 -- -- -- --
Reinvestment of cash distributions -- 931 -- -- -- --
Cost of shares redeemed -- (12,577) -- -- -- --
------- ------- -------- -------- ------- -------
Decrease in net assets from Institutional
Class transactions -- (35,776) -- -- -- --
------- ------- -------- -------- ------- -------
Class Y (b):
Proceeds from shares issued in merger (c) -- 29,918 -- 113,422 -- --
Proceeds from shares issued 16,475 2,116 45,113 16,680 8,152 5,296
Reinvestment of cash distributions 1,808 203 9,516 3,735 612 412
Cost of shares redeemed (11,486) (2,040) (52,263) (28,327) (3,957) (2,718)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from
Class Y transactions 6,797 30,197 2,366 105,510 4,807 2,990
------- ------- -------- -------- ------- -------
Class A (b):
Proceeds from shares issued in merger (c) -- 1 -- 1,207 -- --
Proceeds from shares issued 483 -- 391 282 579 157
Reinvestment of cash distributions 9 -- 143 85 85 70
Cost of shares redeemed (1) -- (865) (445) (311) (285)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from
Class A transactions 491 1 (331) 1,129 353 (58)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 7,288 (5,590) 2,035 106,639 5,160 2,932
------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets 7,371 (5,937) 3,002 105,814 5,437 2,551
------- ------- -------- -------- ------- -------
NET ASSETS:
Beginning of period 30,133 36,070 162,903 57,089 15,230 12,679
------- ------- -------- -------- ------- -------
End of period $37,504 $30,133 $165,905 $162,903 $20,667 $15,230
======= ======= ======== ======== ======= =======
------------------ ----------------- ------------------
INTERMEDIATE
BOND GLOBAL MUNICIPAL
FUND BOND FUND BOND FUND
------------------ ----------------- ------------------
1997 1996(1) 1997 1996 1997 1996
-------- ------- -------- ------- -------- --------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 12,245 $ 8,196 $ 1,774 $ 1,851 $ 71 $ 46
Net realized (loss) gain on investments, forward foreign
currency contracts and foreign currency (735) (1,252) 423 1,197 (6) --
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 2,749 (4,687) (149) (638) 25 13
-------- -------- ------- ------- ------ -------
Net increase in net assets resulting from operations 14,259 2,257 2,048 2,410 90 59
-------- -------- ------- ------- ------ -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (b) (12,161) (8,523) (2,621) (2,254) (34) (10)
Class A (b) (84) (56) (13) (11) (37) (35)
Net realized gains:
Retail Class (a) -- (10) -- -- -- --
Institutional Class (a) -- (1,458) -- -- -- --
Class Y (b) -- -- -- -- -- --
Class A (b) -- -- -- -- -- --
-------- -------- ------- ------- ------ -------
Total dividends distributed (12,245) (10,047) (2,634) (2,265) (71) (45)
-------- -------- ------- ------- ------ -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- (1,294) -- -- -- --
Proceeds from shares issued -- 122 -- -- -- --
Reinvestment of cash distributions -- 44 -- -- -- --
Cost of shares redeemed -- (198) -- -- -- --
-------- -------- ------- ------- ------ -------
Decrease in net assets from Retail Class transactions -- (1,326) -- -- -- --
-------- -------- ------- ------- ------ -------
Institutional Class (a):
Exchanged for Class Y Shares -- (194,533) -- -- -- --
Proceeds from shares issued -- 28,200 -- -- -- --
Reinvestment of cash distributions -- 7,057 -- -- -- --
Cost of shares redeemed -- (28,354) -- -- -- --
-------- -------- ------- ------- ------ -------
Decrease in net assets from Institutional
Class transactions -- (187,630) -- -- -- --
-------- -------- ------- ------- ------ -------
Class Y (b):
Proceeds from shares issued in merger (c) -- 194,533 -- -- -- --
Proceeds from shares issued 18,942 13,215 107 5,150 841 193
Reinvestment of cash distributions 12,215 1,409 2,670 1,604 12 8
Cost of shares redeemed (49,397) (9,632) (602) (797) (269) (167)
-------- -------- ------- ------- ------ -------
Increase (decrease) in net assets from
Class Y transactions (18,240) 199,525 2,175 5,957 584 34
-------- -------- ------- ------- ------ -------
Class A (b):
Proceeds from shares issued in merger (c) -- 1,294 -- -- -- --
Proceeds from shares issued 579 65 31 2 80 126
Reinvestment of cash distributions 78 13 15 10 37 31
Cost of shares redeemed (323) (88) (13) (32) (186) (179)
-------- -------- ------- ------- ------ -------
Increase (decrease) in net assets from
Class A transactions 334 1,284 33 (20) (69) (22)
-------- -------- ------- ------- ------ -------
Increase (decrease) in net assets derived from capital
share transactions (17,906) 11,853 2,208 5,937 515 12
-------- -------- ------- ------- ------ -------
Net increase (decrease) in net assets (15,892) 4,063 1,622 6,082 534 26
-------- -------- ------- ------- ------ -------
NET ASSETS:
Beginning of period 199,878 195,815 33,150 27,068 1,418 1,392
-------- -------- ------- ------- ------ -------
End of period $183,986 $199,878 $34,772 $33,150 $1,952 $ 1,418
======== ======== ======= ======= ====== =======
------------------ -------------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
------------------ -------------------
1997 1996 1997 1996
-------- ------ --------- ------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 583 $ 234 $ 81 $ 77
Net realized (loss) gain on investments, forward foreign
currency contracts and foreign currency 20 (30) (3) 16
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 240 36 24 (8)
------- ------- ------ -------
Net increase in net assets resulting from operations 843 240 102 85
------- ------- ------ -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (b) (521) (212) (65) (72)
Class A (b) (62) (21) (16) (5)
Net realized gains:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) -- -- (8) (9)
Class A (b) -- -- (2) (1)
------- ------- ------ -------
Total dividends distributed (583) (233) (91) (87)
------- ------- ------ -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
------- ------- ------ -------
Decrease in net assets from Retail Class transactions -- -- -- --
------- ------- ------ -------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
------- ------- ------ -------
Decrease in net assets from Institutional
Class transactions -- -- -- --
------- ------- ------ -------
Class Y (b):
Proceeds from shares issued in merger (c) -- 5,703 -- --
Proceeds from shares issued 3,530 1,175 525 438
Reinvestment of cash distributions 297 134 14 39
Cost of shares redeemed (2,772) (397) (388) (625)
------- ------- ------ -------
Increase (decrease) in net assets from
Class Y transactions 1,055 6,615 151 (148)
------- ------- ------ -------
Class A (b):
Proceeds from shares issued in merger (c) -- 684 -- --
Proceeds from shares issued 1,341 124 99 196
Reinvestment of cash distributions 56 17 15 4
Cost of shares redeemed (420) (153) (22) (3)
------- ------- ------ -------
Increase (decrease) in net assets from
Class A transactions 977 672 92 197
------- ------- ------ -------
Increase (decrease) in net assets derived from capital
share transactions 2,032 7,287 243 49
------- ------- ------ -------
Net increase (decrease) in net assets 2,292 7,294 254 47
------- ------- ------ -------
NET ASSETS:
Beginning of period 9,883 2,589 1,621 1,574
------- ------- ------ -------
End of period $12,175 $ 9,883 $1,875 $ 1,621
======= ======= ====== =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(A) RETAIL AND INSTITUTIONAL CLASS AMOUNTS REPRESENT ACTIVITY OF THE ACQUIRED
CONESTOGA FUND FROM NOVEMBER 1, 1995 THROUGH APRIL 21, 1996.
(B) ON APRIL 22, 1996 SERIES A SHARES WERE REDESIGNATED CLASS Y SHARES, AND
SERIES B SHARES WERE REDESIGNATED CLASS A SHARES.
(C) ON APRIL 15 & 22, 1996 THE CONESTOGA FUNDS WERE ACQUIRED BY COREFUNDS, INC.
(1) AMOUNTS REPRESENT CONESTOGA FUNDS ACTIVITY FROM NOVEMBER 1, 1995 THROUGH
APRIL 14, 1996 AND COREFUND ACTIVITY FROM APRIL 15, 1996 TO JUNE 30, 1996.
(2) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
96 & 97
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS
(000)
FOR THE PERIODS
ENDED
JUNE 30
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET FUNDS
<TABLE>
<CAPTION>
-------------------- ---------------------- -------------------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------------------- ---------------------- -------------------
1997 1996 1997 1996 1997 1996
-------- -------- ---------- -------- --------- --------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 43,860 $ 29,926 $ 44,127 $ 32,976 $ 3,787 $ 2,300
Net realized gain (loss) on securities
transactions 8 (4) 1 (2) (1) --
---------- ---------- ---------- ---------- -------- --------
Net increase in net assets resulting
from operations 43,868 29,922 44,128 32,974 3,786 2,300
---------- ---------- ---------- ---------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (a) (43,173) (28,940) (43,042) (32,056) (3,677) (2,245)
Class C (a) (687) (986) (1,085) (920) (86) (55)
---------- ---------- ---------- ---------- -------- --------
Total dividends distributed (43,860) (29,926) (44,127) (32,976) (3,763) (2,300)
---------- ---------- ---------- ---------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Class Y (a)
Proceeds from shares issued in merger (b) -- 397,193 -- 220,190 -- 51,375
Proceeds from shares issued 2,548,964 2,291,733 2,154,887 1,319,098 392,069 223,212
Reinvestment of cash distributions 4,246 5,323 3,136 3,471 229 216
Cost of shares redeemed (2,610,396) (2,280,888) (2,061,985) (1,262,885) (376,938) (233,363)
---------- ---------- ---------- ---------- -------- --------
(Decrease) increase in net assets
from Class Y (a) transactions (57,186) 413,361 96,038 279,874 15,360 41,440
---------- ---------- ---------- ---------- -------- --------
Class C (a)
Proceeds from shares issued in merger (b) -- 744 -- 2,038 -- 1,258
Proceeds from shares issued 12,429 32,271 44,890 34,793 3,779 2,753
Reinvestment of cash distributions 264 440 1,023 905 79 53
Cost of shares redeemed (19,933) (35,682) (37,956) (35,584) (3,506) (2,738)
---------- ---------- ---------- ---------- -------- --------
(Decrease) increase in net assets from
Class C transactions (7,240) (2,227) 7,957 2,152 352 1,326
---------- ---------- ---------- ---------- -------- --------
(Decrease) increase in net assets derived
from capital share transactions (64,426) 411,134 103,995 282,026 15,712 42,766
---------- ---------- ---------- ---------- -------- --------
Net (decrease) increase in net assets (64,418) 411,130 103,996 282,024 15,735 42,766
---------- ---------- ---------- ---------- -------- --------
NET ASSETS:
Beginning of period 911,948 500,818 809,948 527,924 107,046 64,280
---------- ---------- ---------- ---------- -------- --------
End of period $847,530 $ 911,948 $913,944 $ 809,948 $122,781 $107,046
========== ========== ========== ========== ======== ========
<FN>
(A) ON APRIL 22, 1996 SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B
SHARES WERE REDESIGNATED CLASS C.
(B) ON APRIL 15 & 22, THE CONESTOGA FUNDS WERE AQUIRED BY COREFUNDS INC. </FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
98
<PAGE>
[This page intentionally left blank.]
<PAGE>
FINANCIAL
HIGHLIGHTS
FOR THE PERIODS
ENDED
JUNE 30,
COREFUND EQUITY FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- ----------- ----------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $28.47 $0.51 $ 9.16 $(0.51) $(0.24) $37.39 34.44% $241,413 0.37% 1.63%
1996 23.79 0.51 5.47 (0.51) (0.79) 28.47 25.69 166,350 0.35 1.94
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45 112,533 0.37 2.48
1994 20.97 0.55 (0.43) (0.55) -- 20.54 0.55 72,552 0.35 2.63
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39 50,551 0.49 2.82
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59 20,166 0.57 2.66
19911 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+ 12,117 0.97 1.79
CLASS A
199710 $29.62 $0.32 $ 8.05 $(0.38) $(0.24) $37.37 28.58%+ $4,507 0.37% 1.51%
- --------------------
CORE EQUITY FUND(9)
- --------------------
CLASS Y*
1997 $17.26 $0.12 $ 5.32 $(0.12) $(1.47) $21.11 33.10% $515,015 0.98% 0.63%
1996 17.07 0.14 1.49 (0.14) (1.30) 17.26 19.24 414,824 0.97 1.15
INSTITUTIONAL CLASS*
1995 15.00 0.19 2.87 (0.19) (0.80) 17.07 22.00 378,352 1.05 1.44
CLASS A*
1997 $17.28 $0.07 $ 5.32 $(0.07) $(1.47) $21.13 32.74% $16,043 1.23% 0.38%
1996 17.08 0.12 1.49 (0.11) (1.30) 17.28 19.11 11,178 1.22 0.89
RETAIL CLASS*
1995 15.00 0.18 2.87 (0.17) (0.80) 17.08 21.94 6,591 1.34 1.23
PRIOR CLASS
1994 $15.39 $0.11 $ 0.22 $(0.11) $(0.61) $15.00 2.21% $ 50,128 1.49% 0.75%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90 45,677 1.20 0.94
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27 28,103 0.92 1.47
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37 12,830 0.54 2.30
19902 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.65 2.29
- -------------------
GROWTH EQUITY FUND
- -------------------
CLASS Y**
1997 $14.19 $0.04 $ 2.81 $(0.04) $(1.57) $15.43 21.67% $147,700 0.96% 0.30%
1996 11.18 0.08 3.36 (0.08) (0.35) 14.19 31.36 120,073 0.89 0.64
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345 0.76 0.84
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877 0.69 0.48
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777 0.43 0.85
19923 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418 0.14 1.38
CLASS A**
1997 $14.17 $0.01 $ 2.79 $(0.01) $(1.57) $15.39 21.29% $4,693 1.21% 0.04%
1996 11.17 0.05 3.35 (0.05) (0.35) 14.17 31.00 3,162 1.14 0.40
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043 1.01 0.59
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,73 0.94 0.23
19934 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224 0.80 0.39
- -----------------------
SPECIAL EQUITY FUND(9)
- -----------------------
CLASS Y*
1997 $11.86 $0.02 $ 1.81 $(0.03) $(2.39) $11.27 17.94% $71,980 0.84% 0.19%
1996 11.42 0.07 2.13 (0.07) (1.69) 11.86 22.27 63,680 0.34 0.94
INSTITUTIONAL CLASS*
1995 9.37 0.12 2.12 (0.12) (0.07) 11.42 24.44 57,396 0.32 1.14
CLASS A*
1997 $11.85 $ -- $ 1.81 $(0.02) $(2.39) $11.25 17.73% $2,347 1.14% (0.12)%
1996 11.42 0.08 2.11 (0.07) (1.69) 11.85 22.14 1,144 0.37 0.91
RETAIL CLASS*
1995 9.37 0.12 2.12 (0.12) (0.07) 11.42 24.44 734 0.27 1.29
PRIOR CLASS
19945 $10.00 $0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $ 10,069 0.15% 1.06%
RATIO RATIO OF NET
OF EXPENSES INCOME (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO AVG.
(EXCLUDING (EXCLUDING TURNOVER COMM.
WAIVERS) WAIVERS) RATE*** RATE11
----------- ------------ --------- ------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C>
1997 0.71% 1.29% 11% $0.0545
1996 0.71 1.59 13 0.0641
1995 0.76 2.09 27 n/a
1994 0.75 2.23 13 n/a
1993 0.88 2.43 4 n/a
1992 1.06 2.17 27 n/a
19911 1.20 1.56 -- n/a
CLASS A
199710 0.69% 1.19% 11% $0.0545
- --------------------
CORE EQUITY FUND(9)
- --------------------
CLASS Y*
1997 1.03% 0.58% 79% $0.0512
1996 1.01 1.11 114 0.0636
INSTITUTIONAL CLASS*
1995 1.10 1.44 119 n/a
CLASS A*
1997 1.28% 0.33% 79% $0.0512
1996 1.26 0.85 114 0.0636
RETAIL CLASS*
1995 1.53 1.04 119 n/a
PRIOR CLASS
1994 1.51% 0.73% 35% n/a
1993 1.41 0.73 24 n/a
1992 1.23 1.17 39 n/a
1991 1.48 1.36 68 n/a
19902 1.59 1.35 43 n/a
- -------------------
GROWTH EQUITY FUND
- -------------------
CLASS Y**
1997 1.06% 0.20% 74% $0.0451
1996 1.05 0.48 81 0.0601
1995 1.10 0.50 113 n/a
1994 1.11 0.06 127 n/a
1993 1.11 0.17 103 n/a
19923 1.12 0.40 66 n/a
CLASS A**
1997 1.31% (0.06)% 74% $0.0451
1996 1.30 0.23 81 0.0601
1995 1.35 0.25 113 n/a
1994 1.36 (0.19) 127 n/a
19934 1.48 (0.29) 103 n/a
- -----------------------
SPECIAL EQUITY FUND(9)
- -----------------------
CLASS Y*
1997 1.82% (0.79)% 74% $0.0257
1996 1.79 (0.51) 72 0.0539
INSTITUTIONAL CLASS*
1995 1.97 (0.51) 129 n/a
CLASS A*
1997 2.07% (1.05)% 74% $0.0257
1996 1.82 (0.55) 72 0.0539
RETAIL CLASS*
1995 2.24 (0.68) 129 n/a
PRIOR CLASS
19945 2.10% (0.89)% 39% n/a
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
100
<PAGE>
[SQUARE BULLET] COREFUND
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- ----------- ----------
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $13.97 $0.14 $ 1.84 $(0.37) $(0.86) $14.72 15.43% $163,117 1.20% 0.82%
1996 12.29 0.16 1.86 (0.28) (0.06) 13.97 16.72 139,275 1.14 1.05
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838 1.05 0.98
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911 0.99 0.23
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655 0.99 1.22
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594 0.96 1.67
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582 0.99 1.80
19906 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513 1.22 2.57
CLASS A**
1997 $13.96 $0.09 $ 1.85 $(0.34) $(0.86) $14.70 15.09% $2,431 1.45% 0.57%
1996 12.27 0.11 1.89 (0.25) (0.06) 13.96 16.54 2,138 1.39 0.80
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943 1.30 0.73
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019 1.24 0.05
19934 10.07 0.05 1.59 -- -- 11.71 16.29+ 344 1.15 1.51
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997 $12.59 $0.36 $ 1.61 $(0.36) $(0.68) $13.52 16.44% $113,642 0.78% 2.79%
1996 11.06 0.33 1.68 (0.33) (0.15) 12.59 18.41 102,515 0.81 2.79
1995 9.88 0.35 1.21 (0.35) (0.03) 11.06 16.21 61,092 0.73 3.51
1994 10.39 0.35 (0.51) (0.35) -- 9.88 (1.62) 42,429 0.62 3.46
19934 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45 3.38
CLASS A**
1997 $12.59 $0.32 $ 1.61 $(0.32) $(0.68) $13.52 16.15% $4,198 1.03% 2.54%
1996 11.06 0.30 1.68 (0.30) (0.15) 12.59 18.13 3,188 1.06 2.53
1995 9.89 0.34 1.19 (0.33) (0.03) 11.06 15.84 2,344 0.98% 3.27
1994 10.38 0.31 (0.49) (0.31) -- 9.89 (1.86) 2,222 0.87 3.21
19937 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55 5.76
RATIO RATIO OF NET
OF EXPENSES INCOME (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO AVG.
(EXCLUDING (EXCLUDING TURNOVER COMM.
WAIVERS) WAIVERS) RATE*** RATE11
----------- ------------ --------- ------
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
<S> <C> <C> <C> <C>
1997 1.29% 0.73% 59% $0.0080
1996 1.25 0.94 41 0.0270
1995 1.19 0.84 59 n/a
1994 1.18 0.04 67 n/a
1993 1.28 0.93 59 n/a
1992 1.40 1.23 87 n/a
1991 1.56 1.23 49 n/a
19906 1.99 1.80 20 n/a
CLASS A**
1997 1.54% 0.48% 59% $0.0080
1996 1.50 0.69 41 0.0270
1995 1.44 0.59 59 n/a
1994 1.43 (0.14) 67 n/a
19934 1.44 1.22 59 n/a
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997 1.00% 2.57% 54% $0.0033
1996 1.03 2.57 74 0.0621
1995 1.07 3.17 46 n/a
1994 1.08 3.00 56 n/a
19934 1.39 2.45 21 n/a
CLASS A**
1997 1.25% 2.32% 54% $0.0033
1996 1.27 2.32 74 0.0621
1995 1.32 2.93 46 n/a
1994 1.33 2.75 56 n/a
19937 1.48 4.83 21 n/a
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED AS EITHER RETAIL OR INSTITUTIONAL SHARES. ON THAT DATE,
THE FUND'S NET INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS FOR THE PERIOD NOVEMBER 1, 1994 THROUGH FEBRUARY 20, 1995
WERE ALLOCATED TO EACH CLASS OF SHARES. THE BASIS FOR THE ALLOCATION WAS THE RELATIVE NET ASSETS OF EACH CLASS OF
SHARES AS OF FEBRUARY 21, 1995. THE RESULTS WERE COMBINED WITH THE RESULTS OF OPERATIONS AND DISTRIBUTIONS FOR EACH
APPLICABLE CLASS FOR THE PERIOD FEBRUARY 21, 1995 THROUGH OCTOBER 31, 1995. FOR THE YEAR ENDED OCTOBER 31, 1995, THE
FINANCIAL HIGHLIGHTS' RATIOS OF EXPENSES, NET INVESTMENT INCOME, TOTAL RETURN, AND THE PER SHARE INVESTMENT ACTIVITIES
AND DISTRIBUTIONS REFLECT THIS ALLOCATION. ADDITIONALLY, ON APRIL 15 & 22, 1996 THE CONESTOGA EQUITY AND SPECIAL EQUITY
FUNDS WERE ACQUIRED BY COREFUNDS, INC.; AT WHICH TIME THE INSTITUTIONAL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED
FOR CLASS Y SHARES AND THE RETAIL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED FOR CLASS A SHARES.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SPECIAL
EQUITY FUND, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF EACH FUND
WERE REDESIGNATED CLASS A.
***FOR THE YEAR ENDED JUNE 30, 1996, TRANSACTIONS RELATING TO THE MERGER WERE
EXCLUDED FROM THE CALCULATION OF THE PORTFOLIO TURNOVER RATE.
+ THIS FIGURE HAS NOT BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JUNE 1, 1991. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD
HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS MARCH 15, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 12, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED. 7 COMMENCED OPERATIONS MARCH 16, 1993. UNLESS
OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. 8 TOTAL RETURN
DOES NOT REFLECT APPLICABLE SALES LOAD. ADDITIONALLY TOTAL RETURN FOR CLASS Y &
CLASS A FOR THE CORE
EQUITY & SPECIAL EQUITY FUNDS FOR 1996 ARE FOR AN EIGHT MONTH PERIOD ENDED
JUNE 30, 1997.
9 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR ENDED JUNE 30, 1996 REPRESENTS THE PERIOD FROM NOVEMBER 1, 1995 TO
JUNE 30, 1996. ALL PRIOR YEARS ARE FOR THE PERIODS NOVEMBER 1 TO
OCTOBER 31.
10 COMMENCED OPERATIONS ON OCTOBER 9, 1996. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
11 AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS BEGINNING AFTER
SEPTEMBER 1, 1995.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
101
<PAGE>
FINANCIAL
HIGHLIGHTS
FOR THE PERIODS
ENDED
JUNE 30,
COREFUND FIXED INCOME FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- -------- --------- ----------- ----------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.94 $0.53 $ 0.03 $(0.53) $ -- $ 9.97 5.82% $ 37,011 0.47% 5.37%
1996 10.05 0.36 (0.08) (0.38) (0.01) 9.94 2.78 30,132 0.51 5.31
INSTITUTIONAL CLASS*
19951 10.00 0.25 0.03 (0.23) -- 10.05 2.57%+ 36,059 0.63 5.43
CLASS A*
1997 $ 9.93 $0.51 $ 0.03 $(0.51) $ -- $ 9.96 5.59%$ 493 0.73% 5.18%
1996 10.04 0.35 (0.10) (0.35) (0.01) 9.93 2.55 1 0.76 5.05
RETAIL CLASS*
19952 10.01 0.23 0.02 (0.22) -- 10.04 2.87%+ 11 0.88 5.05
- ------------------------------
SHORT-INTERMEDIATE BOND FUND
- ------------------------------
CLASS Y**
1997 $ 9.76 $0.59 $ 0.07 $(0.59) $ -- $ 9.83 6.90% $163,153 0.49% 5.98%
1996 9.84 0.57 (0.08) (0.57) -- 9.76 5.05 159,841 0.55 5.80
1995 9.63 0.53 0.21 (0.53) -- 9.84 8.22 55,128 0.60 5.76
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379 0.58 4.30
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692 0.42 4.62
19923 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623 0.11 5.73
CLASS A**
1997 $ 9.76 $0.56 $ 0.07 $(0.56) $ -- $ 9.83 6.64%$ 2,752 0.74% 5.73%
1996 9.84 0.54 (0.08) (0.54) -- 9.76 4.79 3,062 0.81 5.51
1995 9.63 0.54 0.20 (0.53) -- 9.84 7.95 1,961 0.85 5.27
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365 0.83 4.05
19934 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752 0.75 3.78
- ------------------------
GOVERNMENT INCOME FUND
- ------------------------
CLASS Y**
1997 $ 9.62 $0.62 $ 0.14 $(0.62) $ -- $ 9.76 8.15% $ 19,007 0.70% 6.40%
1996 9.83 0.61 (0.21) (0.61) -- 9.62 4.09 13,943 0.64 6.17
1995 9.52 0.62 0.31 (0.62) -- 9.83 10.26 11,305 0.59 6.53
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089 0.50 4.93
19935 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323 0.44 5.41
CLASS A**
1997 $ 9.62 $0.60 $ 0.14 $(0.60) $ -- $ 9.76 7.88% $ 1,660 0.95% 6.15%
1996 9.84 0.58 (0.22) (0.58) -- 9.62 3.73 1,287 0.88 5.93
1995 9.51 0.61 0.33 (0.61) -- 9.84 10.23 1,374 0.85 6.25
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536 0.75 4.68
19938 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201 0.63 5.35
- -------------
BOND FUND11
- -------------
CLASS Y*
1997 $10.15 $0.64 $ 0.09 $(0.64) $ -- $10.24 7.43% $182,364 0.56% 6.29%
1996 10.55 0.43 (0.30) (0.45) (0.08) 10.15 1.23 198,605 0.55 6.28
INSTITUTIONAL CLASS*
1995 9.81 0.61 0.71 (0.58) -- 10.55 13.87 194,442 0.71 6.09
CLASS A*
1997 $10.15 $0.62 $ 0.09 $(0.62) $ -- $10.24 7.15%$ 1,622 0.81% 6.05%
1996 10.56 0.44 (0.33) (0.44) (0.08) 10.15 0.98 1,273 0.80 6.02
RETAIL CLASS*
1995 9.81 0.60 0.72 (0.57) -- 10.56 13.83 1,373 0.97 6.02
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377 1.01% 5.07%
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346 0.88 5.16
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82 15,180 0.46 6.78
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255 0.47 7.71
19906 10.00 0.50 (0.04) (0.50) -- 9.96 4.64+ 4,593 0.68 7.75
RATIO RATIO OF
OF EXPENSES NET INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
WAIVERS) WAIVERS) RATE***
----------- ------------ ---------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C>
1997 1.05% 4.79% 99%
1996 1.03 4.79 102
INSTITUTIONAL CLASS*
19951 1.08 4.98 40
CLASS A*
1997 1.32% 4.59% 99%
1996 1.25 4.56 102
RETAIL CLASS*
19952 1.33 4.60 40
- ------------------------------
SHORT-INTERMEDIATE BOND FUND
- ------------------------------
CLASS Y*
1997 0.80% 5.67% 158%
1996 0.81 5.54 257
1995 0.84 5.52 405
1994 0.86 4.02 299
1993 0.86 4.18 188
19923 0.84 5.00 51
CLASS A**
1997 1.05% 5.42% 158%
1996 1.06 5.27 257
1995 1.09 5.03 405
1994 1.11 3.77 299
19934 1.19 3.34 188
- ------------------------
GOVERNMENT INCOME FUND
- ------------------------
CLASS Y*
1997 0.85% 6.25% 120%
1996 0.89 5.92 131
1995 0.98 6.14 368
1994 1.00 4.43 157
19935 1.10 4.75 93
CLASS A**
1997 1.10% 6.00% 120%
1996 1.14 5.67 131
1995 1.24 5.86 368
1994 1.25 4.18 157
19938 1.29 4.69 93
- -------------
BOND FUND11
- -------------
CLASS Y*
1997 1.04% 5.81% 210%
1996 0.97 5.86 190
INSTITUTIONAL CLASS*
1995 1.12 5.68 352
CLASS A*
1997 1.29% 5.57% 210%
1996 1.22 5.61 190
RETAIL CLASS*
1995 1.44 5.55 352
PRIOR CLASS
1994 1.60% 4.48% 232%
1993 1.49 4.55 158
1992 1.24 6.01 99
1991 1.41 6.78 47
19906 1.62 6.81 23
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
102
<PAGE>
[SQUARE BULLET] COREFUND
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- -------- --------- ----------- ----------
- -----------------
GLOBAL BOND FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.70 $0.49 $ 0.09 $(0.74) $ -- $ 9.54 6.18% $ 34,590 0.85% 5.14%
1996 9.62 0.47 0.30 (0.69) -- 9.70 8.00 32,998 0.71 5.81
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898 0.64 6.84
19947 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73 5.04
CLASS A**
1997 $ 9.68 $0.42 $ 0.14 $(0.72) $ -- $ 9.52 5.92% $ 182 1.10% 4.89%
1996 9.61 0.61 0.12 (0.66) -- 9.68 7.74 152 0.96 5.56
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170 0.89 6.59
19947 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98 4.79
- ----------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ----------------------------------
CLASS Y**
1997 $ 9.92 $0.42 $ 0.13 $(0.42) $ -- $10.05 5.62% $ 993 0.55% 4.20%
1996 9.83 0.37 0.09 (0.37) -- 9.92 4.74 403 0.81 3.73
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365 0.82 3.91
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088 0.63 3.91
19938 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009 0.58 2.74
CLASS A**
1997 $ 9.92 $0.39 $ 0.13 $(0.39) $ -- $10.05 5.36% $ 959 0.80% 3.92%
1996 9.83 0.35 0.09 (0.35) -- 9.92 4.48 1,015 1.08 3.47
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027 1.08 3.65
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311 0.88 3.66
19938 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166 0.81 2.51
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997 $10.22 $0.54 $ 0.25 $(0.54) $ -- $10.47 7.92% $ 10,171 0.08% 5.23%
1996 10.16 0.55 0.06 (0.55) -- 10.22 6.02 8,864 0.21 5.25
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272 0.39 5.26
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434 0.42 5.09
CLASS A**
1997 $10.22 $0.51 $ 0.25 $(0.51) $ -- $10.47 7.65% $ 2,004 0.33% 4.99%
1996 10.16 0.52 0.06 (0.52) -- 10.22 5.76 994 0.46 4.93
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317 0.64 4.95
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163 0.67 4.84
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997 $10.08 $0.51 $ 0.15 $(0.51) $(0.07) $10.16 6.70% $ 1,477 0.21% 5.02%
1996 10.12 0.51 0.02 (0.51) (0.06) 10.08 5.28 1,317 0.37 4.93
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550 0.42 5.21
19949 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432 0.43 5.07
CLASS A**
1997 $10.07 $0.48 $ 0.15 $(0.48) $(0.07) $10.15 6.44%$ 398 0.45% 4.81%
1996 10.12 0.48 0.01 (0.48) (0.06) 10.07 4.93 304 0.60 4.65
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24 0.68 4.97
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2 0.68 4.82
RATIO RATIO OF
OF EXPENSES NET INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
WAIVERS) WAIVERS) RATE***
----------- ------------ ---------
- -----------------
GLOBAL BOND FUND
- -----------------
CLASS Y**
<S> <C> <C> <C>
1997 1.03% 4.96% 90%
1996 0.95 5.57 67
1995 1.03 6.45 133
19947 1.12 4.65 161
CLASS A**
1997 1.28% 4.71% 90%
1996 1.20 5.32 67
1995 1.28 6.20 133
19947 1.37 4.40 161
- ----------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ----------------------------------
CLASS Y**
1997 1.02% 3.73% 22%
1996 1.31 3.23 10
1995 1.26 3.47 9
1994 1.17 3.37 43
19938 1.45 1.87 10
CLASS A**
1997 1.23% 3.49% 22%
1996 1.61 2.94 10
1995 1.52 3.21 9
1994 1.42 3.12 43
19938 1.68 1.64 10
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997 0.83% 4.48% 39%
1996 0.96 4.50 92
1995 1.14 4.51 18
19949 1.17 4.34 3
CLASS A**
1997 1.08% 4.24% 39%
1996 1.21 4.18 92
1995 1.39 4.20 18
19949 1.42 4.09 3
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997 0.96% 4.27% 19%
1996 1.12 4.18 21
1995 1.17 4.46 32
19949 1.35 4.15 13
CLASS A**
1997 1.20% 4.06% 19%
1996 1.35 3.90 21
1995 1.44 4.21 32
19949 1.60 3.90 13
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
*ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED AS EITHER
RETAIL OR INSTITUTIONAL SHARES. ON THAT DATE, THE FUND'S NET INVESTMENT
INCOME, EXPENSES AND DISTRIBUTIONS FOR THE PERIOD NOVEMBER 1, 1994 THROUGH
FEBRUARY 20, 1995 WERE ALLOCATED TO EACH CLASS OF SHARES. THE BASIS FOR THE
ALLOCATION WAS THE RELATIVE NET ASSETS OF EACH CLASS OF SHARES AS OF FEBRUARY
21, 1995. THE RESULTS WERE COMBINED WITH THE RESULTS OF OPERATIONS AND
DISTRIBUTIONS FOR EACH APPLICABLE CLASS FOR THE PERIOD FEBRUARY 21, 1995
THROUGH OCTOBER 31, 1995. FOR THE YEAR ENDED OCTOBER 31, 1995, THE FINANCIAL
HIGHLIGHTS' RATIOS OF EXPENSES, NET INVESTMENT INCOME, TOTAL RETURN, AND THE
PER SHARE INVESTMENT ACTIVITIES AND DISTRIBUTIONS REFLECT THIS ALLOCATION.
ADDITIONALLY, ON APRIL 22, 1996 THE CONESTOGA SHORT-TERM INCOME AND BOND
FUNDS WERE ACQUIRED BY COREFUNDS, INC. AT WHICH TIME THE INSTITUTIONAL CLASS
OF SHARES OF THESE FUNDS WERE REDESIGNATED CLASS Y AND THE RETAIL CLASS OF
SHARES OF THESE FUNDS WERE REDESIGNATED CLASS A.
**ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SHORT TERM
INCOME AND BOND FUNDS, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF
EACH FUND, EXCLUDING THE SHORT TERM INCOME AND BOND FUNDS, WERE REDESIGNATED
CLASS A.
***FOR THE YEAR ENDED JUNE 30, 1996, TRANSACTIONS RELATING TO THE MERGER WERE
EXCLUDED FROM THE CALCULATION OF THE PORTFOLIO TURNOVER RATE.
+ THIS FIGURE HAS NOT BEEN ANNULAIZED.
1 COMMENCED OPERATIONS MAY 15, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS MAY 17, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS APRIL 1, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS DECEMBER 15, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 COMMENCED OPERATIONS MAY 3, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
9 COMMENCED OPERATIONS MAY 16, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
10 TOTAL RETURN DOES NOT REFLECT THE SALES LOAD CHARGED ON THE CLASS A SHARES.
ADDITIONALLY, TOTAL RETURN FOR CLASS Y & CLASS A FOR THE SHORT TERM INCOME
AND BOND FUNDS FOR 1996 ARE FOR THE EIGHT MONTH PERIOD ENDED DECEMBER 31,
1996.
11 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR ENDED JUNE 30, 1996
REPRESENTS THE PERIOD FROM NOVEMBER 1, 1995 TO JUNE 30, 1996. ALL PRIOR YEARS
ARE FOR THE PERIODS NOVEMBER 1 TO OCTOBER 31.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
103
<PAGE>
FINANCIAL
HIGHLIGHTS
FOR THE PERIODS
ENDED
JUNE 30,
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
RATIO RATIO OF
NET RATIO OF EXPENSES NET INCOME
NET ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ------------- ----------- ------ --------- ----------- ---------- ----------- -----------
- ----------------
TREASURY RESERVE
- ----------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $(0.05) $1.00 4.97% $835,384 0.51% 4.86% 0.71% 4.66%
1996 1.00 0.05 (0.05) 1.00 5.20 892,562 0.50 5.02 0.77 4.75
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91 0.85 4.54
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87 0.86 2.49
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89 0.85 2.50
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58 0.82 4.14
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80 0.82 6.35
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03 0.84 7.56
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26 0.84 8.62
CLASS C*
1997 $1.00 $0.05 $(0.05) $1.00 4.71% $ 12,146 0.76% 4.61% 0.96% 4.41%
1996 1.00 0.05 (0.05) 1.00 4.94 19,386 0.75 4.81 1.03 4.53
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81 1.10 4.44
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62 1.11 2.24
19931 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46 1.14 2.07
- -------------
CASH RESERVE
- -------------
CLASS Y*
1997 $1.00 $0.05 $(0.05) $1.00 5.09% $886,251 0.50% 4.99% 0.70% 4.79%
1996 1.00 0.05 (0.05) 1.00 5.26 790,211 0.50 5.09 0.78 4.81
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04 0.85 4.67
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95 0.85 2.57
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97 0.85 2.58
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68 0.82 4.24
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94 0.82 6.49
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28 0.80 7.82
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62 0.90 8.05
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54 1.14 5.96
1987 1.00 0.06 (0.06) 1.00 5.85 35,054 0.54 5.60 1.01 5.13
CLASS C*
1997 $1.00 $0.05 $(0.05) $1.00 4.83% $ 27,693 0.75% 4.74% 0.95% 4.54%
1996 1.00 0.05 (0.05) 1.00 5.00 19,736 0.75 4.86 1.03 4.58
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86 1.10 4.49
1994 1.00 0.03 (0.03) 1.00 2.74 11,451 0.72 2.70 1.10 2.32
19931 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52 1.15 2.13
- -----------------
TAX-FREE RESERVE
- -----------------
CLASS Y*
1997 $1.00 $0.03 $(0.03) $1.00 3.08% $119,579 0.50% 3.07% 0.70% 2.87%
1996 1.00 0.03 (0.03) 1.00 3.20 104,196 0.48 3.14 0.76 2.86
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09 0.85 2.72
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00 0.87 1.62
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20 0.89 1.82
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39 0.88 2.88
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20 0.81 3.45
CLASS C*
1997 $1.00 $0.03 $(0.03) $1.00 2.83% $ 3,202 0.75% 2.82% 0.95% 2.62%
1996 1.00 0.03 (0.03) 1.00 2.95 2,850 0.73 2.94 1.02 2.65
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80 1.10 2.43
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75 1.12 1.37
19931 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71 1.14 1.33
<FN>
* ON APRIL 22, 1996, SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B SHARES WERE REDESIGNATED CLASS C.
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JANUARY 4, 1993. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS NOVEMBER 21, 1988. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS APRIL 16, 1991. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
104
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND
1. ORGANIZATION
The CoreFund Equity Index Fund, Core Equity Fund, Growth Equity Fund,
Special Equity Fund, International Growth Fund, Balanced Fund (the Equity
Funds), Short Term Income Fund, Short-Intermediate Bond Fund, Government Income
Fund, Bond Fund, Global Bond Fund, Intermediate Municipal Bond Fund,
Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund (the Fixed
Income Funds), Treasury Reserve, Cash Reserve, and Tax-Free Reserve (the Money
Market Funds) are portfolios offered by CoreFunds, Inc. (The Company), an
open-end investment company registered under the Investment Company Act of 1940,
as amended. The Company is presently authorized to offers 20 separate portfolios
(the Funds):
EQUITY PORTFOLIOS: MONEY MARKET PORTFOLIOS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Cash Reserve
International Growth Fund Elite Treasury Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME PORTFOLIOS:
Short Term Income Fund
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements of the Elite Cash Reserve, Elite Treasury Reserve
and Elite Tax-Free Reserve are not presented herein.
The assets of each Portfolio are segregated, and a Shareholder's interest
is limited to the Portfolio in which shares are held. The Funds' prospectus
provides a description of the Funds' investment objectives, policies and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investment securities of the Equity and Fixed Income
Funds that are listed on a securities exchange for which market quotations are
available are valued by an independent pricing service at the last quoted sales
price for such securities on each business day. If there is no such reported
sale, these securities and unlisted securities for which market quotations are
readily available are valued at the most recent quoted bid price using
procedures determined in good faith by the Board of Trustees. Debt obligations
with sixty days or less remaining until maturity may be valued at their
amortized cost. Under this valuation method, purchase discounts and premiums are
accreted and amortized ratably to maturity and are included in interest income.
Investment securities of the Money Market Funds are stated at amortized
cost, which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income.
The books and records of the International Growth Fund and Global Bond Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following bases:
[BULLET] market value of investment securities, assets and liabilities
at the current rate of exchange; and [BULLET] purchases and sales of
investment securities, income and expenses at the relevant rates of
exchange prevailing on the respective dates of such transactions.
The International Growth Fund does not isolate the portion of gains or
losses on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Global Bond Fund does isolate the effect of fluctuations in foreign
currency rates when determining the gain or loss upon sale or maturity of
foreign currency denominated debt obligations for Federal income tax purposes.
105
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
The International Growth Fund and Global Bond Fund report certain foreign
currency related transactions as components of unrealized and realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for Federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--The International Growth Fund and
Global Bond Fund enter into forward foreign currency contracts as hedges against
either specific transactions or portfolio positions. The aggregate principal
amounts of the contracts are not recorded the funds intend to settle the
contracts prior to delivery. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The funds realize gains or losses at the time forward
contracts are extinguished. Financial future contracts are valued at the
settlement price established each day by the board of trade on an exchange on
which they are traded.
SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period, which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on ex-dividend
date.
REPURCHASE AGREEMENTS--Securities pledged as collateral for repurchase
agreements are held by each Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements and procedures adopted by
the adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of collateral by
the Portfolio may be delayed or limited.
EXPENSES--Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Company are
pro-rated to the Funds on the basis of relative net assets.yClass specific
expenses, such as the 12b-1 fees, are borne by that class. Income, other
expenses and accumulated realized and unrealized gains and losses of a Fund are
allocated to the respective class on the basis of the relative net asset value
each day.
DISTRIBUTION TO SHAREHOLDERS--The Equity Index Fund, Core Equity Fund,
Growth Equity Fund, Special Equity Fund, Balanced Fund and Global Bond Fund
declare and pay dividends on a quarterly basis. The International Growth Fund
declares and pays dividends periodically. Such dividends are reinvested in
additional shares unless otherwise requested. The Short Term Income Fund,
Short-Intermediate Bond Fund, Government Income Fund, Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Treasury Reserve, Cash Reserve and Tax-Free Reserve distributions from net
investment income are declared on a daily basis and are payable on the first
business day of the following month. Any net realized capital gains on sales of
securities for a Fund are distributed to its shareholders at least annually.
Distributions from net investment income and net realized capital gains are
determined in accordance with U.S. Federal income tax regulations, which may
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid in capital in the period that the difference arises.
Accordingly, for the International Growth Fund, $413,000 was reclassified
from accumulated net realized gain on investments to accumulated net investment
income. In addition, the following permanent differences primarily attributable
to realized foreign exchange gains and losses, have been relassified from
accumulated net realized gain (loss) on foreign currency transactions to
accumulated net investment income:
(000)
-----
INTERNATIONAL GROWTH FUND $1,679
GLOBAL BOND FUND 1,006
FEDERAL INCOME TAXES--It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income tax is required.
OTHER--Organizational costs incurred with the start up of the Balanced
Fund, Government Income Fund, Short Term Income Fund, Intermediate Municipal
Bond Fund, Global Bond Fund, Pennsylvania Municipal Bond Fund and New Jersey
Municipal Bond Fund are being amortized on a straight line basis over a maximum
period of sixty months. If any or all of the shares representing initial capital
of each fund are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organizational cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
106
<PAGE>
[SQUARE BULLET] COREFUND
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
The Company has entered into an investment advisory agreement with
CoreStates Investment Advisers, Inc. ("CSIA") to provide investment advisory
services to each Fund. For its services CSIA receives a fee based on the annual
average daily net assets of each Fund as shown in the following table:
<TABLE>
<CAPTION>
ADVISER INVESTMENT ADVISORY ADVISER INVESTMENT ADVISORY
FUND FEE AGREEMENT DATE FUND FEE AGREEMENT DATE
- ----------------- ------ ------------------- --------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index 0.40% March 25, 1991 Short Term Income 0.74% April 12, 1996
Core Equity 0.74 April 12, 1996 Short-Intermediate Bond 0.50 March 25, 1991
Growth Equity 0.75 March 25, 1991 Government Income 0.50 March 25, 1991
Special Equity 1.50 April 12, 1996 Bond 0.74 April 12, 1996
International
Growth 0.80 December 5, 1989 Global Bond 0.60 March 25, 1991
Balanced 0.70 March 25, 1991 Intermediate Municipal
Bond 0.50 March 25, 1991
Treasury Reserve 0.40 April 12, 1996 Pennsylvania Municipal
Cash Reserve 0.40 April 12, 1996 Bond 0.50 May 15, 1994
Tax-Free Reserve 0.40 April 12, 1996 New Jersey Municipal
Bond 0.50 May 15, 1994
</TABLE>
Advisory fees are computed daily and paid monthly for all Funds.
Additionally, for the year ended June 30, 1997, CSIA has voluntarily waived a
portion of their fees in order to assist the Funds in maintaining competitive
expense ratios.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, in
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
Sub-Advisory services are provided to the CoreStates Advisers for the
International Growth Fund by Martin Currie, Inc. and Aberdeen Managers (The
"Sub-Advisers"). Sub-Advisory services are provided for the Global Bond Fund by
Analytic TSA (formerly Alpha Global). CoreStates Advisers is responsible for the
supervision, and payment of fees to the Sub-Advisers in connection with their
services.
4. ADMINISTRATIVE, TRANSFER AGENT AND DISTRIBUTION SERVICES Pursuant to an
Administration agreement dated October 30, 1992, as amended
June 1, 1995, SEI Fund Resources ("SFR") acts as the Fund's Administrator. Under
the terms of such agreement, SFR is entitled to receive an annual fee of 0.25%
on the average net assets of the Funds. SFR voluntarily waives a portion of
their fees in order to assist the Funds in maintaining competitive expense
ratios.
Pursuant to a Transfer Agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS"), a wholly owned subsidiary of State Street Bank
and Trust Company acts as the Funds' Transfer Agent. As such, BFDS provides
transfer agency, dividend disbursing and shareholder servicing for the Funds.
On November 2, 1992, SEI Financial Services ("SFS"), a wholly owned
subsidiary of SEI, became the Funds' exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the Plan) for those Funds
offering Class A and C shares. The Plan provides for the payment by the Company
to the Distributor of up to 0.25% of the daily net assets of each Class A and C
Portfolio to which the Plan is applicable. The Distributor is authorized to use
this fee as compensation for its distribution-related services and as payment to
certain securities broker/dealers and financial institutions that enter into
shareholder servicing agreements or broker agreements with the Distributor. The
Funds paid approximately $2,071,000 to affiliated brokers for commissions earned
on the sales of the shares of the Funds.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Funds.
The Funds have paid legal fees in the amount of $187,000 to a law firm in
which the Secretary of the Company is a partner.
107
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
5. INVESTMENT TRANSACTIONS
During the year ended June 30, 1997, purchases of securities and proceeds
from sales of securities, other than temporary investments in short-term
securities, were as follows: <TABLE> <CAPTION>
- ---------------------------------------------------------------------------------------------------------------
--------------------------------- -------------------------------
PURCHASES SALES
--------------------------------- -------------------------------
U.S. U.S.
PORTFOLIO INVESTMENT TRANSACTIONS (000) GOVERNMENT OTHER TOTAL GOVERNMENT OTHER TOTAL
------------ --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Equity Index Fund $ -- $ 41,562 $ 41,562 $ -- $ 21,792 $ 21,792
Core Equity Fund -- 360,782 360,782 -- 377,058 377,058
Growth Equity Fund -- 99,072 99,072 -- 95,849 95,849
Special Equity Fund -- 47,567 47,567 -- 47,793 47,793
International Growth Fund -- 93,823 93,823 -- 80,367 80,367
Balanced Fund 17,498 37,932 55,430 6,264 51,482 57,746
Short Term Income Fund 18,275 11,227 29,502 18,994 7,177 26,171
Short-Intermediate Bond Fund 169,942 73,534 243,476 160,267 83,151 243,418
Government Income Fund 26,799 -- 26,799 23,101 -- 23,101
Bond Fund 289,125 99,353 388,478 286,710 112,502 399,212
Global Bond Fund -- 24,856 24,856 -- 30,685 30,685
Intermediate Municipal Fund -- 942 942 -- 365 365
Pennsylvania Municipal Bond Fund -- 6,182 6,182 -- 4,110 4,110
New Jersey Municipal Bond Fund -- 867 867 -- 287 287
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Certain net capital losses incurred subsequent to October 31, 1996 have
been deferred for tax purposes and will be recognized during the fiscal year
ended June 30, 1998. The Funds had capital loss carryforwards at June 30, 1997,
as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES
6/30/97 2002 2003 2004 2005
------------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Short Term Income Fund $ 88,520 $ -- $ -- $ -- $ 88,520
Short-Intermediate Bond Fund 2,907,103 -- 1,483,436 217,497 1,206,170
Government Income Fund 319,174 -- 222,660 4,127 92,387
Bond Fund 1,702,115 -- -- -- 1,702,115
Global Bond Fund 1,573,551 -- 844,493 -- 729,058
Intermediate Term Municipal Bond Fund 79,158 -- 41,918 34,827 2,413
Pennsylvania Municipal Bond Fund 96,691 73,679 95 8,784 14,133
Treasury Reserve 9,082 -- -- -- 9,082
Cash Reserve 167,012 134,628 23,362 9,022 --
Tax-Free Reserve 54,381 5,273 44,981 4,127 --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
At June 30, 1997 the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial purposes. The aggregate gross
unrealized gain or loss on securities at June 30, 1997 for each fund within the
CoreFunds is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
------------ ------------ --------
AGGREGATE AGGREGATE
GROSS GROSS
AGGREGATE GROSS UNREALIZED GAIN (LOSS) (000) APPRECIATION DEPRECIATION NET
------------ ------------ --------
<S> <C> <C> <C>
Equity Index Fund $100,868 $(2,365) $98,503
Core Equity Fund 125,274 (13,875) 111,399
Growth Equity Fund 46,345 (1,369) 44,976
Special Equity Fund 16,602 (10,082) 6,520
International Growth Fund 32,813 (4,297) 28,516
Balanced Fund 20,203 (1,004) 19,199
Short Term Income Fund 40 (27) 13
Short-Intermediate Bond Fund 794 (497) 297
Government Income Fund 191 (141) 50
Bond Fund 1,253 (618) 635
Global Bond Fund 119 (356) (237)
Intermediate Municipal Fund 22 (1) 21
Pennsylvania Municipal Bond Fund 278 (20) 258
New Jersey Municipal Bond Fund 48 (1) 47
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
108
<PAGE>
[SQUARE BULLET] COREFUND
6. FORWARD FOREIGN CURRENCY CONTRACTS
The International Growth Fund and Global Bond Fund enter into forward foreign
currency contracts as hedges against portfolio positions. Such contracts, which
protect the value of a Fund's investment securities against a decline in the
value of currency, do not eliminate fluctuations in the underlying prices of the
securities. They simply establish an exchange rate at a future date. Also,
although such contracts tend to minimize the risk of loss due to a decline in
the value of a hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of such foreign currency
increase. The following forward foreign currency contracts were outstanding at
June 30, 1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GLOBAL BOND FUND:
Foreign Currency Sales:
Unrealized
Contracts to In Exchange Appreciation/
Deliver/Receive For (Depreciation)
--------------- ----------- --------------
<S> <C> <C> <C>
7/23/97 DM 9,450,000 $5,471,917 $ 45,959
7/23-9/23/97 DK 17,000,000 2,640,875 75,155
9/12/97 GP 3,030,000 5,000,864 3,373
9/23/97 SK 13,376,000 1,742,347 7,518
----------
Net Unrealized Appreciation $ 132,005
==========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
CURRENCY LEGEND
DM German Marks
DK Danish Kroner
GP British Pounds
SK Swedish Krona
At June 30, 1997, the CoreFund Global Bond Fund had unrealized gains on closed
but unsettled forward foreign currency contracts of $83,006 scheduled to settle
between July 23, 1997 and September 12, 1997.
109
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
7. CONCENTRATION OF CREDIT RISK
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in debt instruments of
municipal issuers. Although these Funds maintain a diversified portfolio, with
the exception of the Pennsylvania Municipal Bond Fund and the New Jersey
Municipal Bond Fund, the issuers ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in securities that
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At June 30, 1997, the percentage of
portfolio investments by each revenue source was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ ---------- --------
INTERMEDIATE PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL MUNICIPAL
BOND BOND BOND TAX-FREE
FUND FUND FUND RESERVE
------------ ------------ ---------- --------
REVENUE BONDS:
<S> <C> <C> <C> <C>
Education Bonds 10.9% 25.1% 21.1% 8.9%
Health Care Bonds 6.8 11.1 9.4 8.3
Transportation Bonds 11.2 6.6 2.8 4.4
Utility Bonds 14.8 10.1 10.3 6.6
Housing Bonds -- 3.5 -- 6.5
Pollution Control Bonds -- -- -- 10.4
Industrial Bonds 5.3 15.4 -- 7.8
Public Facility Bonds -- 1.3 2.9 1.6
Resource Recovery Bonds -- -- -- 0.8
Other 18.3 1.6 6.6 11.7
GENERAL OBLIGATIONS 32.7 25.3 46.9 3.5
TAX EXEMPT COMMERCIAL PAPER -- -- -- 23.9
TAX AND REVENUE ANTICIPATION NOTES -- -- -- 1.6
TAX ANTICIPATION NOTES -- -- -- 4.0
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The rating of long-term debt as a percentage of total value of investments
at June 30, 1997 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
SHORT- PENNSYLVANIA NEW JERSEY
SHORT TERM INTERMEDIATE GOVERNMENT GLOBAL INTERMEDIATE MUNICIPAL MUNICIPAL
INCOME BOND INCOME BOND BOND MUNICIPAL BOND BOND
FUND FUND FUND FUND FUND FUND FUND FUND
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
STANDARD & POORS RATINGS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA 56% 71% 98% 77% 84% 68% 65% 37%
AA+ -- -- -- -- 10 3 -- --
AA 3 -- -- -- 5 16 11 18
AA- 1 2 -- 1 -- 3 8 9
A+ 13 4 -- 3 -- 3 3 --
A 3 5 -- 3 -- -- 2 --
A- 3 2 -- 1 -- -- 1 --
BBB+ -- 1 -- 4 -- -- -- --
BBB 5 4 -- 2 -- -- -- --
BBB- 5 4 -- 4 -- -- -- --
BB+ -- 1 -- -- -- -- -- --
BB -- 1 -- -- -- -- -- --
NR 11 5 2 5 1 7 10 36
----- ----- ----- ----- ------ ------ ------ ------
100% 100% 100% 100% 100% 100% 100% 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
110
<PAGE>
[SQUARE BULLET] COREFUND
Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount on an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by the issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions). At June 30, 1997, the percentage of securities with credit
enhancements are as follows:
- ----------------------------------------------------------------------------
------- ----------
LETTERS
OF BOND
CREDIT INSURANCE
------- ----------
Intermediate Municipal Bond Fund --% 66.3%
Pennsylvania Municipal Bond Fund -- 51.4
New Jersey Municipal Bond Fund 3.7 19.5
Tax-Free Reserve 54.2 37.8
- ----------------------------------------------------------------------------
8. SHARE TRANSACTIONS (000):
The following are the share transactions for the year ended June 30, 1997.
<TABLE>
<CAPTION>
------ ------- ------- ------- ------------- -------- -------- ------- --------
EQUITY CORE GROWTH SPECIAL INTERNATIONAL
INDEX EQUITY EQUITY EQUITY GROWTH BALANCED TREASURY CASH TAX-FREE
FUND FUND(1) FUND FUND FUND FUND RESERVE RESERVE RESERVE
------ ------- ------ ------- ------------- -------- -------- ------- --------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 1,368 3,083 2,709 1,267 2,555 1,854 2,548,964 2,154,887 392,069
Shares issued in lieu
of cash distributions 158 2,104 937 1,299 840 694 4,246 3,136 229
Shares redeemed (913) (4,824) (2,533) (1,549) (2,276) (2,286) (2,610,396) (2,061,985) (376,938)
----- ------ ------ ------ ------ ------ ---------- ---------- --------
Net increase (decrease) 613 363 1,113 1,017 1,119 262 (57,186) 96,038 15,360
===== ====== ====== ====== ====== ====== ========== ========== ========
CLASS A/C
Shares issued 123 181 120 92 35 100 12,429 44,890 3,779
Shares issued in lieu
of cash distributions 1 57 30 31 14 23 264 1,023 79
Shares redeemed (3) (126) (68) (11) (37) (66) (19,933) (37,956) (3,506)
----- ------ ------ ------ ------ ------ ---------- ---------- --------
Net increase (decrease) 121 112 82 112 12 57 (7,240) 7,957 352
===== ====== ====== ====== ====== ====== ========== ========== ========
TOTAL SHARE ACTIVITY
FOR PERIOD 734 475 1,195 1,129 1,131 319 (64,426) 103,995 15,712
===== ====== ====== ====== ====== ====== ========== ========== ========
<FN>
(1) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND. AMOUNTS DESIGNATED AS "--"
ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
111
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
8. SHARE TRANSACTIONS (000): -- CONTINUED
<TABLE>
<CAPTION>
---------- ------------ ---------- ----- ------- ------------ ------------ ----------
SHORT TERM SHORT- GOVERNMENT GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
INCOME INTERMEDIATE INCOME BOND BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND FUND FUND FUND BOND FUND BOND FUND BOND FUND
---------- ------------ ---------- ----- ------- ------------ ------------ ----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 1,654 4,595 844 1,850 11 84 340 52
Shares issued in lieu
of cash distributions 181 970 63 1,198 276 1 28 1
Shares repurchased (1,154) (5,334) (408) (4,823) (62) (27) (267) (39)
------ ------ ---- ------ --- ---- ---- ----
Net increase (decrease) 681 231 499 (1,775) 225 58 101 14
====== ====== ==== ====== === ==== ==== ====
CLASS A
Shares issued 48 40 59 57 3 8 129 10
Shares issued in lieu
of cash distributions 1 14 9 8 1 4 5 1
Shares repurchased -- (88) (32) (32) (1) (19) (40) (2)
------ ------ ---- ------ --- ---- ---- ----
Net increase (decrease) 49 (34) 36 33 3 (7) 94 9
====== ====== ==== ====== === ==== ==== ====
TOTAL SHARE ACTIVITY
FOR PERIOD 730 197 535 (1,742) 228 51 195 23
====== ====== ==== ====== === ==== ==== ====
</TABLE>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
112
<PAGE>
[SQUARE BULLET] COREFUND
(UNAUDITED)
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, each portfolio is designating
long-term capital gains, qualifying dividends and exempt income with regard to
distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C) (E)
CAPITAL GAINS INCOME TOTAL (D) TAX (F)
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) INTEREST TAX CREDIT(2)
- --------- ------------- ------------- ------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index Fund 26% 74% 100% 100% 0% 0%
Core Equity Fund 35% 65% 100% 24% 0% 0%
Growth Equity Fund 91% 9% 100% 92% 0% 0%
Special Equity Fund 19% 81% 100% 4% 0% 0%
International Growth Fund 61% 39% 100% 0% 0% 9%(3)
Balanced Fund 44% 56% 100% 18% 0% 0%
Short Term Income Fund 0% 100% 100% 0% 0% 0%
Short-Intermediate Bond Fund 0% 100% 100% 0% 0% 0%
Government Income Fund 0% 100% 100% 0% 0% 0%
Bond Fund 0% 100% 100% 0% 0% 0%
Global Bond Fund 0% 100% 100% 0% 0% 0%
Intermediate Municipal Bond Fund 0% 100% 100% 0% 100% 0%
Pennsylvania Municipal Bond Fund 0% 100% 100% 0% 100% 0%
New Jersey Municipal Bond Fund 11% 89% 100% 0% 100% 0%
Treasury Reserve 0% 100% 100% 0% 0% 0%
Cash Reserve 0% 100% 100% 0% 0% 0%
Tax-Free Reserve 0% 100% 100% 0% 100% 0%
<FN>
Please consult your tax adviser for proper treatment of this information.
- ----------
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION.
(2) SEE ATTACHED NOTICE WHICH DETAILS THE PER SHARE AMOUNT OF FOREIGN TAXES PAID
BY COUNTRY AND THE PER SHARE AMOUNT OF EACH DIVIDEND THAT REPRESENTS INCOME
DERIVED FROM SOURCES WITHIN EACH COUNTRY.
(3) THIS AMOUNT REPRESENTS THE FOREIGN TAX CREDIT FOR CLASS Y. THE FOREIGN TAX
CREDIT FOR CLASS A IS 10%.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE PORTFOLIO'S TOTAL
DISTRIBUTIONS.
** ITEMS (D), (E) AND (F) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME
DISTRIBUTIONS OF THE PORTFOLIO.
</FN>
</TABLE>
113
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND
(UNAUDITED)
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
The CoreFund International Growth Fund has made an election under Section
853 of the Internal Revenue Code to provide a foreign tax deduction or credit to
its shareholders for the fiscal year ended June 30, 1997. The information
provided below is pertinent to taxpayers who meet the following two criteria: 1)
file a U.S. Federal Income Tax Return on the basis of the fiscal year ended June
30, 1997, and 2) held shares of the Fund on the dividend record date of December
30, 1996.
The amount per share of income and foreign taxes paid to each country is
listed in the following schedule:
<TABLE>
<CAPTION>
Class Y Class A
Gross Foreign Gross Foreign
Country Dividend Taxes Paid Dividend Taxes Paid
- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Argentina................................................... 0.0019 0.0000 0.0018 0.0000
Australia................................................... 0.0169 0.0005 0.0155 0.0005
Austria..................................................... 0.0012 0.0000 0.0011 0.0000
Belgium..................................................... 0.0035 0.0004 0.0032 0.0004
Denmark..................................................... 0.0002 0.0000 0.0002 0.0000
Finland..................................................... 0.0002 0.0000 0.0002 0.0000
France...................................................... 0.0163 0.0021 0.0150 0.0021
Germany..................................................... 0.0162 0.0014 0.0148 0.0014
Hong Kong................................................... 0.0355 0.0000 0.0323 0.0000
Indonesia................................................... 0.0015 0.0000 0.0014 0.0000
Italy....................................................... 0.0058 0.0004 0.0053 0.0004
Japan....................................................... 0.0368 0.0037 0.0338 0.0037
Malaysia.................................................... 0.0057 0.0013 0.0053 0.0013
Mexico...................................................... 0.0004 0.0000 0.0004 0.0000
Netherlands................................................. 0.0143 0.0019 0.0132 0.0019
New Zealand................................................. 0.0018 0.0002 0.0016 0.0002
Norway...................................................... 0.0003 0.0000 0.0003 0.0000
Philippines................................................. 0.0001 0.0000 0.0001 0.0000
Singapore................................................... 0.0043 0.0008 0.0040 0.0008
Spain....................................................... 0.0094 0.0006 0.0086 0.0006
South Africa................................................ 0.0022 0.0001 0.0020 0.0001
Sweden...................................................... 0.0078 0.0008 0.0072 0.0008
Switzerland................................................. 0.0116 0.0012 0.0106 0.0012
Thailand.................................................... 0.0115 0.0009 0.0106 0.0009
United Kingdom.............................................. 0.1512 0.0158 0.1391 0.0158
United States............................................... 0.0452 0.0001 0.0412 0.0001
------- ------- ------- -------
0.4017 0.0322 0.3687 0.0322
</TABLE>
114
<PAGE>
SHAREHOLDER
NOTES
[SQUARE BULLET] COREFUND
115
<PAGE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF THE SHAREHOLDERS OF THE CORPORATION. THE REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE CORPORATION UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. SHARES IN THE FUNDS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CORESTATES BANK, N.A.,
THE PARENT CORPORATION OF EACH FUND'S INVESTMENT ADVISER. SUCH SHARES ARE ALSO
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF A MUTUAL FUND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. CORESTATES BANK, N.A.
SERVES AS CUSTODIAN FOR THE FUNDS. SEIFINANCIAL SERVICES COMPANY SERVES AS
DISTRIBUTOR AND IS NOT AFFILIATED WITH CORESTATES BANK, N.A.
<PAGE>
COREFUNDS,
INC.
[SQUARE BULLET]
DIRECTORS
EMIL J. MIKITY, CHAIRMAN
GEORGE H. STRONG
ERIN ANDERSON
THOMAS TAYLOR
CHERYL WADE
OFFICERS
DAVID G. LEE, PRESIDENT
JAMES W. JENNINGS, SECRETARY
INVESTMENT ADVISER
CORESTATES INVESTMENT ADVISERS, INC.
PHILADELPHIA, PA 19101
ADMINISTRATOR
SEI FUND RESOURCES
WAYNE, PA 19087
DISTRIBUTOR
SEIINVESTMENTS DISTRIBUTION CO.
OAKS, PA 19456
LEGAL COUNSEL
MORGAN, LEWIS &BOCKIUS
PHILADELPHIA, PA 19103
AUDITORS
ERNST & YOUNG LLP
PHILADELPHIA, PA 19103
INVESTMENT ADVISER
[COREFUND LOGO]
CORESTATES INVESTMENT ADVISERS FOR MORE INFORMATION, CALL COREFUND AT
1-800-355-CORE (2673).
COR-F-044-05
<PAGE>
CoreFunds,Inc.
-------------
ELITE CASH RESERVE
ANNUAL REPORT
June 30, 1997
<PAGE>
INVESTMENT ADVISER'S REPORT
COREFUND ELITE CASH RESERVE
JUNE 30, 1997
The CoreFund Elite Cash Reserve Fund (Class Y) returned 5.30% for the one-year
period ended June 30, 1997. The Fund significantly outperformed it's benchmark
index, The IBC/Donoghue All-Taxable Money Fund, which returned 4.87% for the
same period.
The Fund's assets decreased by 46.1% during the period from $384.4 million on
June 30, 1996 to $207 million on June 30, 1997.
The average weighted maturity was reduced during this first quarter of 1997 to
accommodate this move. The average weighted maturity changed from 45-55 to 55-65
days during the one-year period. The current maturity target for the CoreFund
Elite Cash Reserve is 65 to 70 days.
The portfolio structure continues to favor commercial paper as it offers the
best absolute value to the Fund. Other spread products, such as, floaters,
insurance funding agreements and corporate note also enhance the overall yield.
We continue to use a laddered approach and look for added value along the money
market yield curve.
<PAGE>
<PAGE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER - 57.4%
BANKING - 7.3%
Abbey National Bank (A)
5.770%, 07/01/97 ...................... $ 150 $ 148
Abm Amro North American Finance
5.479%, 07/09/97 ...................... 5,000 4,994
Cit Group Holdings
5.628%, 08/21/97 ...................... 5,000 4,961
Eureka Securitization
5.580%, 09/03/97 ...................... 5,000 4,950
---------
Total Banking 15,053
---------
FINANCIAL SERVICES - 23.8%
AI Credit
5.560%, 07/21/97 ...................... 5,000 4,985
Ameritech Capital Funding
5.799%, 12/08/97 ...................... 5,000 4,875
Asset Securitization Coop
5.715%, 07/10/97 ...................... 4,450 4,444
5.606%, 08/28/97 ...................... 5,000 4,955
Ciesco
5.679%, 08/12/97 ...................... 5,000 4,967
Merrill Lynch
5.494%, 07/01/97 ...................... 5,000 5,000
5.689%, 08/01/97 ...................... 5,000 4,976
Morgan Stanley
5.518%, 07/15/97 ...................... 5,000 4,989
5.610%, 09/12/97 ...................... 5,000 4,943
Pitney Bowes Credit
5.670%, 07/07/97 ...................... 5,000 4,995
---------
Total Financial Services 49,129
---------
INDUSTRIAL - 16.7%
Amoco
5.587%, 07/08/97 ...................... 5,000 4,995
5.500%, 08/13/97 ...................... 5,000 4,967
Ford Motor Credit
5.638%, 08/27/97 ...................... 5,000 4,956
5.640%, 12/03/97 ...................... 5,000 4,878
1
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
General Electric Capital
5.603%, 07/28/97 ...................... $5,000 $ 4,979
5.765%, 10/31/97 ...................... 5,000 4,905
Mobil Australia Finance
5.694%, 08/06/97 ...................... 5,000 4,972
--------
Total Industrial 34,652
--------
SOVEREIGNTIES - 9.6%
Province of British Columbia
5.655%, 07/16/97 ...................... 5,000 4,988
5.783%, 10/29/97 ...................... 5,000 4,906
Province of Quebec
5.667%, 07/03/97 ...................... 5,000 4,998
5.603%, 07/17/97 ...................... 5,000 4,988
--------
Total Sovereignties 19,880
--------
TOTAL COMMERCIAL PAPER
(Cost $118,714) ............................................ 118,714
- -----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.3%
FHLB
6.000%, 09/24/97 ...................... 5,000 5,006
5.260%, 12/10/97 (A) .................. 5,000 4,999
5.810%, 01/23/98 ...................... 5,000 5,000
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $15,005) ............................................. 15,005
- -----------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 2.8%
Capita Equipment Receivables Trust, Series 1996-1, Class A1
5.600%, 10/15/97 ...................... 869 869
Goldman Sachs Asset Backed Securities Investment Trust,
Series 1997-C, Class N (A)
5.688%, 07/16/97 ...................... 5,000 5,000
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $5,869) .............................................. 5,869
- -----------------------------------------------------------------------------
2
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 10.8%
FINANCIAL SERVICES - 3.5%
Abbey National Treasury Services (A)
5.650%, 04/15/98 ...................... $5,000 $ 4,998
Associates Corporation of North America
7.750%, 11/01/97 ...................... 2,200 2,215
--------
Total Financial Services 7,213
--------
INDUSTRIAL - 7.3%
E.I. duPont de Nemours
5.590%, 10/08/97 ...................... 5,000 5,000
8.650%, 12/01/97 ...................... 5,000 5,061
Toyota Motor Credit (A)
5.680%, 07/01/97 ...................... 5,000 5,000
--------
Total Industrial 15,061
--------
TOTAL CORPORATE OBLIGATIONS
(Cost $22,274) ............................................. 22,274
- -----------------------------------------------------------------------------
MASTER NOTES - 1.8%
FINANCIAL SERVICES - 1.8%
Associates Corporation of North America (A)
5.497%, 07/01/97 ...................... 3,647 3,647
SLMA (A)
5.220%, 07/01/97 ...................... 14 14
--------
Total Financial Services 3,661
--------
TOTAL MASTER NOTES
(Cost $3,661) .............................................. 3,661
- -----------------------------------------------------------------------------
TIME DEPOSITS - 8.2%
BANKING - 8.2%
Bank of Montreal
6.000%, 07/01/97 ...................... 5,000 5,000
First Union Bank
6.000%, 07/01/97 ...................... 2,000 2,000
Republic New York
6.000%, 07/01/97 ...................... 5,000 5,000
Sumitomo Bank
6.125%, 07/01/97 ...................... 5,000 5,000
--------
Total Banking 17,000
--------
3
<PAGE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost $17,000) .............................................. $ 17,000
- -----------------------------------------------------------------------------
INSURANCE FUNDING AGREEMENTS - 2.4%
FINANCIAL SERVICES - 2.4%
Allstate (A)
5.745%, 07/01/97 ...................... $5,000 5,000
--------
TOTAL INSURANCE FUNDING AGREEMENTS
(Cost $5,000) ............................................... 5,000
- -----------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 7.2% BANKING - 7.2% National Westminster Bank PLC
5.940%, 06/26/98 ...................... 5,000 4,997
Societe Generale
6.080%, 06/09/98 ...................... 5,000 4,998
Swiss Bank
6.020%, 06/12/98 ...................... 5,000 5,002
--------
Total Banking 14,997
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $14,997) .............................................. 14,997
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENT - 2.4%
Swiss Bank 5.95%, dated 06/30/97, matures
07/01/97, repurchase price $5,000,826 (collateralized by U.S. Treasury
Note, par value $5,025,000, 6.50%, 04/30/99;
market value $5,121,480) ................. 5,000 5,000
--------
TOTAL REPURCHASE AGREEMENT
(Cost $5,000) ............................................... 5,000
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.3%
(Cost $207,520) ................................................ 207,520
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.3%) ........................ (533)
- -----------------------------------------------------------------------------
4
<PAGE>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
VALUE
ELITE CASH RESERVE (000)
- ----------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 750 million authorized) based on
206,990,198 outstanding shares ................................. $206,990
Accumulated net realized loss on investments (3)
- -----------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ......................................... $206,987
- -----------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE .................... $1.00
- -----------------------------------------------------------------------------
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
PLC -- PUBLIC LIMITED COMPANY
SLMA -- STUDENT LOAN MARKETING ASSOCIATION
5
<PAGE>
STATEMENT OF OPERATIONS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the year ended June 30, 1997
ELITE CASH RESERVE+
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ................................................. $19,367
-------
EXPENSES:
Investment advisory fees .................................... 710
Less investment advisory fees waived ........................ (659)
Administrative fees ......................................... 888
Less administrative fees waived ............................. (521)
Transfer agent fees & expenses .............................. 57
Registration & filing fees .................................. 35
Printing .................................................... 32
Professional fees ........................................... 29
Directors fees .............................................. 10
Insurance ................................................... 4
Miscellaneous ............................................... 15
-------
Total expenses .................................................... 600
-------
NET INVESTMENT INCOME ............................................. 18,767
-------
NET REALIZED LOSS ON INVESTMENTS .................................. (3)
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $18,764
=======
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY RESERVE.
See accompanying notes to financial statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the years ended June 30
ELITE CASH RESERVE+
- --------------------------------------------------------------------------------
1997 1996
----------- --------
OPERATIONS:
Net investment income ................ $ 18,767 $ 21,639
Net realized loss on securities sold . (3) --
----------- --------
Net increase in net assets resulting
from operations ................... 18,764 21,639
----------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ................ (18,767) (21,639)
----------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued .......... 825,899 596,669
Cost of shares redeemed .............. (1,003,355) (618,820)
----------- --------
Decrease in net assets derived from
capital share transactions ........ (177,456) (22,151)
----------- --------
NET DECREASE IN NET ASSETS: ................ (177,459) (22,151)
NET ASSETS:
Beginning of period .................. 384,446 406,597
----------- --------
End of period ........................ 206,987 $384,446
=========== ========
SHARES ISSUED AND REDEEMED:
Shares issued ........................ 825,899 596,669
Shares redeemed ...................... (1,003,355) (618,820)
----------- --------
Decrease in net shares derived from
capital share transactions ........ (177,456) (22,151)
----------- --------
OUTSTANDING SHARES:
Beginning of period .................. 384,446 406,597
----------- --------
End of period ........................ 206,990 384,446
=========== ========
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY RESERVE.
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS COREFUND MONEY MARKET FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, 1997
ELITE CASH RESERVE+
- ------------------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIB-
BUTIONS RATIO RATIO OF
NET FROM NET NET RATIO OF EXPENSES NET INCOME
ASSET NET NET ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE INVEST- INVEST- VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING MENT MENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ------ ------ --------- ------ -------- ---------- ---------- -------- --------
For the year ended
June 30, 1997 $1.00 0.05 (0.05) $1.00 5.43% $206,987 0.17% 5.28% 0.50% 4.94%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.62% $384,446 0.15% 5.46% 0.76% 4.85%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.46% $406,597 0.17% 5.35% 0.81% 4.71%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.31% $382,814 0.16% 3.24% 0.84% 2.56%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.29% $424,363 0.17% 3.25% 0.81% 2.61%
For the year ended
June 30, 1992 $1.00 0.05 (0.05) $1.00 5.04% $416,945 0.18% 4.96% 0.83% 4.31%
For the year ended
June 30, 1991 $1.00 0.07 (0.07) $1.00 7.49% $453,947 0.15% 7.05% 0.80% 6.40%
For the period ended
June 30, 1990 (1) $1.00 0.08 (0.08) $1.00 8.03%* $232,091 0.13% 8.42% 0.83% 7.72%
- -----------------
</TABLE>
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE ELITE CASH RESERVE COMMENCED OPERATIONS AUGUST 7, 1989.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY RESERVE.
See accompanying notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
1. ORGANIZATION
The CoreFund Elite Cash Reserve is a Fund offered by CoreFunds, Inc. (the
"Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Treasury Reserve
International Growth Fund Elite Cash Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME FUNDS:
Short Term Income
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements included herein present only those of the Elite Cash
Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Cash Reserve.
SECURITY VALUATION -- Investment securities of the Elite Cash Reserve are stated
at amortized cost which approximates market value. Under this valuation method,
purchase discounts and premiums are accreted and amortized ratably to maturity
and are included in interest income.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Cash
Reserve. For the year ended June 30, 1997, CoreStates Advisers earned $710,442
in investment advisory fees, of which $659,442 was voluntarily waived in order
to assist the Fund in maintaining a competitive expense ratio.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, at
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resources ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Fund's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Cash Reserve. Such a fee is computed daily and
paid monthly. For the year ended June 30, 1997, administrative fees totaled
$887,885 of which $521,130 was voluntarily waived in order to assist the Fund in
maintaining a competitive expense ratio.
Pursuant to a transfer agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS") a subsidiary of State Street Bank and Trust
Company acts as the Fund's Transfer Agent. As such, BFDS provides transfer
agency, dividend disbursing, shareholder servicing and administrative services
for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
11
<PAGE>
NOTICE TO SHAREHOLDERS OF COREFUNDS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for
informational purposes only.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, the Elite Cash Reserve is
designating long-term capital gains, qualifying dividends and exempt income with
regard to distributions paid during the year as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(A)* (B)*
LONG TERM ORDINARY (C) (E)**
CAPITAL GAINS INCOME TOTAL (D)** TAX (F)**
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST TAX CREDIT
--------- ------------ ------------- ------------- ------------ -------- ----------
Elite Cash Reserve 0% 100% 100% 0% 0% 0%
</TABLE>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE FUNDS'
TOTAL DISTRIBUTION.
** ITEMS (D), (E) AND (F) ARE BASED ON A PERCENTAGE OF
ORDINARY INCOME DISTRIBUTIONS OF THE PORTFOLIO.
Please consult your tax department for proper treatment of this information.
12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statement of net assets of the CoreFund Elite
Cash Reserve of CoreFunds, Inc. (the "Fund") as of June 30, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the years
presented herein. 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
audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 verification by examination of securities held by the
custodian as of June 30, 1997 and confirmation of securities not held by the
custodian by correspondence with 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
audit provides 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 the
Fund at June 30, 1997, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for each of the years
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997 /S/Ernst & Young LLP
13
<PAGE>
<PAGE>
<PAGE>
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Corporation. The report is not
authorized for distribution to prospective investors in the Corporation unless
preceded or accompanied by an effective prospectus. Shares in the Fund are not
deposits or obligations of, or guaranteed or endorsed by, CoreStates Bank, N.A.,
the parent corporation of the Fund's investment adviser. Such shares are also
not federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
COR-F-056-02
<PAGE>
CoreFunds, Inc.
--------------
ELITE TREASURY RESERVE
ANNUAL REPORT
June 30, 1997
<PAGE>
<PAGE>
INVESTMENT ADVISER'S REPORT
COREFUND ELITE TREASURY RESERVE
JUNE 30, 1997
The CoreFund Elite Treasury Reserve returned 5.33% net of expenses for the
one-year period ended June 30, 1997. The Fund's assets decreased in size by
11.4% during the period from $24.5 million on June 30, 1996 to $21.7 million on
June 30, 1997. The average weighted maturity of the Fund increased from 58 to 63
days during the one-year period. The Fund significantly outperformed its
benchmark index, the IBC/Donoghue U.S. Treasury and Repo Average, which returned
4.78% for the same period.
<PAGE>
<PAGE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
<TABLE>
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 35.7%
U.S. Treasury Bills+
5.901%, 08/21/97 .......................................................... $ 500 $ 496
5.589%, 10/16/97 .......................................................... 500 492
5.508%, 11/13/97 .......................................................... 500 490
5.564%, 11/13/97 .......................................................... 500 490
5.648%, 03/05/98 .......................................................... 500 481
5.806%, 04/02/98 .......................................................... 500 479
5.796%, 04/30/98 .......................................................... 500 477
5.587%, 05/28/98 .......................................................... 500 476
U.S. Treasury Notes
5.500%, 07/31/97 .......................................................... 400 400
5.750%, 10/31/97 .......................................................... 500 500
5.250%, 12/31/97 .......................................................... 500 499
5.625%, 01/31/98 .......................................................... 900 900
U.S. Treasury STRIPS+
5.400%, 08/15/97 .......................................................... 500 497
5.684%, 11/15/97 .......................................................... 700 686
5.725%, 05/15/98 .......................................................... 400 381
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,744) .................................................................................... 7,744
- -------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 64.7%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price
$5,000,819 (collateralized by U.S. Treasury Note, par value $5,020,000,
6.00%, 09/30/98;
market value $5,100,320) ..................................................... 5,000 5,000
First National Bank of Chicago 5.95%, dated 06/30/97, matures 07/01/97,
repurchase price $1,007,166 (collateralized by U.S. Treasury Note, par
value $1,035,000,
5.75%, 10/31/00; market value $1,030,550) .................................... 1,007 1,007
Goldman Sachs 5.80%, dated 06/30/97, matures 07/01/97,
repurchase price $900,145 (collateralized by U.S. Treasury
Note, par value $865,000, 9.125%, 05/15/99;
market value $921,484) ....................................................... 900 900
Hong Kong Shanghai Bank 5.80%, dated 06/30/97, matures 07/01/97, repurchase
price $600,097 (collateralized by U.S. Treasury Note, par value $585,000,
7.25%, 05/15/04;
market value $617,643) ....................................................... 600 600
</TABLE>
1
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch 5.60%, dated 06/30/97, matures 07/01/97, repurchase price
$900,140 (collateralized by U.S. Treasury Note, par value $910,000,
6.125%, 05/15/98;
market value $919,646) ...................................................... $ 900 $ 900
Sanwa Bank 5.85%, dated 06/30/97, matures 07/01/97,
repurchase price $5,000,813 (collateralized by U.S.
Treasury Note, par value $4,985,000, 6.125%, 08/31/98;
market value $5,100,154) .................................................... 5,000 5,000
Swiss Bank 5.875%, dated 06/30/97, matures 07/01/97,
repurchase price $600,098 (collateralized by U.S. Treasury
Note, par value $625,000, 5.625%, 11/30/00;
market value $616,438) ...................................................... 600 600
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $14,007) .................................................................................. 14,007
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.4%
(Cost $21,751) ..................................................................................... 21,751
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.4%) ............................................................ (84)
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 250 million authorized shares)
based on 21,666,504 outstanding shares ............................................................. 21,667
- -------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ............................................................................. $21,667
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ........................................................ $1.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
+ EFFECTIVE YIELD
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
See accompanying notes to financial statements.
2
<PAGE>
STATEMENT OF OPERATIONS (000) COREFUND MONEY MARKET FUNDS
- ----------------------------------------------------------------------
For the year ended June 30, 1997
ELITE TREASURY RESERVE+
- ----------------------------------------------------------------------
NVESTMENT INCOME:
Interest ........................................... $1,392
------
EXPENSES:
Investment advisory fees .............................. 52
Less investment advisory fees waived .................. (47)
Administrative fees ................................... 64
Less administrative fees waived ....................... (39)
Transfer agent fees & expenses ........................ 18
Professional fees ..................................... 2
Registration & filing fees ............................ (9)
Printing .............................................. 4
------
Total expenses .............................................. 45
------
NET INVESTMENT INCOME ....................................... 1,347
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $1,347
======
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
See accompanying notes to financial statements.
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the years ended June 30
ELITE TREASURY RESERVE+
- --------------------------------------------------------------------------------
1997 1996
---- ----
OPERATIONS:
Net investment income ................. $ 1,347 $ 1,112
--------- ---------
Net increase in net assets resulting
from operations .................... 1,347 1,112
--------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ................. (1,347) (1,112)
--------- ---------
Total dividends distributed ........... (1,347) (1,112)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ........... 40,896 26,668
Cost of shares redeemed ............... (43,727) (20,565)
--------- ---------
Increase (decrease) in net assets derived from
capital share transactions ......... (2,831) 6,103
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ....... (2,831) 6,102
NET ASSETS:
Beginning of period ................... 24,498 18,396
--------- ---------
End of period ......................... $21,667 $ 24,498
========= =========
SHARES ISSUED AND REDEEMED:
Shares issued ......................... 40,896 26,668
Shares redeemed ....................... (43,727) (20,565)
--------- ---------
Increase (decrease) in net shares derived from
capital share transactions ......... (2,831) 6,103
--------- ---------
OUTSTANDING SHARES:
Beginning of period ................... 24,498 18,395
--------- ---------
End of period ......................... 21,667 24,498
========= =========
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS COREFUND MONEY MARKET FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, 1997
ELITE TREASURY RESERVE+
- ------------------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO RATIO
NET DISTRIBUTIONS NET NET RATIO OF EXPENSES NET INCOME
ASSET NET FROM NET ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE INVEST- INVEST- VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING MENT MENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ------ ------ --------- ------ --------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended
June 30, 1997 $1.00 0.05 (0.05) $1.00 5.33% $21,667 0.17% 5.20% 0.50% 4.87%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.54% $24,498 0.19% 5.39% 0.80% 4.78%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.24% $18,396 0.23% 5.09% 0.87% 4.45%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.10% $20,363 0.28% 3.03% 0.91% 2.40%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.17% $27,614 0.18% 3.19% 0.85% 2.52%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 2.00%* $49,328 0.05% 3.95% 0.80% 3.20%
</TABLE>
- --------------------------------------------------------------------------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE ELITE TREASURY RESERVE COMMENCED OPERATIONS ON DECEMBER 10, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
See accompanying notes to financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
1. ORGANIZATION
The CoreFund Elite Treasury Reserve is a Fund offered by CoreFunds, Inc. (the
"Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Treasury Reserve
International Growth Fund Elite Cash Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME FUNDS:
Short Term Income Fund
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements included herein present only those of the Elite
Treasury Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Treasury Reserve.
SECURITY VALUATION -- Investment securities of the Elite Treasury Reserve are
stated at amortized cost which approximates market value. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by each Fund's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of the collateral
by the Fund may be delayed or limited.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Treasury
Reserve. For the year ended June 30, 1997, CoreStates Advisers earned $51,711 in
investment advisory fees, of which $46,509 was voluntarily waived in order to
assist the Fund in maintaining a competitive expense ratio.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, at
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds'
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
Board approval and at the expense of the Funds, employ sub-custodians on behalf
of the Funds who invest in foreign countries provided that CoreStates Bank shall
remain liable for the performance of all of its duties under the Custodian
Agreement.
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resource ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Fund's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Treasury Reserve. Such a fee is computed daily and
paid monthly. For the year ended June 30, 1997, administrative fees totaled
$64,633 of which $38,795 was voluntarily waived in order to assist the Fund in
maintaining a competitive expense ratio.
Pursuant to a transfer agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS") a subsidiary of State Street Bank and Trust
Company acts as the Fund's Transfer Agent. As such, BFDS provides transfer
agency, dividend disbursing, and shareholder servicing for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
8
<PAGE>
NOTICE TO SHAREHOLDERS OF COREFUNDS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for
informational purposes only.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, the Elite Treasury Reserve Fund
is designating long-term capital gains, qualifying dividends and exempt income
with regard to distributions paid during the year as follows:
<TABLE>
(A)* (B)*
LONG TERM ORDINARY (C) (E)**
CAPITAL GAINS INCOME TOTAL (D)** TAX (F)**
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST TAX CREDIT
------------ ------------ ------------ ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Elite Treasury Reserve 0% 100% 100% 0% 0% 0%
</TABLE>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE
PORTFOLIOS' TOTAL DISTRIBUTION.
** ITEMS (D), (E) AND (F) ARE BASED ON A
PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS OF THE PORTFOLIO.
Please consult your tax department for proper treatment of this information.
9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statement of net assets of the CoreFund Elite
Treasury Reserve of CoreFunds, Inc. (the "Fund") as of June 30, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the years
presented herein. 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
audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 verification by examination of securities held by the
custodian as of June 30, 1997 and confirmation of securities not held by the
custodian by correspondence with 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
audit provides 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 the
Fund at June 30, 1997, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for each of the years
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997 /S/ERNST & YOUNG LLP
10
<PAGE>
NOTES
<PAGE>
<PAGE>
<PAGE>
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Corporation. The report is not
authorized for distribution to prospective investors in the Corporation unless
preceded or accompanied by an effective prospectus. Shares in the Fund are not
deposits or obligations of, or guaranteed or endorsed by, CoreStates Bank, N.A.,
the parent corporation of the Fund's investment adviser. Such shares are also
not federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
COR-F-057-02
<PAGE>
CoreFunds,Inc.
-------------
ELITE TAX-FREE RESERVE
ANNUAL REPORT
June 30, 1997
<PAGE>
<PAGE>
INVESTMENT ADVISER'S REPORT
COREFUND ELITE TAX-FREE RESERVE
JUNE 30, 1997
The CoreFund Elite Tax-Free Reserve returned 3.42% for the one-year period ended
June 30, 1997. This compared with a return of 3.03% for the Benchmark Index, the
IBC/Donoghue Tax Free Average, for the same period. The Fund grew by 70.3%
during the period from $86.5 million on June 30, 1996 to $147.3 million on June
30, 1997.
The average weighed maturity of the Tax-Free Reserve was 41 days during the
year. And, the Fund's one year effective yield was 3.42%, as the Fund
outperformed its benchmark.
During the first six months of this period we experienced normal patterns in the
tax-free money market securities market. The market is driven by seasonality in
terms of the amount of cash in the market. Typically during January, June, and
July, yields fall due to an abundance of cash in the market. However, in January
of 1997, a new pattern emerged as a strong decline in prerefunded bonds took
cash out of the market. As a result, supply was adequate and yields were
fabulous.
Throughout the first half of 1997, conditions have remained positive for the
Fund. For a few days in June, the tax-exempt rate was equal to the taxable rate.
We're seeing changes to the fundamentals of the market that are resulting in
higher yields. And, the trend should continue. It appears that supply should
remain strong and, with more availability comes higher yields.
Our strategy will remain steady as we keep the average maturity of the Fund
between 40 and 60 days. We will extend out on the yield curve when we see an
issue of high value. We will also continue to utilize commercial paper and
smaller note deals as appropriate. Our challenge will be to research and
identify new cash flow patterns and take advantage of them in the coming months.
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS - 101.4%
ALABAMA - 3.9%
Montgomery, Alabama TECP
3.500%, 08/13/97 ........................................................... $2,000 $ 2,000
North Alabama Environmental Improvement Authority Revenue
Bond for Reynold Metals Project (A) (B) (C)
4.100%, 07/01/97 ........................................................... 1,300 1,300
Winfield, Alabama Industrial Development Authority Revenue
Bond for Union Underwear Project (A) (B) (C)
4.000%, 12/01/97 ........................................................... 2,400 2,400
--------
Total Alabama 5,700
--------
ALASKA - 2.1%
Valdez, Alaska TECP
3.650%, 08/08/97 ........................................................... 3,075 3,075
--------
ARIZONA - 1.9%
Arizona Agriculture Improvement and Power District Electric
Revenue Bond for Salt River Project, Series E
Pre-Refunded @ 100 (D)
8.250%, 01/01/98 ........................................................... 2,710 2,773
--------
CALIFORNIA - 1.5%
Sonoma County, California TRAN
4.500%, 01/29/98 ........................................................... 2,200 2,212
--------
COLORADO - 1.0%
Moffat County, Colorado Pollution Control Revenue Bond (A) (B)
4.200%, 07/01/97 ........................................................... 1,400 1,400
--------
DELAWARE - 0.7%
Wilmington, Delaware Franciscan Health System Hospital
Revenue Bond (A) (B)
4.100%, 07/01/97 ........................................................... 400 400
Wilmington, Delaware Hospital Revenue Bond for Franciscan
Health Systems Project, Series A (A) (B) (C)
4.100%, 07/01/97 ........................................................... 700 700
--------
Total Delaware 1,100
--------
</TABLE>
1
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
<S> <C> <C>
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
FLORIDA - 3.7%
Dade County, Florida Fixed Capital Asset Acquisition Revenue
Bond, Series 1990 (A) (B) (C)
4.450%, 07/01/97 ........................................................... $1,200 $ 1,200
Florida State Housing Finance Agency Revenue Bond for Carlton
Project, Series EEE (A) (B) (C)
4.200%, 07/01/97 ........................................................... 1,020 1,020
Florida State Housing Finance Agency Revenue Bond for
Huntington Project (A) (B) (C)
4.300%, 07/01/97 ........................................................... 200 200
Jacksonville, Florida Hospital Revenue Bond for Methodist
Hospital Project Pre-Refunded @ 102 (D)
10.500%, 10/01/97 .......................................................... 2,000 2,073
Sunshine State, Florida TECP
3.700%, 08/12/97 ........................................................... 1,000 1,000
--------
Total Florida 5,493
--------
GEORGIA - 0.9%
Georgia Municipal Electric Authority Revenue Bond,
Series B Pre-Refunded @ 102 (A) (B) (D)
8.000%, 01/01/98 ........................................................... 1,000 1,041
Hapeville, Georgia Industrial Development Authority
Revenue Bond for Hapeville Hotel Project (A) (B) (C)
4.150%, 07/01/97 ........................................................... 300 300
--------
Total Georgia 1,341
--------
ILLINOIS - 3.3%
Chicago, Illinois Equipment Notes
3.600%, 12/04/97 ........................................................... 2,500 2,500
Chicago, Illinois O'Hare Airport Revenue Bond (A) (B) (C)
4.200%, 07/01/97 ........................................................... 300 300
Illinois Development Financial Authority Pollution Control
Revenue Bond for Amoco Oil Company Project (A) (B)
4.000%, 07/01/97 ........................................................... 600 600
Illinois State Toll Highway Authority Revenue Bond,
Series B MBIA (A) (B)
4.150%, 07/01/97 ........................................................... 1,400 1,400
--------
Total Illinois 4,800
--------
</TABLE>
2
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
<S> <C> <C>
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
INDIANA - 4.6%
Gary, Indiana Environmental Improvement Revenue Bond for
U.S. Steel Project (A) (B) (C)
4.100%, 07/15/97 ........................................................... $ 700 $ 700
MT Vernon, Indiana TECP
3.450%, 07/16/97 ........................................................... 735 735
Sullivan, Indiana TECP
3.950%, 07/02/97 ........................................................... 1,950 1,950
3.500%, 07/16/97 ........................................................... 1,300 1,300
3.550%, 09/09/97 ........................................................... 1,000 1,000
3.800%, 09/19/97 ........................................................... 1,050 1,050
--------
Total Indiana 6,735
--------
KANSAS - 2.1%
Burlington, Kansas TECP
3.800%, 07/18/97 ........................................................... 1,500 1,500
3.800%, 08/14/97 ........................................................... 1,200 1,200
Kansas City, Kansas Industrial Development Revenue Bond
for PQ Corporation Project (A) (B) (C)
4.200%, 07/01/97 ........................................................... 100 100
Wichita, Kansas Health Facilities Revenue Bond for Wichita
Health Systems Project, Series XXV (A) (B) (C)
4.350%, 07/02/97 ........................................................... 300 300
--------
Total Kansas 3,100
--------
KENTUCKY - 2.0%
Pendelton, Kentucky TECP
3.750%, 07/22/97 ........................................................... 3,000 3,000
--------
LOUISIANA - 1.1%
Louisiana State Public Facilities Authority Revenue Bond for
Kenner Hotel Project (A) (B) (C)
4.150%, 07/01/97 ........................................................... 600 600
Louisiana State Recovery District Sales Tax Revenue Bond FGIC
3.900%, 07/01/97 ........................................................... 1,000 1,000
--------
Total Louisiana 1,600
--------
</TABLE>
3
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
<S> <C> <C>
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- --------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 0.9%
Massachusetts State GO Series B, (A) (B) (C)
4.000%, 12/01/97 ........................................................... $ 350 $ 350
Massachusetts State Health and Educational Facilities Lahey
Clinic Project, Series A 1 Pre-Refunded
07/01/98 @ 102 MBIA
7.625%, 07/01/98 ........................................................... 950 1,003
--------
Total Massachusetts 1,353
--------
MICHIGAN - 1.8%
Cornell Township, Michigan Economic Development
Corporation Revenue Bond for Environmental
Improvement (A) (B) (C)
4.000%, 07/01/97 ........................................................... 1,900 1,900
Delta County, Michigan Environmental Improvement Revenue
Bond for Mead Escambia Paper Project, Series C (A) (B) (C)
4.100%, 07/01/97 ........................................................... 600 600
Michigan State Strategic Fund Pollution Control Revenue Bond
for Consumer Power Project (A) (B) (C)
4.050%, 07/01/97 ........................................................... 100 100
--------
Total Michigan 2,600
--------
MISSISSIPPI - 1.6%
Claiborne County, Mississippi TECP
3.700%, 07/25/97 ........................................................... 1,000 1,000
Jackson County, Port Facility Revenue Bond for Mississippi
Chevron USA Project, Series A AMBAC (A) (B) (C)
4.000%, 07/01/97 ........................................................... 1,400 1,400
--------
Total Mississippi 2,400
--------
MISSOURI - 2.1%
Claireborne, Missouri TECP
3.800%, 07/18/97 ........................................................... 800 800
Missouri State Health and Educational Facilities Authority
Revenue Bond for Washington University, Series A (A) (B)
4.100%, 07/01/97 ........................................................... 2,300 2,300
--------
Total Missouri 3,100
--------
</TABLE>
4
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MONTANA - 2.0%
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project (A) (B) (C)
4.150%, 07/01/97 ........................................................... $1,000 $ 1,000
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project, Series A (A) (B) (C)
4.150%, 07/01/97 ........................................................... 2,000 2,000
--------
Total Montana 3,000
--------
NEVADA - 3.5%
Clark County, Nevada Industrial Development
Revenue Bond Series C (A) (B)
4.200%, 07/01/97 ........................................................... 3,000 3,000
Nevada State Housing Authority Revenue Bond for Multi-
Unit Park Project, Series A (A) (B) (C)
4.250%, 07/01/97 ........................................................... 2,200 2,200
--------
Total Nevada 5,200
--------
NEW HAMPSHIRE - 0.4%
New Hampshire State Industrial Development Revenue Bond
for Oerlikon-Burlhe Project (A) (B) (C)
3.800%, 07/01/97 ........................................................... 600 600
--------
NEW YORK - 4.6%
New York City, New York GO (A) (B) (C)
5.500%, 07/01/97 ........................................................... 2,400 2,400
New York State Urban Development Corporate Revenue Bond
for Correctional Facilities Project Series C,
Pre-Refunded @ 102 AMBAC (D)
7.625%, 01/01/98 ........................................................... 1,175 1,220
New York State Energy Research and Development Authority
Pollution Control Revenue Bond (A) (B) (C)
3.600%, 12/01/97 ........................................................... 1,500 1,500
New York State Energy Research and Development Authority
Pollution Control Revenue Bond for Niagara Mohawk
Power Project Series A (A) (B)
5.450%, 07/01/97 ........................................................... 400 400
New York, New York General Obligation Series C (A) (B) (C)
5.500%, 07/01/97 ........................................................... 1,300 1,300
--------
Total New York 6,820
--------
</TABLE>
5
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA - 4.0%
Lexington, North Carolina Medical Care Community Hospital
Revenue Bond for Memorial Hospital Project (A) (B)
4.200%, 07/01/97 ........................................................... $5,900 $ 5,900
--------
OHIO - 2.0%
Evandale, Ohio Industrial Development Authority
Revenue Bond (A) (B) (C)
3.900%, 07/01/97 ........................................................... 1,600 1,600
Ohio State Air Quality Revenue Bond (A) (B) (C)
4.000%, 07/01/97 ........................................................... 100 100
Ohio State Air Quality Revenue Bond, Series B (A) (B) (C)
5.500%, 07/01/97 ........................................................... 1,300 1,300
--------
Total Ohio 3,000
--------
OREGON - 3.5%
Port of Portland, Oregon Pollution Control Revenue Bond
for Reynold Metals Project (A) (B) (C)
4.100%, 07/01/97 ........................................................... 1,800 1,800
Port of St. Helens, Oregon Pollution Control
Revenue Bond (A) (B) (C)
4.050%, 07/01/97 ........................................................... 2,800 2,800
Umatilla County, Oregon Franciscan Health System
Revenue Bond, Series A (A) (B) (C)
4.100%, 07/01/97 ........................................................... 300 300
Umatilla County, Oregon Franciscan Health System
Revenue Bond, Series B (A) (B) (C)
4.100%, 07/01/97 ........................................................... 200 200
--------
Total Oregon 5,100
--------
PENNSYLVANIA - 19.6%
Allegheny County, Pennsylvania Revenue Bond for
Presbyterian University Hospital (A) (B)
4.200%, 07/01/97 ........................................................... 5,115 5,115
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series A (A) (B) (C)
4.050%, 07/01/97 ........................................................... 1,000 1,000
</TABLE>
6
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series B (A) (B) (C)
4.050%, 07/01/97 ........................................................... $1,100 $1,100
Curwensville, School District TRAN
4.160%, 06/30/98 ........................................................... 840 841
Langhorne, Pennsylvania Saint Mary Hospital Authority Revenue
Bond for Franciscan Health Systems Project, Series C (A) (B)
4.000%, 07/01/97 ........................................................... 1,100 1,100
Langhorne, Pennsylvania Saint Mary Hospital Authority Revenue
Bond for Franciscan Health Systems, Series C (A) (B)
4.000%, 07/01/97 ........................................................... 600 600
Lehigh County, Pennsylvania Industrial Development Authority
Revenue Bond for Allegheny Electric Project, Series A (A) (B) (C)
4.000%, 07/01/97 ........................................................... 500 500
Montgomery County, Pennsylvania Series B GO
3.600%, 10/15/97 ........................................................... 315 315
North Penn, Pennsylvania School District GO
3.750%, 09/01/97 ........................................................... 1,615 1,615
Parkland School District, Pennsylvania GO (C)
4.000%, 09/01/97 ........................................................... 380 380
Pennsylvania State Higher Education Facilities Authority Revenue
Bond for Carnegie Mellon University Project, Series B (A) (B)
4.150%, 07/01/97 ........................................................... 800 800
Pennsylvania State Higher Educational Facilities Authority Revenue
Bond for Carnegie Mellon University Project, Series A (A) (B)
4.150%, 07/01/97 ........................................................... 1,500 1,500
Pennsylvania State University Revenue Bond, Series A
4.500%, 11/25/97 ........................................................... 1,750 1,756
Souderton, Pennsylvania Area School District Bond GO FGIC
3.750%, 09/01/97 ........................................................... 1,095 1,095
Temple University, Pennsylvania Commonwealth
System of Higher Education GO
4.750%, 05/18/98 ........................................................... 1,000 1,007
Upper Darby, School District TRAN
4.170%, 06/30/98 ........................................................... 1,756 1,759
</TABLE>
7
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Washington County, Pennsylvania Industrial Development
Authority Revenue Bond for Werrerau
Finance Company Project (A) (B) (C)
4.250%, 07/01/97 ........................................................... $2,500 $ 2,500
Washington County, Pennsylvania Lease Revenue Bond (A) (B) (C)
4.200%, 07/01/97 ........................................................... 1,500 1,500
York, Pennsylvania General Authority
Pooled Revenue Bond (A) (B) (C)
4.150%, 07/01/97 ........................................................... 4,350 4,350
--------
Total Pennsylvania 28,833
--------
PUERTO RICO - 1.2%
Puerto Rico Commonwealth TRAN, Series A
4.000%, 07/30/97 ........................................................... 1,800 1,801
--------
TEXAS - 9.6%
Grapevine, Texas Industrial Development Authority Revenue Bond
for American Airlines Project, Series B4 (A) (B) (C)
4.100%, 07/01/97 ........................................................... 100 100
Grapevine, Texas Industrial Development Corporation Revenue
Bond for American Airlines Project, Series B2 (A) (B)
4.100%, 07/01/97 ........................................................... 200 200
North Central, Texas Health Facility Development Corporation
Revenue Bond MBIA (A) (B)
4.100%, 07/01/97 ........................................................... 200 200
Nueces County, Texas Health Facilities Authority Revenue Bond
for Driscoll Children's Foundation Project (A) (B) (C)
4.200%, 07/01/97 ........................................................... 600 600
Port Corpus Christi Texas Industrial Development Corporation
Revenue Bond, Series A (A) (B) (C)
4.200%, 07/01/97 ........................................................... 2,000 2,000
Tarrant County, Texas Housing Finance Authority Revenue
Bond for Windcastle Project (A) (B) (C)
4.300%, 07/01/97 ........................................................... 1,034 1,034
Texas State Southwest, Texas Higher Education Authority
Revenue Bond for Southern Methodist University (A) (B) (C)
4.100%, 07/01/97 ........................................................... 5,000 5,000
Texas State TAN
4.750%, 08/29/97 ........................................................... 5,000 5,006
--------
Total Texas 14,140
--------
</TABLE>
8
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VERMONT - 0.8%
Vermont State Student Loan Revenue Bond, Student Loan
Assistance Corporation Project (A) (B) (C)
3.800%, 07/01/97 ........................................................... $1,240 $ 1,240
--------
VIRGINIA - 5.3%
Virginia State Housing Revenue Bond
3.800%, 06/10/98 ........................................................... 3,000 3,000
Virginia State Peninsula Port Authority Revenue Bond for
Dominion Terminal Project, Series 1987C (A) (B) (C)
4.000%, 07/01/97 ........................................................... 2,005 2,005
Virginia State Peninsula Port Authority Revenue Bond for
Dominion Terminal Project, Series D (A) (B)
4.100%, 07/01/97 ........................................................... 2,100 2,100
Waynesboro, Virginia Residential Care Facilities
Revenue Bond (A) (B)
4.200%, 07/01/97 ........................................................... 775 775
--------
Total Virginia 7,880
--------
WEST VIRGINIA - 0.9%
Putnam County, West Virginia Industrial Development
Authority Revenue Bond for FMC
Corporation Project (A) (B) (C)
3.800%, 07/01/97 ........................................................... 1,300 1,300
--------
WYOMING - 8.8%
Gillette County, Wyoming TECP
3.650%, 07/07/97 ........................................................... 3,000 3,000
3.800%, 07/11/97 ........................................................... 1,200 1,200
3.800%, 09/10/97 ........................................................... 1,400 1,400
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project (A) (B)
4.000%, 07/01/97 ........................................................... 4,200 4,200
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project, Series D (A) (B)
4.100%, 07/01/97 ........................................................... 1,800 1,800
Lincoln County, Wyoming Resource Recovery Revenue Bond
for Exxon Project, Series C (A) (B) (C)
4.100%, 07/01/97 ........................................................... 300 300
Platte County, Wyoming Pollution Control
Revenue Bond, Series A (A) (B) (C)
4.200%, 07/01/97 ........................................................... 900 900
</TABLE>
9
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Platte County, Wyoming Pollution Control
Revenue Bond, Series B (A) (B) (C)
4.200%, 07/01/97 ........................................................... $100 $ 100
--------
Total Wyoming 12,900
--------
TOTAL MUNICIPAL BONDS
(Cost $149,496) ................................................................................ 149,496
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.4%
(Cost $149,496) ................................................................................... 149,496
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (1.4%) ........................................................... (2,185)
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 250 million authorized) based
on 147,340,849 outstanding shares ................................................................. 147,341
Accumulated net realized loss on investments ......................................................... (30)
- -------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ............................................................................ $147,311
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ....................................................... $1.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- FIANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
TECP -- TAX-EXEMPT COMMERCIAL PAPER
TAN -- TAX ANTICIPATION NOTES
TRAN -- TAX AND REVENUE ANTICIPATION NOTES
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSER OF THE
PUT DEMAND DATE OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK.
(D) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
See accompanying notes to financial statements.
10
<PAGE>
STATEMENT OF OPERATIONS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the year ended June 30, 1997
ELITE TAX-FREE RESERVE+
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ................................................... $3,966
------
EXPENSES:
Investment advisory fees ...................................... 222
Less investment advisory fees waived .......................... (196)
Administrative fees ........................................... 278
Less administrative fees waived ............................... (169)
Registration & filing fees .................................... 24
Printing ...................................................... 11
Taxes - other than income ..................................... 7
Professional fees ............................................. 6
Directors fees ................................................ 3
Transfer agent fees & expenses ................................ 2
Miscellaneous ................................................. 4
------
Total expenses ...................................................... 192
------
NET INVESTMENT INCOME ............................................... 3,774
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $3,774
======
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
See accompanying notes to financial statements.
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the years ended June 30
ELITE TAX-FREE RESERVE+
- --------------------------------------------------------------------------------
1997 1996
---------- --------
OPERATIONS:
Net investment income .................. $ 3,774 $ 3,012
Net realized loss on securities sold ... -- (5)
---------- ---------
Net increase in net assets resulting
from operations ..................... 3,774 3,007
---------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income .................. (3,774) (3,012)
Net realized gains ..................... -- --
---------- ---------
Total dividends distributed ............ (3,774) (3,012)
---------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ............ 226,783 224,591
Cost of shares redeemed ................ (165,949) (210,702)
---------- ---------
Increase in net assets derived from
capital share transactions .......... 60,834 13,889
---------- ---------
NET INCREASE IN NET ASSETS ................... 60,834 13,884
NET ASSETS:
Beginning of period .................... 86,477 72,593
---------- ---------
End of period .......................... $147,311 $ 86,477
========== ---------
SHARES ISSUED AND REDEEMED:
Shares issued .......................... 226,783 224,591
Shares redeemed ........................ (165,949) (210,702)
---------- ---------
Increase in net shares derived from
capital share transactions .......... 60,834 13,889
---------- ---------
OUTSTANDING SHARES:
Beginning of period .................... 86,507 72,618
---------- ---------
End of period .......................... 147,341 86,507
========== =========
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
See accompanying notes to financial statements.
12
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS COREFUND MONEY MARKET FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, 1997
ELITE TAX-FREE RESERVE+
- ------------------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO RATIO
NET NET NET RATIO OF EXPENSES NET INCOME
ASSET DISTRIBUTIONS ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- --------- ------ --------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended
June 30, 1997 $1.00 0.03 (0.03) $1.00 3.42% $147,311 0.17% 3.39% 0.50% 3.06%
For the year ended
June 30, 1996 $1.00 0.03 (0.03) $1.00 3.51% $ 86,477 0.16% 3.44% 0.76% 2.84%
For the year ended
June 30, 1995 $1.00 0.03 (0.03) $1.00 3.41% $ 72,593 0.19% 3.37% 0.83% 2.73%
For the year ended
June 30, 1994 $1.00 0.02 (0.02) $1.00 2.32% $ 78,219 0.17% 2.29% 0.82% 1.64%
For the year ended
June 30, 1993 $1.00 0.02 (0.02) $1.00 2.48% $ 48,424 0.19% 2.45% 0.83% 1.81%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 1.50%* $66,158 0.17% 3.00% 0.89% 2.28%
- ---------------------
</TABLE>
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE ELITE TAX-FREE RESERVE COMMENCED OPERATIONS ON NOVEMBER 19, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
See accompanying notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
1. ORGANIZATION
The CoreFund Elite Tax-Free Reserve is a Fund offered by CoreFunds, Inc. (the
"Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Treasury Reserve
International Growth Fund Elite Cash Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME FUNDS:
Short Term Income Fund
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements included herein present only those of the Elite
Tax-Free Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Tax-Free Reserve.
SECURITY VALUATION -- Investment securities of the Elite Tax-Free Reserve are
stated at amortized cost which approximates market value. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
and amortization of the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Tax-Free
Reserve. For the year ended June 30, 1997, CoreStates Advisers earned $222,334
in investment advisory fees, of which $196,321 was voluntarily waived in order
to assist the Portfolio in maintaining a competitive expense ratio.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, at
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resources ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Fund's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Tax-Free Reserve. Such a fee is computed daily and
paid monthly. For the year ended June 30, 1997, administrative fees totaled
$277,939 of which $168,848 was voluntarily waived in order to assist the Fund in
maintaining a competitive expense ratio.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
Pursuant to a transfer agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS") a subsidiary of State Street Bank and Trust
Company acts as the Fund's Transfer Agent. As such, BFDS provides transfer
agency, dividend disbursing, and shareholder servicing for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
5. INVESTMENT COMPOSITION
The Fund invests in securities which include revenue and general obligation
instruments.
At June 30,1997, the revenue sources by purpose were as follows:
% OF PORTFOLIO
INVESTMENTS
--------------
REVENUE INSTRUMENTS
Education Bonds ....................... 10%
Hospital & Health Care Bonds .......... 12
Housing Bonds ......................... 5
Industrial Bonds ...................... 10
Other Bonds ........................... 11
Pollution Control Bonds ............... 12
Transportation Bonds .................. 4
Utility Bonds ......................... 3
TAX EXEMPT COMMERCIAL PAPER .................... 17
GENERAL OBLIGATIONS ............................ 6
TAX & REVENUE ANTICIPATION NOTES ............... 10
----
100%
====
In addition, certain investments are covered by insurance issued by several
private issuers who guarantee the payment of interest and principal at final
maturity in the event of default. Such insurance, however, does not guarantee
the market value of the securities or the value of the Fund's shares.
16
<PAGE>
NOTICE TO SHAREHOLDERS OF COREFUNDS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for
informational purposes only.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, the Elite Tax-Free Reserve Fund
is designating long-term capital gains, qualifying dividends and exempt income
with regard to distributions paid during the year as follows:
<TABLE>
(A)* (B)*
LONG TERM ORDINARY (C) (E)**
CAPITAL GAINS INCOME TOTAL (D)** TAX (F)**
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST TAX CREDIT
------------ ------------ ------------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Elite Tax-Free Reserve 0% 100% 100% 0% 100% 0%
</TABLE>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE
PORTFOLIOS' TOTAL DISTRIBUTION.
** ITEMS (D), (E) AND (F) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME
DISTRIBUTIONS OF THE PORTFOLIO.
Please consult your tax department for proper treatment of this information.
17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statement of net assets of the CoreFund Elite
Tax-Free Reserve of CoreFunds, Inc. (the "Fund") as of June 30, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the years
presented herein. 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
audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 verification by examination of securities held by the
custodian as of June 30, 1997 and confirmation of securities not held by the
custodian by correspondence with 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
audit provides 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 the
Fund at June 30, 1997, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for each of the years
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997 /S/Ernst & Young LLP
18
<PAGE>
NOTES
<PAGE>
<PAGE>
<PAGE>
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Corporation. The report is not
authorized for distribution to prospective investors in the Corporation unless
preceded or accompanied by an effective prospectus. Shares in the Fund are not
deposits or obligations of, or guaranteed or endorsed by, CoreStates Bank, N.A.,
the parent corporation of the Fund's investment adviser. Such shares are also
not federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
<PAGE>
[SQUARE BULLET]
COREFUND[REGISTERED MARK]
FAMILY OF MUTUAL FUNDS
- -------------------------
1997
SEMI-ANNUAL REPORT
TO OUR
SHAREHOLDERS
FOR SIX MONTHS ENDING
DECEMBER 31, 1997
[GRAPHIC OF POINTER]
COREFUNDS...INVESTING OUR EXPERIENCE IN YOUR FUTURE.
<PAGE>
COREFUND
PORTFOLIOS
BY
ASSET
CLASS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
FUND TRADING SYMBOL
----------------------------------
(A/C SHARES) (Y SHARES)
EQUITY FUNDS-----------------------------------------------------------------
[SQUARE BULLET] Equity Index -- VEIFX
[SQUARE BULLET] Core Equity CVERX CVEAX
[SQUARE BULLET] Growth Equity CRQAX CRGEX
[SQUARE BULLET] Special Equity CSPAX CSEQX
[SQUARE BULLET] International Growth CROAX CFIGX
BALANCED FUNDS---------------------------------------------------------------
[SQUARE BULLET] Balanced COBAX CBAAX
FIXED INCOME FUNDS-----------------------------------------------------------
[SQUARE BULLET] Short Term Income -- COSTX
[SQUARE BULLET] Short-Intermediate Bond CSIAX CFBDX
[SQUARE BULLET] Government Income CRIAX CRYIX
[SQUARE BULLET] Bond CBOAX CONIX
[SQUARE BULLET] Global Bond CRGAX CGBIX
TAX-EXEMPT INCOME FUNDS------------------------------------------------------
[SQUARE BULLET] Intermediate Municipal Bond CRMAX CRMYX
[SQUARE BULLET] Pennsylvania Municipal Bond CPAAX CPAYX
[SQUARE BULLET] New Jersey Municipal Bond CNJAX CNJYX
MONEY MARKET FUNDS-----------------------------------------------------------
[SQUARE BULLET] Treasury Reserve CTRXX CRTXX
[SQUARE BULLET] Cash Reserve -- CRCXX
[SQUARE BULLET] Tax-Free Reserve CXCXX CRXXX
TABLE OF CONTENTS
---------------------------
MESSAGE TO OUR SHAREHOLDERS
1
INVESTING FOR THE LONG TERM
2
HOW TO USE YOUR
SEMI-ANNUAL REPORT
4
GLOSSARY OF TERMS
6
CHOOSING THE RIGHT FUNDS
8
FUND DESCRIPTIONS
10
INVESTMENT ADVISERS' REVIEW
14
MANAGERS' DISCUSSIONS OF
FUND PERFORMANCE
18
FINANCIAL STATEMENTS
47
[GRAPHIC OF POINTER]
SHAREHOLDER SERVICES
-------------------------------
FOR MORE INFORMATION ON OPENING
A NEW ACCOUNT, MAKING CHANGES TO
EXISTING ACCOUNTS, PURCHASING,
EXCHANGING OR REDEEMING SHARES,
OR OTHER INVESTOR SERVICES,
PLEASE CALL
1-800-355-CORE (2673) OR
REFER TO YOUR FUND PROSPECTUS.
<PAGE>
MESSAGE
TO OUR
SHAREHOLDERS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
CoreFund shareholders earned overall positive returns for the semi-annual
period ending December 31, 1997 in spite of pockets of market volatility. A
significant stock market decline in October, a correction in technology stock
prices, and turbulence in the Asian markets caused some bumps in the road.
However, with the exception of Asia, good, strong economic fundamentals
continued. Healthy economic growth in the U.S., low inflation, and declining
interest rates supported a stable economy, providing an encouraging outlook for
long-term investors.
MAXIMIZING OPPORTUNITIES Also during the six-month period, CoreFunds
introduced a new B Class of shares for seven Funds, which gives individual
investors the option of a contingent deferred sales charge rather than an
up-front sales charge. We also debuted our new Elite Money Market Funds. And, we
now offer a Systematic Exchange Plan, as well as weekly and overnight sweep
privileges from some checking accounts. These products are all designed to
increase shareholders' options and flexibility while providing fee efficiencies.
As always, CoreFund urges you to invest for the long term. Recent changes
in IRA tax legislation and the creation of the Roth IRA offer investors still
additional incentives for committing to a long-term investment plan. Investors
are realizing the value of staying with their strategy over the long haul.
OUR DUTY TO YOU Many of you have read about the proposed merger between
CoreStates and First Union. Your board will be considering the impact of the
transaction on the Funds and you may rest assured that we will be guided by the
best interests of CoreFund shareholders. Our number one job is to make sure that
your best interests are served. We thank you for your confidence.
[PHOTO OF EMIL MIKITY OMITTED]
/S/ SIGNATURE
EMIL J. MIKITY
CHAIRMAN
1
<PAGE>
INVESTING FOR THE
LONG TERM
- --------------------------------------------------------------------------------
A LITTLE BIT TODAY
CAN TAKE YOU
A LONG WAY.
[GRAPHIC OF POINTER]
Throughout this report, we talk about investing for the long term --
setting financial goals, choosing your funds, and then staying with your plan
over a period of years. Why is this important? Because long-term investing can
truly help you reach your financial goals.
Whether you're investing for your retirement, a child's education, a
vacation home, or some other goal, the key is to start early. This way, you can
actually reduce the total amount you will need to save. That's because your
money will work for you as it compounds over the years. The more time you have,
the more you will benefit from compounding.
In addition, when you stay with your plan over time, you can minimize
the impact of short-term fluctuations in the market. Historically, the longer an
investment is held, the less it is affected by market ups and downs.
Finally, by investing the same amount each month, you can reduce the
average cost you pay per share. Your money will buy more shares when the price
is low and fewer shares when the price is high. This is a proven technique for
obtaining the best possible price.
STOCKS HAVE OUTPERFORMED OVER THE LONG TERM.
HISTORICALLY, STOCKS HAVE EXPERIENCED GREATER SHORT-TERM VOLATILITY, BUT OVER
THE LONGER TERM, THEY HAVE OUTPERFORMED BONDS AND OTHER FIXED-INCOME
INVESTMENTS.
TIME CAN SMOOTH THE BUMPS ALONG THE WAY.
THE LONGER YOU HOLD YOUR INVESTMENT, THE LESS IT WILL BE IMPACTED BY SHORT-TERM
MARKET FLUCTUATIONS. THIS CHART ILLUSTRATES THE MAXIMUM AND MINIMUM RETURNS FOR
DIFFERENT INVESTMENT PERIODS. AN INVESTOR WITH A LONGER TIME HORIZON CAN AFFORD
TO ASSUME GREATER RISK IN EXCHANGE FOR POTENTIALLY GREATER LONG-TERM REWARDS.
REGULAR INVESTING IS A SIMPLE STRATEGY THAT WORKS OVER TIME.
THIS HYPOTHETICAL EXAMPLE ASSUMES MONTHLY INVESTMENTS OF $100, $300, AND $500,
RESPECTIVELY, GROWING AT A COMPOUNDED ANNUAL RATE OF RETURN OF 8%.
2
<PAGE>
Growth of $10,000 since 1973
[LINE GRAPH DEPICTING GROWTH OF $10,000 SINCE 1973]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON LONG TERM GOV'T BOND INDEX, IBBOTSON
30 DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT A PARTICULAR COREFUND. PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
[BAR GRAPH DEPICTING REDUCTION OF RISK OVER TIME]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON INTERMEDIATE GOV'T BOND INDEX, IBBOTSON
30 DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT A PARTICULAR COREFUND. PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
[CHART DEPICTING REGULAR INVESTING CAN HELP YOU REACH YOUR GOALS]
MONTHLY 10 15 20 25 30
INVESTMENT YEARS YEARS YEARS YEARS YEARS
$100 $18,012 $33,761 $56,900 $90,899 $140,855
$300 $54,037 $101,282 $170,700 $272,697 $422,565
$500 $90,062 $158,803 $284,500 $454,495 $704,275
SOURCE: SEI RESEARCH. THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT A PARTICULAR COREFUND.
3
<PAGE>
HOW TO USE YOUR
SEMI-ANNUAL
REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OF POINTER]
COREFUND SHARES ARE
CURRENTLY AVAILABLE IN
FOUR DIFFERENT CLASSES:
CLASS Y SHARES
ARE FOR INSTITUTIONAL INVESTORS.
CLASS A SHARES
ARE FRONT-END LOADED FUNDS
FOR INDIVIDUALS INVESTING IN EQUITY AND FIXED-INCOME FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
CLASS B SHARES
ARE FOR INDIVIDUAL INVESTORS,
OFFERING AN ALTERNATIVE
PRICING STRUCTURE FOR THE EQUITY CLASS A SHARES AND
MONEY MARKET CLASS C SHARES.
CLASS C SHARES
ARE FOR INDIVIDUALS INVESTING
IN MONEY MARKET FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
THE COREFUND 1997 SEMI-ANNUAL REPORT In the pages that follow, you will
read about your specific funds, the economic trends of the past year, and the
outlook going forward. But the most significant message of this 1997 Semi-Annual
Report has nothing to do with market conditions, new products, or economic
forecasts. Instead, we want to stress the importance of staying with your sound,
long-term investment plan through all economic cycles.
On pages two and three, we discuss the reasons why investing over a period of
many years can help you reduce the amount of money you will need to reach your
goal, and how long-term investing can limit the impact of short-term market
fluctuations on your investment. Don't underestimate the importance of starting
your investment program early and saving on a regular basis. Take a few minutes
and read this section. It may help you learn about new ways to reach your
financial goals.
Also in this Semi-Annual Report, you will find CoreStates Investment Advisers'
insights into current economic conditions and a global investment outlook. You
will find a Manager's Discussion of Fund Performance for each fund in the
CoreFund Family of Funds. Each manager's commentary presents a snapshot of fund
performance for the 6-month period ending December 31, 1997. The managers offer
you insights into the investment strategies they are employing and examine the
current climate of specific markets, as well as the market forces that are
expected to prevail into 1998.
WHAT
YOU NEED
TO KNOW
[SQUARE BOX]
4
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
QUICK FUND FACTS
Accompanying each commentary are boxes highlighting important fund
information:
[SQUARE BULLET] When a fund was opened
[SQUARE BULLET] Portfolio size
[SQUARE BULLET] Number of shares outstanding
[SQUARE BULLET] Average weighted maturity of a fund's fixed-income holdings
(where applicable)
[SQUARE BULLET] Seven-day effective yield (where applicable)
PORTFOLIO COMPOSITION
For funds with equity holdings, the individual reports include listings of
the top five holdings and the percentage of the total fund invested in these
holdings.
For funds with only fixed-income or money market holdings, the reports
include pie charts that show how these holdings are divided according to quality
ratings, or maturity.
PERFORMANCE DATA EQUITY AND FIXED-INCOME FUNDS
The performance box shows the six-month total return for the retail Class A
and B shares (shown with and without the sales charge) and the institutional
Class Y shares. Also, a bar chart shows each Fund's six-month total return and
30-day yield as compared with a commonly used industry index.
For the CoreFund Class A and B shares, the performance information has been
adjusted to reflect the 12b-1 fee associated with these shares. The data has
also been divided to show performance with and without the assessment of a sales
charge, also known as the load.
PERFORMANCE DATA MONEY MARKET FUNDS
The performance boxes show the six-month cumulative total return, 7-day and
30-day yields for each class as compared to the industry benchmark that the fund
manager uses to measure performance. Also, a bar chart shows each Fund's
six-month total return and 7-day yield compared with a commonly used industry
index.
UNDERSTANDING FUND PERFORMANCE
[SQUARE BULLET]
As you review the information in these fund reports, please remember that past
performance of the portfolios does not predict future results. Also, investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
[GRAPHIC OF POINTER]
5
<PAGE>
GLOSSARY
OF TERMS
- --------------------------------------------------------------------------------
[GRAPHIC OF POINTER]
Various terms used in the fund reports are defined as follows:
CLASS Y, A, B & C CoreFund shares are currently offered in these classes. Class
Y shares are for institutional investors. Class A, B & C shares are for
individuals. Class A, B & C shares include added features such as shareholder
servicing and automatic and systematic investment plans, as well as some
additional fees. Class C shares also offer checkwriting privileges.
DISTRIBUTIONS are the payments of income and capital gains to shareholders of a
mutual fund. For tax purposes, capital gains distributions are calculated
separately from interest income or dividends.
DIVERSIFICATION is the spreading of investment risk by putting assets in a
wide-ranging portfolio of securities, such as a mutual fund.
DOLLAR-COST AVERAGING is an installment-purchase technique that involves
investing a fixed amount of money in mutual fund shares at regular intervals
rather than all at once. The objective is to buy fewer shares when prices are
high and more shares when prices are low.
EXPENSE RATIO is the amount, expressed as a percentage of average assets, that
shareholders paid in the past year for mutual fund operating expenses and
management fees.
FACE VALUE is the amount the bondholder receives when the bonds are redeemed at
maturity. Interest payments are based on the face value (also called "par
value").
HEDGE is a defensive investment strategy, often involving the buying or selling
of options, to offset possible losses and thereby to reduce risk.
INDEX is a statistical composite of selected stocks or bonds that is used to
measure price fluctuations in these markets. For example, Standard & Poor's 500
Composite Index (S&P 500) is a popular measure of the stock market's performance
based on prices of 500 common stocks listed on the New York and American stock
exchanges or traded over the counter.
6
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
LOAD refers to sales charges that may be associated with a particular fund.
Where loads are shown, both sales charges (incurred when purchasing shares) and
12b-1 fees have been included. The 12b-1 fee, named after the Securities and
Exchange Commission rule that permits it, is sometimes assessed to recover costs
incurred through advertising, commission payments to brokers, or other expenses
associated with marketing and distributing a fund. CoreFunds offer both
front-end loaded and back-end loaded funds.
MATURITY refers to the period over which a bond or other fixed income security
must be held to earn the full yield offered by the issuer of the security.
Average weighted maturity describes the average period of maturity in a
portfolio that contains fixed income securities of varying maturities.
NET ASSET VALUE (NAV) reflects the market value of one share of the fund on the
date listed. This figure is determined by taking the fund's total assets --
securities, cash, and any accrued earnings -- and then deducting liabilities and
dividing by the number of shares outstanding.
Money market funds seek to maintain a stable NAV of $1.00, although there
is no guarantee they will always do so. There are three money market portfolios
in the CoreFund Family of Mutual Funds: Cash Reserve, Treasury Reserve, and
Tax-Free Reserve.
SWEEP ACCOUNTS allow excess checking account balances to be invested regularly
in higher-yielding money market mutual fund accounts.
TOTAL RETURN shows how the value of an investment has changed from the beginning
to the end of a period, assuming that dividends and capital gains have been
reinvested. In the performance tables for equity and fixed income funds, total
return is shown on an "annualized" basis -- it assumes performance at a constant
rate for each year. In the performance boxes for money market funds, the
six-month total return is shown on a "cumulative" basis -- i.e., the total
return for the period from July 1, 1997 to December 31, 1997.
VOLATILITY is a description of how much the price of securities, such as mutual
funds, moves up or down within a given period.
YIELD refers to the rate of return for an investment portfolio, expressed as a
percentage. Yield for mutual funds is established by a formula set by the
Securities and Exchange Commission. A fund's yield will fluctuate and reflect
the portfolio's net earning power after fund expenses have been paid.
DEFINING THE TERMS
[SQUARE BULLET]
7
<PAGE>
CHOOSING
THE
RIGHT FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC OF POINTER]
The CoreFund Family offers a diverse range of high-quality mutual fund
investment options designed to help you reach your financial goals.
These include: the capital appreciation potential of equity and
balanced funds, the income potential of fixed-income funds, the tax advantages
of municipal bond funds, the stability of money market funds, and the expanded
reach and potential of international funds. By allowing free exchange among all
funds, CoreFund makes it easy for you to adapt your individual investment
program to your changing needs.
THE RIGHT CHOICES FOR A WELL-ROUNDED INVESTMENT PLAN.
Each investor has a unique notion of what the "right" mix of risk and
reward should be. You may, for example, be an investor who seeks to maintain the
highest possible degree of stability in your portfolio, and therefore favor
money market securities. Or, you may be at the opposite end of the spectrum --
someone who is willing to accept and tolerate higher degrees of risk in exchange
for the potential of higher returns offered by stocks. Because higher returns
generally mean greater price fluctuations, investment decisions will always
revolve around this tradeoff.
FINDING THE RIGHT MIX OF RISK AND REWARD.
To help you align your portfolio's particular blend of stability and
return with your investment preferences, CoreFunds offers a broad array of
investment options.
DIVERSIFICATION
IS A WAY TO
MODERATE
YOUR RISK.
As illustrated at right, these funds fall into distinct categories that match
up with the various stages of the risk/return spectrum. By taking these factors
into consideration, you can fashion a well-rounded, diversified portfolio that
will help you achieve your individual investment goals while maintaining a
comfortable level of risk. In this way, CoreFunds' expertise and experience can
best be used to shape your investment future.
8
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
<TABLE>
MUTUAL FUND CATEGORIES
LOWER HIGHER
RETURN RETURN
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH [SQUARE BULLET] INTERNATIONAL GROWTH
INTERNATIONAL STOCK FUNDS
OFFER POTENTIALLY HIGHER
RETURNS, BUT CARRY SPECIAL
RISKS. THESE RISKS ARE
OUTLINED IN YOUR PROSPECTUS.
GROWTH [SQUARE BULLET] SPECIAL EQUITY
[SQUARE BULLET] GROWTH EQUITY
STOCK AND BALANCED FUNDS [SQUARE BULLET] CORE EQUITY
PURSUE LONG-TERM GROWTH. [SQUARE BULLET] EQUITY INDEX
THEY OFFER THE GREATEST GROWTH [SQUARE BULLET] BALANCED
POTENTIAL, BUT FLUCTUATE MORE
IN PRICE.
INTERNATIONAL INCOME [SQUARE BULLET] GLOBAL BOND
GLOBAL BOND FUNDS SEEK GROWTH AND
INCOME OFFERING POTENTIALLY HIGHER RETURNS
THAN DOMESTIC BONDS, BUT WITH LESS
STABILITY OF PRINCIPAL.
INCOME [SQUARE BULLET] BOND
[SQUARE BULLET] GOVERNMENT INCOME
INTERMEDIATE- AND LONG-TERM TAXABLE BOND [SQUARE BULLET] SHORT-INTERMEDIATE BOND
FUNDS SEEK A MODERATE-TO-HIGH LEVEL OF [SQUARE BULLET] SHORT TERM INCOME
INCOME AND PRESERVATION OF CAPITAL.
TAX-FREE INCOME [SQUARE BULLET] INTERMEDIATE MUNICIPAL BOND
[SQUARE BULLET] PENNSYLVANIA MUNICIPAL BOND
THESE FUNDS SEEK TO PROVIDE INCOME THAT [SQUARE BULLET] NEW JERSEY MUNICIPAL BOND
IS GENERALLY EXEMPT FROM INCOME TAX,
WHILE PRESERVING CAPITAL.
STABILITY [SQUARE BULLET] TREASURY RESERVE
[SQUARE BULLET] CASH RESERVE
MONEY MARKET FUNDS SEEK GREATER SAFETY [SQUARE BULLET] TAX-FREE RESERVE
AND STABILITY OF PRINCIPAL WHILE
PROVIDING INCOME.
LOWER HIGHER
RISK RISK
RISK/RETURN SPECTRUM
</TABLE>
9
<PAGE>
FUND
DESCRIPTIONS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
[SQUARE BULLET] EQUITY (STOCK) FUNDS
INVEST PRIMARILY IN SECURITIES SUCH AS COMMON STOCKS. THESE FUNDS SEEK MAXIMUM
LONG-TERM GAINS THROUGH CAPITAL APPRECIATION.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] EQUITY Seeks to achieve price and yield ...results substantially in line with the performance
INDEX FUND performance similar to the S&P 500 of the stock market as a whole.
Composite Index.
[SQUARE BULLET] CORE EQUITY Seeks growth of capital by investing ...growth of capital and is willing to take higher
FUND primarily in a diversified portfolio risk for potentially higher returns.
of common stocks.
[SQUARE BULLET] GROWTH Seeks growth of capital and an ...capital appreciation and is willing to take higher
EQUITY FUND increasing flow of dividends from risk for potentially higher returns.
a diversified portfolio of common
stocks.
[SQUARE BULLET] SPECIAL Seeks capital growth by investing ...growth of capital and is willing to take higher risk
EQUITY FUND principally in a diversified and experience greater volatility for potentially higher
portfolio of common stocks. returns.
[SQUARE BULLET] INTERNATIONAL Seeks long-term growth of capital ...growth of capital and is willing to assume the
GROWTH FUND by investing in a portfolio of additional risks inherent in foreign investing in
common stocks diversified by country exchange for potentially higher returns.
and industry.
</TABLE>
10
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
[SQUARE BULLET] BALANCED FUND
INVESTING IN BOTH COMMON STOCKS AND FIXED INCOME. THIS FUND SEEKS TO PROVIDE
TOTAL RETURN WHILE PRESERVING CAPITAL.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] BALANCED FUND Seeks to provide total return while ...participation in a diversified portfolio program
preserving capital. that is continuously and professionally managed and is
willing to take higher risk for potentially higher returns.
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS
INVEST PRIMARILY IN INTEREST-PAYING SECURITIES ISSUED BY THE U.S. GOVERNMENT AND
ITS AGENCIES AS WELL AS CORPORATE BONDS AND COMMERCIAL PAPER. THESE FUNDS SEEK
TO PROVIDE A REGULAR STREAM OF CURRENT INCOME.
[SQUARE BULLET] SHORT TERM Seeks consistent current income ...higher yield than can be expected from either cash
INCOME FUND and relative stability of principal by management funds or other short-term investments,
investing primarily in a diversified but with less volatility than most longer-term bond funds.
portfolio of investment-grade debt
securities with remaining maturities
of three years or less.
[SQUARE BULLET] SHORT- Seeks consistent current income by ...higher yield than can be expected from other
INTERMEDIATE investing principally in a short-term investments but without the wide swings
BOND FUND diversified portfolio of debt normally attributable to long-term bond funds.
securities with an average weighted
maturity of two to five years.
</TABLE>
11
<PAGE>
FUND
DESCRIPTIONS
(CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] GOVERNMENT Seeks to provide current income while ...investment performance and can tolerate the risk
INCOME FUND preserving principal value and from an actively managed portfolio of taxable fixed-income
maintaining liquidity. securities without credit risk.
[SQUARE BULLET] BOND FUND Seeks to maximize long-term total ...investment performance and can tolerate the associated
return by investing principally in a risk from an actively managed portfolio of taxable fixed
diversified portfolio of debt income securities.
securities.
[SQUARE BULLET] GLOBAL Seeks to provide capital appreciation ...capital appreciation and current income over the
BOND FUND and current income through investment long term, and is willing to assume the additional
in fixed income securities of the risks of foreign investing for potentially higher returns,
United States and foreign issuers. and seeks benefits of international diversification.
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS
INVEST IN GENERAL OBLIGATION BONDS, REVENUE BONDS, AND MUNICIPAL NOTES, ALL OF
WHICH FINANCE PUBLIC WORKS AND SERVICES. THESE FUNDS SEEK TO PROVIDE INCOME THAT
IS GENERALLY EXEMPT FROM FEDERAL INCOME TAX AND IN SOME CASES FROM STATE AND
LOCAL TAXES.
[SQUARE BULLET] INTERMEDIATE Seeks a high level of income exempt ...a conservative investment and seeks after-tax
MUNICIPAL from federal income tax consistent yields while protecting principal.
BOND FUND with the preservation of capital.
[SQUARE BULLET] PENNSYLVANIA Seeks a high level of current income, ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from PA state enhanced investment performance of an actively managed
and local personal income tax. portfolio of tax-free securities.
</TABLE>
12
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] NEW JERSEY Seeks a high level of current income ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from New Jersey enhanced investment performance of an actively managed
state and local personal income tax. portfolio of tax-free securities.
[SQUARE BULLET] MONEY MARKET FUNDS
INVEST PRIMARILY IN QUALITY SHORT-TERM SECURITIES OF THE U.S. GOVERNMENT AND ITS
AGENCIES, COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT, AND REPURCHASE AGREEMENTS.
THESE FUNDS SEEK TO MAINTAIN A CONSTANT SHARE PRICE OF $1.00 WITH INCOME VARYING
ACCORDING TO MARKET CONDITIONS AND INTEREST RATES. HOWEVER, MONEY MARKET FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO
ASSURANCE THAT THESE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00.
[SQUARE BULLET] TREASURY Seeks current income with liquidity ...liquidity of assets, current income, and
RESERVE and stability of principal, with stability of principal.
investments exclusively in U.S.
Treasury obligations.
[SQUARE BULLET] CASH RESERVE Seeks current income with liquidity ...liquidity of assets, current income, and
and stability of principal. stability of principal.
[SQUARE BULLET] TAX-FREE Seeks current income that is exempt ...current income exempt from federal income taxes,
RESERVE from regular income tax with stability of principal, and liquidity of assets.
liquidity and stability of principal.
</TABLE>
13
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
ABOUT CORESTATES
INVESTMENT ADVISERS
(CSIA)
[SQUARE BULLET] INVESTMENT MANAGERS FOR THE
COREFUND FAMILY OF MUTUAL
FUNDS.
[SQUARE BULLET] AN AFFILIATE OF CORESTATES
FINANCIAL CORP, ONE OF THE
NATION'S LARGEST AND MOST
RESPECTED BANKING INSTITUTIONS.
[SQUARE BULLET] DEDICATED TO PROVIDING ITS
INVESTORS WITH PROFESSIONAL
INVESTMENT MANAGEMENT.
[SQUARE BULLET] SERVING THE NEEDS OF INSTITUTIONS,
CORPORATIONS, MUNICIPALITIES, AND
INDIVIDUAL INVESTORS.
[SQUARE BULLET] MANAGING MORE THAN $18 BILLION
IN ASSETS, INCLUDING MORE THAN
$4 BILLION IN COREFUNDS.
[SQUARE BULLET] SUPPORTING YOU WITH INVESTMENT
EXPERTISE FOR THE LONG TERM.
COREFUND INVESTMENT REVIEW
Q: How did the economic climate over the last six months of 1997 impact the
world's markets?
[PHOTO OF MARK STALNECKER OMITTED]
A: The U.S. economy was strong and stable through the period and continued
to grow at a real rate of nearly 4%. In addition, inflation, as measured by the
Consumer Price Index, was less than 2%, despite tighter labor markets, strong
consumer confidence and nearly double-digit growth in corporate profits.
[PHOTO OF MARK STALNECKER OMITTED]
During the six months, fears that the Federal Reserve would again move to
restrict monetary growth never became a reality. Subsequently, the inflation
picture remained favorable and short-term interest rates remained relatively
stable. Given the improved inflation outlook, intermediate and long-term U.S.
interest rates have declined. In fact, by year-end the 30-year U.S. Treasury
bond rate was below 6%.
Toward the end of the period, serious problems throughout the Southeast
Asian economy negatively impacted the world markets. International equities
underperformed the domestic markets. International bonds also had a challenging
six months.
[PHOTO OF MARK STALNECKER OMITTED]
Q: How did the CoreFunds perform overall during their semi-annual period?
[GRAPHIC OF POINTER OMITTED]
A: We are pleased to report that for the six-month period ending December
31, 1997, your fund managers produced largely positive returns for CoreFund
investors in spite of periods of volatility throughout the world economy.
Q: Why did equity investors experience such sudden market fluctuations
during the period?
A: Recent difficulties in the overseas market, and in Southeast Asia in
particular,
14
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
caused market uncertainty in late October, triggering a sudden sharp price drop
followed by a vigorous recovery.
However, for the full calendar year 1997, the broad U.S. stock market saw
solid gains as it continued to make bull market history. The large
capitalization S&P 500 Index (S&P) produced a total return of 33.36%. Most of
this return, 20.6%, was realized in the first half of 1997. For the last half of
the year (the first six-months of the funds' fiscal year), the market produced a
return of 10.58%.
[PHOTO OF MARK STALNECKER OMITTED]
Smaller capitalization stocks continued to provide investors with more
modest returns than the S&P 500 in 1997. The Russell 3000 Equal Weighted Index,
which includes both mid-cap and small-cap stocks, produced a return of 25.35%
for the full year 1997, including a return of 12.76% in the last six months. All
in all, U.S. stock prices benefited from lower interest rates and strong profit
growth. Expectations are that 1998 will bring slower profit growth.
And, if uncertainties continue in the international markets, it will be
unlikely that stock market conditions in 1998 will match those of 1997.
Q: How did uncertainties in the equity market affect U.S. bonds and money
market instruments?
A: After rising modestly in the first quarter of 1997, money market rates
stabilized. Asian economic worries and lower than anticipated inflation (the two
are not unrelated) allayed fears of Federal Reserve "tightening." In fact, by
year-end 1997, most market experts expected that the next policy action by the
Federal Reserve would be to "ease" money market rates rather than to raise them.
As long-term interest rates fell in response to these changed expectations,
the return on bond investments rose. For the full-year 1997, the bond market, as
measured by the Salomon
(CONTINUED)
[BAR GRAPH DEPICTING CAPITAL MARKET RETURNS]
CAPITAL MARKET RETURNS
(% OF TOTAL RETURN)
FULL YEAR (1/97-1/98) LAST SIX MONTHS `97
DJIA 24.94 4.01
S&P 500 33.36 10.58
SBBI 9.62 6.37
JPMGB 1.40 2.52
EAFE 1.78 (8.48)
DJIA = DOW JONES INDUSTRIAL AVERAGE
S&P 500 = STANDARD & POOR'S COMPOSITE INDEX
SBBI = SALOMON BROTHERS BROAD BOND INDEX
JPMGB = JP MORGAN GLOBAL BOND INDEX, US$ HEDGED
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
[LINE GRAPH DEPICTING CHANGES IN THE YIELD CURVE OMITTED]
CHANGES IN THE YIELD CURVE
(US TREASURY SECURITIES)
6/30/97 12/31/97
3 MO 5.172% 5.342%
6 MO 5.251% 5.435%
1 YR 5.651% 5.476%
2 YR 6.059% 5.642%
3 YR 6.209% 5.669%
5 YR 6.372% 5.705%
10 YR 6.491% 5.741%
30 YR 6.780% 5.924%
15
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
(CONCLUDED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
[BAR GRAPH DEPICTING STOCKS -- INTERNATIONAL VS. DOMESTIC]
STOCKS -- INTERNATIONAL VS. DOMESTIC
(% OF TOTAL RETURN AS OF 12/97)
S&P 500 EAFE
1 YR. 33.36 1.78
2 YR. 28.05 3.90
3 YR. 31.13 6.28
4 YR. 22.94 6.65
5 YR. 20.25 11.39
S&P 500 = STANDARD & POOR'S 500 COMPOSITE INDEX
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
Brothers Broad Index, earned a total return of 9.62%. The Index return for the
first half of the year was 3.06%, and for the second half of the year was 6.37%.
With falling commodity prices, a strong U.S. dollar, and weaker international
economies, the outlook for U.S. interest rates remains optimistic.
[PHOTO OF MARK STALNECKER OMITTED]
Q: How have the international equity markets performed given the recent
conditions?
A: By and large, foreign equities continued to underperform domestic
equities. Troubles in Asia, generally disappointing growth, and weaker
currencies against the dollar all hurt returns. For the full-year 1997,
international equity returns (in U.S. dollar terms), as represented by the
Morgan Stanley EAFE Index, were 1.78%. For the first six months of the funds'
fiscal year, the return was (8.48)%, compared to 11.21% for the six months
ending June 30, 1997.
Q: What is the economic outlook for 1998?
A: While signs point to a continuing strong economy in the U.S. in 1998,
major uncertainty hangs over the markets. Distress in Asian markets, including
Japan, together with a drop in their foreign exchange rates could again have an
impact on domestic markets. Given the current high valuation of U.S. equities,
the market continues to remain vulnerable to negative surprises. While market
expectations are that the worst is now behind us, and while we believe the aid
packages put in place by international agencies to help Southeast Asia will
suffice, there remains a risk that this economic "flu" will spread and damage
the U.S. and other economies.
[PHOTO OF MARK STALNECKER OMITTED]
16
<PAGE>
[SQUARE BULLET] CORE FUND
- --------------------------------------------------------------------------------
Q: What advice do you have for CoreFund investors given current conditions?
A: Solid, long-term real returns can be realized by investors who stay with
their long-term investment plans through market cycles. Investors should view
any short-term market declines within the context of the returns earned during
the past decade. Investors should remain committed to their long-term investment
plan and not attempt to try to "time" market movements.
Thank you for your continued confidence in the CoreFund Family of Mutual
Funds. We are committed to providing investors with strong returns across all
investment objectives. For additional information concerning your fund(s), I
direct your attention to the comments by the fund portfolio managers.
[PHOTO OF MARK STALNECKER OMITTED]
/S/ SIGNATURE
MARK STALNECKER
CHAIRMAN, CSIA
17
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
COREFUND EQUITY MANAGERS
LARY AASHEIM
EQUITY INDEX
STEPHEN DALTON
GROWTH EQUITY AND BALANCED
(MANAGERS NOT SHOWN)
JOSEPH STOCKE
CORE EQUITY & SPECIAL EQUITY
MICHAEL GIBSON
MARTIN CURRIE, INC.
AND
BEVERLY HENDRY
ABERDEEN MANAGERS
INTERNATIONAL GROWTH
[PHOTO OF LARY AASHEIM AND STEPHEN DALTON OMITTED]
[SQUARE BULLET] EQUITY INDEX FUND
SEMI-ANNUAL RESULTS
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] This Fund returned 10.12% after expenses for the six months
ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Composite Index (S&P 500),
returned 10.58% for the same period.
[SQUARE BULLET] Assets in the Fund grew 11% from$245.9 million to $272.7 million
during the six months.
COMMENTARY
The CoreFund Equity Index Fund is managed to mirror the S&P 500 Index. As it
reflects the performance of the overall stock market, the Fund offers investors
the potentially attractive long-term returns of the equity market, while
insulating them from the risks associated with any one investment management
style.
The Fund is invested in a well-diversified sampling of the 500 names of the S&P
500 Index. A quantitative model is used to make sure that sector weightings are
maintained in the same proportions as the Index. This minimizes the impact of
transaction costs which can have a negative impact on performance. We take
advantage of every opportunity to keep transaction costs as low as possible at
all times.
Even after taking out expenses, the Fund slightly underperformed the
Index for the semi-annual time period. One reason for this was the need to
maintain higher cash levels to support less predictable cash flows during this
period. The result was a slight drag on net performance which impacted the
Fund's ability to track, or match, Index performance.
Although the Fund is not managed in terms of market conditions, we closely
monitor the world economy. Looking ahead,
18
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
we expect market volatility to continue due to the Southeast Asia turmoil and
the strength of the U.S. dollar. On the bright side, the problems in Southeast
Asia have helped to lower interest rates. While corporate earnings are hurt by
Asian exposure, valuations are helped by the lower interest rates.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
S&P 500 INDEX EQUITY INDEX (CLASS Y)
10.58 10.12
PERFORMANCE
- ---------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 10.12% $37.39 $39.65
CLASS A W/O LOAD 2.74 37.37 39.66
CLASS A W/LOAD (2.90) 39.54 41.97
CLASS B W/O LOAD 3.37* -- 39.12
CLASS B W/LOAD (1.62)* -- --
S&P 500 INDEX 10.58 -- --
- ---------------------------------------------
*INCEPTION DATE 11/7/97
[SQUARE BULLET] CORE EQUITY FUND
[GRAPHIC OF POINTER]
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 11.87% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Index, returned 10.58% for the
same period.
[SQUARE BULLET] Assets in the Fund grew 9% from$531.1 million to $576.8 million
during the six months.
COMMENTARY
During the last six months of 1997, the Core Equity Fund produced positive
results for shareholders and slightly outperformed its benchmark. Throughout the
period, we saw an equity market that was much more volatile than we've seen in
recent years.
There was a sell-off in October due to concern about the implications
of the situation in Asia on the United States A rebound followed, but the market
wasn't able to break through to new highs. As a result, we've entered a period
where the market is supported by low interest rates due to low inflation and a
strong dollar. But, these positives are being offset by the problems
EQUITY INDEX FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 14, 1985
PORTFOLIO SIZE:
$272.7 MILLION
SHARES OUTSTANDING:
6,877,433 (Y A&B COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
GENERAL ELECTRIC
3.2%
COCA-COLA
2.2%
MICROSOFT
2.0%
EXXON
2.0%
MERCK & COMPANY
1.7%
19
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
CORE EQUITY FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$576.8 MILLION
SHARES OUTSTANDING:
27,999,895 (Y, A&B COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
WORLDCOM
3.8%
CENDANT
3.5%
AIRTOUCH COMMUNICATIONS
3.3%
MOBIL
3.2%
NABISCO CLASS A
3.1%
[SQUARE BULLET] CORE EQUITY (CONTINUED)
in Asia which may put pressure oncorporate profits.
Throughout the period we kept to our Fund strategy, using a bottom-up
approach that combines quantitative and qualitative analysis, to invest in a
diversified group of the most attractive large- and mid-capitalization
companies.Overall, sector weightings within the Fund remained consistent
throughout the period.
The Fund benefited from an overweighting within the communication sector
including strong performance from such stocks as Storage Technology and America
Online. Investments in Lowe's Company and General Nutrition within the retail
sector also helped performance. The Fund was hurt by weak performance in the
basic materials sector and the healthcare sector.
Looking ahead, we expect the market to continue to be choppy, reacting on
a daily basis to whatever news is coming out of the Asian countries and the most
current economic data. Although investors are being pushed into the bond market
due to concerns about Asia, they are also being pulled back to the stock market
because of low, and declining, interest rates. As a result, the market is not
making a lot of progress in either direction and we wouldn't be surprised to see
these conditions continue for a while longer.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
S&P 500 INDEX CORE EQUITY (CLASS Y)
10.58 11.87
PERFORMANCE
- ---------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 11.87% $21.11 $20.60
CLASS A W/O LOAD 11.70 21.13 20.61
CLASS A W/LOAD 5.56 22.36 21.81
CLASS B W/O LOAD (7.39)* -- 18.31
CLASS B W/LOAD (11.36)* -- --
S&P 500 INDEX 10.58 -- --
- ---------------------------------------------
*INCEPTION DATE 11/7/97
20
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] GROWTH EQUITY FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 14.11% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmarks, the Lipper Growth Funds Index and the S&P
500 returned 10.98% and 10.58% respectively for the six months.
[SQUARE BULLET] Assets in the Fund grew 11% from $152.4 million to $168.5
million during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund Growth Equity Fund outperformed its benchmarks while producing
positive returns for investors.
Sector leadership was rotational. Through October, the technology,
financial, and healthcare sectors led performance. In the second quarter,
electric utilities performed well, as did telecommunications services where we
saw strength based on consolidations and continued strong fundamentals.
Briefly, at the beginning of the period, smaller capitalization stocks
performed better than larger capitalization stocks. However, a flight to larger
capitalization, quality, domestic, and interest-sensitive sectors paced the
broader market's return in the second quarter. The stocks of companies perceived
to have significant Asian exposure or sectors containing stocks of companies
pre-announcing negative earnings surprises, such as oil service, technology, and
HMO's, were the weakest of the quarter.
The Fund benefited from better-than-expected earnings growth and
enjoyed great performance through September. However, the Fund's overweighting
in technology caused it to be negatively impacted by the Asian crisis the second
quarter.
Offsetting the weaker areas, an overweighting in financial stocks and
communications services helped performance. This was primarily due to
exceptional results by Teleport, McLeod, and Brooks Fiber Properties. During
this period we increased our holdings of consumer cyclicals, telecommunications
services, and financial stocks while reducing our energy and healthcare
holdings.
Looking ahead, we will remain fully invested with incremental buying in
domestically oriented sectors with strong growth characteristics, including
retail, media, food, and insurance. We will keep our lower
GROWTH EQUITY FUND
------------------
QUICK FUND FACTS
------------------
INCEPTION DATE:
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$168.5 MILLION
SHARES OUTSTANDING:
10,318,439 (Y, A&B COMBINED)
TOP FIVE HOLDINGS
------------------
(% OF FUND INVESTMENTS)
DAYTON HUDSON
3.0%
GAP
2.8%
HEALTH MANAGEMENT
ASSOCIATES
2.7%
BMCSOFTWARE
2.6%
ALLSTATE
2.5%
21
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] GROWTH EQUITY (CONTINUED)
technology weighting, until we see what impact the Asian economic crisis will
have on this sector. The Asian crisis may have a negative effect on selected
companies and modestly slow the U.S. expansion. However, the positive impact of
lower inflation and interest rates may have an overall beneficial impact on U.S.
financial assets. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
GROWTH EQUITY (CLASS Y) LIPPER GROWTH EQUITY INDEX S&P 500 INDEX
14.11 10.98 10.58
PERFORMANCE
- ----------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 14.11% $15.43 $16.33
CLASS A W/O LOAD 14.02 15.39 16.27
CLASS A W/LOAD 7.72 16.29 17.22
CLASS B W/O LOAD 0.85* -- 16.19
CLASS B W/LOAD (3.83)* -- --
LIPPER GROWTH 10.98 -- --
S&P 500 INDEX 10.58 -- --
- --------------------------------------------
*INCEPTION DATE 11/18/97
[SQUARE BULLET] SPECIAL EQUITY FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 8.14% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Russell 3000 Equal Weighted Index,
returned 12.76% for the same period.
[SQUARE BULLET] Assets in the Fund grew 4% from $74.3 million to $77.0 million
during the six months.
COMMENTARY
The CoreFund Special Equity Fund underperformed its benchmark during a volatile
period in its sector of the stock market. The underperformance was due primarily
to stock selection, profit taking, and an overall market gravitation away from
smaller companies to blue-chip companies as investors reacted to the crisis in
Asia.
There was a sell-off in October due to concerns about the implications
of the situation in Asia on the United States. A rebound followed, but the
market wasn't able to break through to new highs. As a result, we've entered a
period where the market is supported by low interest rates due to low
22
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
SPECIAL EQUITY (CLASS Y) RUSSELL 3000 (EW) INDEX
8.14 12.76
PERFORMANCE
- ----------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 14.11% $15.43 $16.33
CLASS A W/O LOAD 14.02 15.39 16.27
CLASS A W/LOAD 7.72 16.29 17.22
CLASS B W/O LOAD 0.85* -- 16.19
CLASS B W/LOAD (3.83)* -- --
LIPPER GROWTH 10.98 -- --
S&P 500 INDEX 10.58 -- --
- ----------------------------------------------
*INCEPTION DATE 11/7/97
inflation and a strong dollar. But, these positives are being offset by the
problems in Asia which may put pressure on corporate profits.
Throughout the period we kept to our Fund strategy, using a bottom-up
approach combining quantitative and qualitative analysis, to invest in a
diversified group of the most attractive mid- and small-capitalization
companies. Overall, sector weightings within the Fund remained consistent
throughout the period.
[SQUARE POINTER OMITTEED]
The Fund benefited from strong performance from such stocks as Bright
Horizons (a daycare franchise), Mac-Gray (a laundry services company) as well as
America Online, within the technology sector, and General Nutrition within the
retail sector. Financial stocks were among the best performers, led by declining
interest rates and continuing consolidation among banks and brokers. Overall,
technology stocks had a poor year as fourth quarter concerns over the growing
Asian crisis were particularly harmful.
Looking ahead, we expect the market to continue to be choppy, reacting
on a daily basis to whatever news is coming out of the Asian countries and the
most current economic data. Although investors are being pushed into the bond
market due to concerns about Asia, they are also being pulled back to the stock
market because of low, and declining, interest rates. As a result, the market is
not making a lot of progress in either direction and we wouldn't be surprised to
see these conditions continue for a while longer. [SQUARE BULLET]
- --------------------------------------------------------------------------------
SPECIAL EQUITY FUND
-------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE:
MARCH 15, 1994
PORTFOLIO SIZE:
$77.0 MILLION
SHARES OUTSTANDING:
7,232,439 (Y, A&BCOMBINED)
TOP FIVE HOLDINGS
(% OF FUND INVESTMENTS)
SCIOS NOVA
3.4%
CENDANT
2.8%
AMBPROPERTY
2.1%
LUCENT TECHNOLOGIES
1.8%
KUHLMAN
1.7%
23
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
INTERNATIONAL GROWTH FUND
-------------------------
QUICK FUND FACTS
-------------------------
INCEPTION DATE:
FEBRUARY 12, 1990
PORTFOLIO SIZE:
$160.7 MILLION
SHARES OUTSTANDING:
12,101,514 (Y, A&BCOMBINED)
TOP FIVE HOLDINGS
-------------------------
(% OF FUND INVESTMENTS)
NOVARTIS AG
2.4%
VEBA
2.1%
EAUX
2.0%
ROCHE HOLDINGS
2.0%
CREDIT SUISSE GROUP
1.8%
[SQUARE BULLET] INTERNATIONAL GROWTH FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned (4.89)% for the six months ending December
31, 1997.
[SQUARE BULLET] The Fund's benchmark, the Morgan Stanley Capital International
EAFE Index, returned (8.48)% for the same period.
[SQUARE BULLET] Assets in the Fund declined 2.9% from $165.5 million to $160.7
million during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund International Growth Fund beat its benchmark and provided investors
with strong relative performance during a very challenging economic period. The
Fund benefited from the added level of diversification gained by being
co-managed by Martin Currie, Inc. (80%) and Aberdeen Managers (20%).
The Fund's performance was primarily due to very good stock selection,
an underweighting of Japanese securities, a reduction of the Fund's overall
position in the Far East, and a higher than normal cash position. However, the
Fund was still significantly challenged by severe problems in Asia.
Overall, in the third quarter of 1997, the U.K and European markets
were very strong. The U.K. market rallied as interest rates fell. The pound
sterling was weak in the third quarter and strengthened in the fourth quarter.
In the fourth quarter, the U.K. was neutral and Europe was again strong. These
economies are being generally accepted as on track, which has had a positive
effect on investor psychology.
The stocks that performed best for the Fund were financials,
pharmaceutical, and utilities in the U.K. Similar performance was found in these
sectors of the European markets, and in stocks of companies experiencing
restructuring. In the third quarter, the Fund owned some companies with export
exposure, but sold them in the fourth quarter due to currency strengthening.
This move benefited the Fund.
Japan had a very difficult six months. It was down significantly in the
last half of 1997 due to wide spread economic weakness. The Fund is
significantly underweighted in Japan, and we are focusing primarily on those
Japanese companies that export to take advantage of the weak currency.
24
<PAGE>
[SQUARE BULLET] CORE FUND
- --------------------------------------------------------------------------------
Central and Latin America were not too severely impacted by Asian
problems during the third quarter, but caught a bit of the "flu" in the fourth
quarter. The Fund had strong exposure to Mexico and Brazil. But the Brazilian
exposure was reduced during the fourth quarter. We believe Mexico will continue
to do very well. We have excellent relative performance here and believe that
there is still opportunity as it is a more mature, and yet still emerging,
market.
The Asian market environment was very difficult and at times extremely
volatile throughout the period. The markets fell sharply due to severe currency
devaluation and some weakness in the economy. We believe the problems here are
going to take awhile to resolve themselves. In general, we started reducing our
exposure to this area when problems began to emerge at the end of 1996 and the
reduction continued throughout 1997.
Looking ahead, with the Economic Monetary Union still on track, we
expect continued growth in both the U.K. and Europe through 1998. The Fund will
remain focused on pharmaceuticals and financial companies, [BAR GRAPH OMITTED]
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
INTERNATIONAL GROWTH (CLASS Y) MSCI/EAFE INDEX
(8.48) (4.89)
PERFORMANCE
- ---------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y (4.89)% $14.72 $13.28
CLASS A W/O LOAD (4.98) 14.70 13.28
CLASS A W/LOAD (10.24) 15.56 14.05
CLASS B W/O LOAD 1.46* -- 13.28
CLASS B W/LOAD (3.35)* -- --
MSCI/EAFE (8.48) -- --
- ---------------------------------------------
*INCEPTION DATE 11/24/97
while reducing exposure to manufacturers with exports as a significant part of
their business.
As for the Asian markets, currently we're looking for buying opportunities.
With 70% of the world's population in this region, values are being created. We
will be closely focusing on the well-managed, well-financed companies which
survive and emerge strongly thereafter. [SQUARE BULLET]
- --------------------------------------------------------------------------------
25
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
BALANCED FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
JANUARY 4, 1993
PORTFOLIO SIZE:
$127.4 MILLION
SHARES OUTSTANDING:
9,369,442 (Y, A&BCOMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
HEALTH MANAGEMENT ASSOCIATES
1.5%
CRESTAR FINANCIAL
1.5%
BMCSOFTWARE
1.5%
HBO
1.5%
SCHERING PLOUGH
1.4%
[SQUARE BULLET] BALANCED FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 7.31% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmarks, the S&P 500 Index and the Lehman Brothers
Intermediate Government/Corporate Bond Index returned 10.58%
and 4.90%, respectively, for the same period.
[SQUARE BULLET] Assets in the Fund grew 8% from $117.8 million to $127.4 million
during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund Balanced Fund produced positive returns for investors for the
semi-annual period. The period was volatile, characterized by
better-than-expected earnings growth, as well as peaking and declining interest
rates. We also saw overwhelming concern about the Southeast Asian economic
crisis which seemed to rule the market and add additional volatility on the
downside to equities, and on the upside to bond yields.
On the equity side, sector leadership was rotational. In the first quarter
(through September), the technology, financial, and healthcare sectors led
performance. In the second quarter electric utilities performed well, as did
telecommunications services where we saw strength based on consolidations and
continued strong fundamentals both in the competitive local exchange carrier and
second-tier long distance stocks.
Briefly, at the beginning of the period, smaller capitalization stocks
performed better than larger capitalization stocks. However, a flight to larger
capitalization, quality, domestic, and interest-sensitive sectors paced the
broader market's return in the second quarter. The stocks of companies perceived
to have significant Asian exposure, and those sectors containing stocks of
companies preannouncing negative earnings surprises, including oil service,
technology and HMO's were the weakest of the quarter. We are now decreasing our
overweighting in energy stocks while increasing our underweighting in financial
stocks which we believe will improve performance.
On the bond side, we saw a peaking of yields at the beginning of this
period and a general decline that accelerated through the end of December. The
flight to quality coupled with the rally in the long bond made
26
<PAGE>
[SQUARE BULLET] CORE FUND
- --------------------------------------------------------------------------------
the 30-year U.S. Treasuries the best performing bonds. The bond portion of the
Fund (30%) underperformed it's index due to having a shorter average duration
than the index.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
- ----------------------
BALANCED (CLASS Y) S&P 500 INDEX LEHMAN INT. GOV'T/CORP INDEX
7.31 10.58 4.90
PERFORMANCE
- -----------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- -----------------------------------------------
CLASS Y 7.31% $13.52 $13.60
CLASS A W/O LOAD 7.19 13.52 13.60
CLASS A W/LOAD 1.27 14.31 14.39
CLASS B W/O LOAD (0.45)* -- 13.51
CLASS B W/LOAD (5.14)* -- --
S&P 500 INDEX 10.58 -- --
LEHMAN INT.
GOV'T/CORP.
BOND INDEX 4.90 -- --
- -----------------------------------------------
*INCEPTION DATE 11/5/97
[GRAPHIC OF POINTER OMITTED]
The Fund's asset allocation is currently 64% stocks, 30% bonds, and 6%
cash. Given current conditions, we plan to keep this breakdown consistent.
Looking ahead, the U.S. economy and corporate profits will be further impacted
by the Asian crisis. Negatively, Asian demand will probably decline for products
used in large projects and big ticket items. On the positive side, inflation,
interest rates, and economic activity in the U.S. should remain below current
expectations, which is beneficial for financial assets. We will thus focus on
domestically-oriented growth issues in equities, while looking to pick up yield
in the bond market. [SQUARE BULLET]
- --------------------------------------------------------------------------------
27
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
SHORT TERM INCOME FUND
----------------------
QUICK FUND FACTS
----------------------
INCEPTION DATE:
MAY 15, 1995
PORTFOLIO SIZE:
$37.8 MILLION
SHARES OUTSTANDING:
3,782,284 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
0.96 YEARS
QUALITY DIVERSIFICATION
[PIE CHART OMITTED]
AAA 53%
AA 4%
A 31%
BBB 6%
OTHER 6%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] SHORT TERM INCOME FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 3.00% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-year Treasury Bill
Index, returned 2.92% for the same period.
[SQUARE BULLET] Assets in the Fund grew 1% from $37.5 million to $37.8 million
during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund Short Term Income Fund provided investors with positive returns for
the year. The Fund's asset allocation is about 40% Treasuries, 40% corporates,
and 20% asset-backed securities. Duration matched Index throughout the period
with the exception of the end of the fourth quarter when duration was lengthened
slightly as year-end trades increased. This strategy benefited the Fund's
performance.
During the third quarter of 1997, inflation fears subsided and the
yield curve on short-term securities flattened in reaction to dampened concerns
about an impending increase in the Federal funds rate. Also, as the U.S. moves
closer to a budget surplus, there was a reduction in the supply of Treasury
securities coupled with a healthy demand, causing rates to drop. Corporates were
tightening to Treasuries in the third quarter.
In the fourth quarter, the Asian crisis impacted the market and corporates
began to widen as investors looking for stability moved money into Treasuries.
Events in Asia unraveled, causing investors to reassess value and risk factors
in the market in general. Also
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
SHORT TERM INCOME (CLASS Y) MERRILL LYNCH 1-YEAR T-BILL INDEX
3.00 2.92
YIELD 30-DAY %
--------------
SHORT TERM INCOME (CLASS Y) MERRILL LYNCH 1-YEAR T-BILL INDEX
5.46 5.49
PERFORMANCE
- -----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- -----------------------------------------------
CLASS Y 3.00% 5.46% $ 9.99
CLASS A W/O LOAD 2.87 5.46 9.98
CLASS A W/LOAD (0.43) 5.04 10.32
MERRILL LYNCH
1-YEAR T-BILL
INDEX 2.92 5.49 --
- -----------------------------------------------
28
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
in this quarter, U.S. Dollar short-term LIBOR Rates were driven higher and the
supply of Treasury Bills increased. Focus has shifted from LIBOR floater bonds
to Federal Fund-based and Prime-based floater bonds, since these securities tend
to fluctuate less.
Looking forward, we believe uncertainty due to the Asian crisis will
continue, which will keep money moving into the fixed-income market. However,
the impact of the crisis on domestic corporations is still unknown. We will
increase our emphasis on credit quality while maintaining our current neutral
duration structure. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[SQUARE BULLET] SHORT-INTERMEDIATE BOND
SEMI-ANNUAL RESULTS
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] This Fund returned 4.25% for the six month ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-3 year Treasury Index
returned 4.90% for the same period.
[SQUARE BULLET] Assets in the Fund grew 4% from $165.9 million to $172.8 million
during the six months.
COMMENTARY
The CoreFund Short-Intermediate Bond Fund outperformed it's benchmark and
provided investors with positive returns for the year. During the semi-annual
period, there was a significant rally in the bond market. The yield curve
declined, largely led by the 30-year Treasury. However, shorter-term securities
did not participate in the rally as much as longer-term bonds.
Treasury securities outperformed all other bonds throughout the period.
Events in Asia unraveled during the second half of the year, causing investors
to reassess value and risk factors in the market in general. As a result, more
money was shifted toward the Treasury market.
SHORT-INTERMEDIATE BOND FUND
----------------------------
QUICK FUND FACTS
----------------------------
INCEPTION DATE:
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$172.8 MILLION
SHARES OUTSTANDING:
17,360,703 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
3.97 YEARS
QUALITY DIVERSIFICATION
AAA 65%
AA 13%
A 10%
BBB 8%
BB 1%
OTHER 3%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
29
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] SHORT-INTERMEDIATE (CONTINUED)
Coming into the second half of 1997, the Fund's duration was slightly
longer than the Index, which helped performance. The superior performance
resulting from the longer duration was somewhat offset by the Fund's
underweighting in Treasury securities relative to the 100% Treasury Index.
Duration was scaled back to more closely match the Index over the final quarter
of 1997.
COREFUND FIXED INCOME MANAGERS
[PHOTO OMITTED]
(LEFT TO RIGHT)
JOSEPH BAXTER
INTERMEDIATE, PA & NJ MUNI BONDS
DAN TAYLOR
SHORT-INTERMEDIATE BOND
BRIAN SNYDER
INTERMEDIATE, PA & NJ MUNI BONDS
JOHN ACKLER
SHORT TERM INCOME
WILLIAM LAWRENCE
GOVERNMENT INCOME & BOND
(MANAGER NOT SHOWN)
GEORGE MCNEILL
GLOBAL BOND
The yield advantage provided by the Fund's mortgage-backed and
asset-backed securities also added incremental return to the portfolio. However,
the higher yields were offset by the widening of these sectors, in the fourth
quarter of 1997. The Fund took advantage of historically wide asset-backed
securities spreads at year end to increase allocation to that sector.
Within the corporate sector the Fund has focused on banks and financial
companies with an emphasis on takeover themes and strong fundamentals.
Looking ahead to 1998, we will continue to work to add value through
security selection and sector allocation. We expect investors will continue to
be concerned about the impact of the Asian crisis. Accordingly, the high grade
segments of the fixed-income markets should continue to perform well. In
addition, prepayment protection in the mortgage-backed and asset-backed sectors
will become increasingly important the longer Treasury yields remain at these
historically low levels. We will likely lower the Fund's duration as short-term
Treasury yields continue their decline below the Federal Reserve's target
overnight rate. We will also continue to minimize prepayment risk in the Fund's
mortgage and asset-backed holdings. [SQUARE BULLET]
- --------------------------------------------------------------------------------
30
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND FUND
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
SHORT-INTERMEDIATE (CLASS Y) MERRILL LYNCH 1-3 YR TREASURY INDEX
4.25 4.90
YIELD 30-DAY %
--------------
SHORT-INTERMEDIATE (CLASS Y) MERRILL LYNCH 1-3 YR TREASURY INDEX
5.65 5.91
PERFORMANCE
- ----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 4.25% 5.65% $ 9.95
CLASS A W/O LOAD 4.14 5.65 9.95
CLASS A W/LOAD 0.76 5.29 10.28
MERRILL LYNCH
1-3 YR. TREASURY 4.90 5.91 --
- ----------------------------------------------
[SQUARE BULLET] GOVERNMENT INCOME FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.00% after expenses for the six months
ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmarks, the Lehman Brothers Aggregate Bond Index
and the Salomon Brothers Broad Bond Index returned 6.38% and
6.37% respectively for the same period.
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] Assets in the Fund grew 11% from $20.7 million to $22.9 million
during the six months.
COMMENTARY
The CoreFund Government Income Fund produced positive results for shareholders
while nearly matching its benchmark. Throughout the third quarter of the
calendar year moderating retail sales and excellent inflation data were combined
with an improving Federal deficit and a decline in the number of Treasury
securities being auctioned.
In the fourth quarter of 1997, this rally continued but, for different
reasons. The Asian crisis dominated this period, fueling a global flight to
quality which helped both the U.S. Dollar and U.S. Treasury securities.
GOVERNMENT INCOME FUND
----------------------
QUICK FUND FACTS
----------------------
INCEPTION DATE:
APRIL 1, 1993
PORTFOLIO SIZE:
$22.9 MILLION
SHARES OUTSTANDING:
2,279,366 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
8.47 YEARS
MATURITY DIVERSIFICATION
UNDER 1 YEAR 2%
1-5 YEARS 49%
6-10 YEARS 36%
OVER 20 YEARS 13%
[PIE CHART OMITTED]
MATURITY IN YEARS -- % OF FUND INVESTMENTS.
31
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
GOVERNMENT INCOME FUND
----------------------
QUICK FUND FACTS
----------------------
INCEPTION DATE:
APRIL 1, 1993
PORTFOLIO SIZE:
$22.9 MILLION
SHARES OUTSTANDING:
2,279,366 (Y&ACOMBINED)
AVERAGE WEIGHTED MATURITY:
8.47 YEARS
MATURITY DIVERSIFICATION
UNDER 1 YEAR 2%
1-5 YEARS 49%
6-10 YEARS 36%
OVER 20 YEARS 13%
[PIE CHART OMITTED]
MATURITY IN YEARS --% OF FUND INVESTMENTS
The Fund began the period heavily invested in mortgage-backed
securities with the balance in U.S. Treasuries. The Fund's average duration was
slightly longer than the Index. As the market rallied, the percent of Treasury
holdings was increased, but the Fund was still underweighted in this area. The
duration of the Treasury holdings was extended to offset the prepayment aspects
of the Fund's mortgage holdings. And, the Fund overall finished the year
slightly longer than the Index duration.
Fund performance was enhanced by the yield advantage of its mortgage
holdings and its duration structure. But, the underweighting in Treasuries and
overweighting in mortgages hurt the Fund's relative performance versus the
Index.
Investors should note that this was a very good period for high grade bond
investors. Looking forward, we believe that for at least the first half of 1998,
concern about the Asian crisis will result in investors being more risk opposed,
emphasizing credit quality and liquidity. The Fund should continue to benefit
from its large Treasury holdings. The Federal Reserve may ease interest rates
possibly resulting in the Treasury market becoming overpriced.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
GOVERNMENT INCOME LEHMAN AGGREGATE SALOMON BROTHERS
(CLASS Y) BOND INDEX BOND INDEX
6.00 6.38 6.37
YIELD 30-DAY %
--------------
GOVERNMENT INCOME LEHMAN AGGREGATE SALOMON BROTHERS
(CLASS Y) BOND INDEX BOND INDEX
5.94 6.24 6.30
PERFORMANCE
- ----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 6.00% 5.94% $10.03
CLASS A W/O LOAD 5.86 5.94 10.03
CLASS A W/LOAD 2.40 5.50 10.37
LEHMAN
AGGREGATE BOND 6.38 6.24 --
SALOMON
BROAD BOND 6.37 6.30 --
- ----------------------------------------------
The Fund will retain its fully invested posture and work to minimize
prepayment risk in its mortgage holdings. Mortgaged pass-through securities will
be utilized as a source of higher yield. [SQUARE BULLET]
- --------------------------------------------------------------------------------
32
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.06% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers Aggregate Bond Index,
returned 6.38% for the same period.
[SQUARE BULLET] Assets in the Fund declined 5% from $184.0 million to $175.6
million during the six months.
COMMENTARY
During the last year, CoreFund Bond Fund produced positive returns for investors
while nearly matching the performance of its benchmark. Throughout the third
quarter of the calendar year moderating retail sales and excellent inflation
data were combined with an improving Federal deficit and a decline in the number
of Treasury securities being auctioned.
In the fourth quarter of 1997, the rally continued, but, it did so for
different reasons. The Asian crisis dominated this period fueling a global
flight to quality which helped both the U.S. dollar and U.S. Treasury
securities. Also, with the Asian currencies dropping and their economies
weakening, import goods cheapened and global demand softened, giving us an
excellent inflation outlook.
The corporate bond market came under a lot of pressure as a result of the
Asian crisis. In particular, the emerging market subsector dramatically
underperformed in the fourth quarter as the markets of Malaysia, Thailand,
Indonesia, and Korea took hard hits. Domestic corporates also lagged the rally,
especially those companies that have a direct link to the Asian economy.
[GRAPHIC OF POINTER OMITTED]
The Fund's performance was helped by a maturity structure that was
longer than the Index. Early in the period, the Fund benefited from certain
corporate holdings in the finance sector (Salomon Brothers, Lehman Bros.,
BankBoston) due to the ongoing consolidation in the banking and securities
industries. Holdings in TCI and Time Warner also contributed to performance.
Performance was hurt by an underweighting in the U.S. Treasury sector and an
overweighting in the asset-backed sector.
Investors should note that this was a very good period for high grade
bond investors. Looking forward, we believe that
BOND FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$175.6 MILLION
SHARES OUTSTANDING:
16,670,007 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.23 YEARS
QUALITY DIVERSIFICATION
AAA 64%
AA 3%
A 8%
BBB 12%
OTHER 13%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
33
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] BOND FUND (CONTINUED)
for at least the first half of 1998, investors will continue to be concerned
about the Asian crisis. As a result, they will be more risk opposed, emphasizing
credit quality and liquidity. The Fund should continue to benefit from its
Treasury holdings. The Federal Reserve may ease interest rates, but probably not
until later in the second quarter. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[BAR GRAPH]
6-MONTH TOTAL RETURN %
----------------------
BOND (CLASS Y) LEHMAN AGGREGATE BOND INDEX
6.06 6.38
YIELD 30-DAY %
--------------
BOND (CLASS Y) LEHMAN AGGREGATE BOND INDEX
6.02 6.24
PERFORMANCE
- ------------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ------------------------------------------------
CLASS Y 6.06% 6.02% $10.53
CLASS A W/O LOAD 5.93 6.02 10.53
CLASS A W/LOAD 0.91 5.52 11.06
LEHMAN
AGGREGATE BOND 6.38 6.24 --
- ------------------------------------------------
[SQUARE BULLET] GLOBAL BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 2.06% for the year ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmark, the J.P. Morgan Global Bond Index,
returned 2.52% for the same period.
[SQUARE BULLET] Assets in the Fund grew 3% from $34.8 million to $35.9 million
during the six months.
COMMENTARY
During the past year, the Global Bond Fund reported modest positive returns for
investors within the context of a challenging economic environment. As the
period began, there were indications that the U.S. and the U.K. economies were
overheating and that, while there was no evidence of inflationary pressure,
labor markets were becoming tight.
Higher interest rates became a possibility, and the bond markets began
to look overvalued. The markets in Continental Europe also appeared to be
overvalued as they responded to difficult convergence criteria in advance of the
European Monetary Union. As the period progressed, these pressures increased. In
response, your managers took
34
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
GLOBAL BOND (CLASS Y) JPM GLOBAL BOND U.S. INDEX
2.06 2.52
YIELD 30-DAY %
--------------
GLOBAL BOND (CLASS Y)
4.95
PERFORMANCE
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
CLASS Y 2.06% 4.95% $9.33
CLASS A W/O LOAD 2.05 4.95 9.32
CLASS A W/LOAD (2.75) 4.47 9.78
JPM GLOBAL BOND 2.52 N/A --
a low risk strategy with a relatively short maturity profile, while keeping some
interest rate hedges to provide for the possibility of further overheating.
The market became even more challenging during the last three months of
1997 as the period was dominated by troubles in a number of the Far East
economies. Over borrowing, overproduction, and unsound financial structures led
to huge devaluations of currencies. The outlook for the bigger economies of
Japan and China is still unclear. One of the consequences of these conditions
was the downgrading of growth forecasts for the developed economies. This
happens as exporting prospects to the Far East were reduced and the prospect of
an inflow of cheaper goods from the Far East was taken into account. Although
these events gave developed bond markets an additional boost as they became a
safe haven from the uncertainties and disasters elsewhere, it also made them
even more overvalued in fundamental terms.
[GRAPHIC OF POINTER OMITTED]
Currently, all the good news is in the market. Short term, nearly all the
markets look vulnerable. However, the bigger picture, looking slightly into the
future, is very encouraging. The U.S. may be close to the limits of domestically
inspired growth, as is the U.K. with its strong currency. European growth will
suffer from downgraded export prospects. Ignoring the impact of the Far East, we
have a sound bond environment. [SQUARE BULLET]
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 15, 1993
PORTFOLIO SIZE:
$35.9 MILLION
SHARES OUTSTANDING:
3,843,846 (Y&ACOMBINED)
AVERAGE WEIGHTED MATURITY:
9.2 YEARS
QUALITY DIVERSIFICATION
AAA 89%
AA 10%
NOT RATED 1%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
35
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
--------------------------------
INCEPTION DATE:
MARCH 3, 1993
PORTFOLIO SIZE:
$1.9 MILLION
SHARES OUTSTANDING:
182,592 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
6.2 YEARS
QUALITY DIVERSIFICATION
AAA 71%
AA 23%
A 3%
NOT RATED 3%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] INTERMEDIATE MUNI BOND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 4.13% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers 7-Year Municipal Bond
Index, returned 4.91% for the same period.
[SQUARE BULLET] Assets in the Fund declined 5% from $2.0 million to $1.9 million
during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
During the semi-annual period, CoreFund Intermediate Municipal Bond Fund
provided investors with positive returns as it outperformed its benchmark.
In general, the municipal bond market lagged the rally in U.S.
Treasuries during the last six months of 1997. During the Fund's first quarter
(through September) bond markets fluctuated in reaction to various economic
releases, inflation reports, and concerns about interest rates. In July,
favorable employment and inflation reports led to strong rallies and lower
municipal bond yields. Evidence of stronger economic growth and a weaker dollar
followed in August.
In September, new issues flooded the market as many municipalities
chose to refinance existing bonds to take advantage of the low rates. On the
positive side, legislation did not repeal the De Minimis exemption. This repeal
would have made it less attractive for corporations to invest in municipals, and
therefore may have resulted in the loss of key corporate support.
After reacting to inflation fears in October, bond market yields moved
lower on
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
INTERMEDIATE MUNI (CLASS Y) LEHMAN 7-YEAR MUNI INDEX
4.13 4.91
YIELD 30-DAY %
--------------
INTERMEDIATE MUNI (CLASS Y) LEHMAN 7-YEAR MUNI INDEX
3.86 4.37
PERFORMANCE
- ----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 4.13% 3.86% $10.25
CLASS A W/O LOAD 4.00 3.86 10.25
CLASS A W/LOAD 0.60 3.49 10.59
LEHMAN 7-YEAR 4.91 4.37 --
- ----------------------------------------------
36
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
expectations that the Asian crisis would slow the U.S. economy and the belief
that the Federal Reserve would not tighten credit. As government bonds rallied,
municipals lagged due to heavy new issuance.
For the six months, issuance was 31% higher vs. 1996, causing municipals to
consistently underperform U.S. Treasuries. As Treasuries benefited from a
world-wide flight to quality, the oversupply within the municipal market kept a
ceiling on how far prices could rise.
Throughout this period, a reduction in Fund assets kept the Fund's duration
slightly shorter than the Index.
Looking ahead, we expect interest rates to remain stable, municipal bond
supply to come down, and municipal yields to tighten. Our strategy is to manage
duration to maximize opportunities. We will continue to manage cash flow. We
will also work to replace bonds that have reached their call prices with new
bonds. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[SQUARE BULLET] PA MUNICIPAL BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.51% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers Pennsylvania Bond
Index, returned 5.54% for the same period.
[SQUARE BULLET] Assets in the Fund grew 43% from $12.2 million to $17.5 million
during the six months.
COMMENTARY
The CoreFund Pennsylvania Municipal Fund nearly mirrored the performance of its
benchmark for the semi-annual period, providing investors with positive tax-free
returns. Through October, the Fund received a 5-Star, rating from Morningstar on
its 1-year return and its assets grew significantly.
[GRAPHIC OF POINTER OMITTED]
In general, the municipal bond market lagged the rally in U.S. Treasuries
during the last six months of 1997. During the first quarter (through September)
bond markets fluctuated in reaction to various economic releases, inflation
reports, and concerns about interest rates. In July, favorable
PENNSYLVANIA MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
--------------------------------
INCEPTION DATE:
MAY 16, 1994
PORTFOLIO SIZE:
$17.5 MILLION
SHARES OUTSTANDING:
1,624,413 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.6 YEARS
QUALITY DIVERSIFICATION
AAA 65%
AA 19%
A 6%
OTHER 10%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
37
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] PA MUNICIPAL BOND (CON'T.)
employment and inflation reports led to strong rallies and lower municipal bond
yields. Evidence of stronger economic growth and a weaker dollar followed in
August.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
PA MUNICIPAL (CLASS Y) LEHMAN BROS. PA BOND INDEX
5.51 5.54
YIELD 30-DAY %
--------------
PA MUNICIPAL (CLASS Y) LEHMAN BROS. PA BOND INDEX
4.70 4.71
PERFORMANCE
- ---------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 5.51% 4.70% $10.77
CLASS A W/O LOAD 5.47 4.70 10.78
CLASS A W/LOAD 0.48 4.25 11.32
LEHMAN BROS.
PA BOND 5.54 4.71 --
- ---------------------------------------------
In September, new issues flooded the market as many municipalities
chose to refinance existing bonds to take advantage of the low rates. On the
positive side, legislation did not repeal the De Minimis exemption. This repeal
would have made it less attractive for corporations to invest in municipals, and
therefore may have resulted in the loss of key corporate support.
After reacting to inflation fears in October, bond market yields moved
lower on expectations that the Asian crisis would slow the U.S. economy and the
belief that the Federal Reserve would not tighten credit. As government bonds
rallied, municipals lagged due to heavy new issuance.
For the six months, issuance was 31% higher vs. 1996, causing
municipals to consistently underperform U.S. Treasuries. As Treasuries benefited
from a world-wide flight to quality, the oversupply within the municipal market
kept a ceiling on how far prices could rise.
Looking ahead, we expect interest rates to remain stable, municipal
supply to come down, and municipal yields to tighten. Our duration strategy has
been to stay slightly longer than the Index -- however, we plan to start
bringing it down to neutral with the Index in light of current conditions. We
38
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
will continue to work to replace bonds that have reached their call prices with
newer bonds. [SQUARE BULLET]
[SQUARE BULLET] NJ MUNICIPAL BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.55% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers New Jersey Bond Index,
returned 5.54% for the same period.
[SQUARE BULLET] Assets in the Fund grew 11% from $1.9 to $2.1 million during the
six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund NJ Municipal Fund provided investors with positive tax-free returns
for the semi-annual period while outperforming its benchmark.
In general, the municipal bond market lagged the rally in U.S. Treasuries
during the last six months of 1997. During the first quarter (through September)
bond markets fluctuated in reaction to various economic releases, inflation
reports, and concerns about interest rates. In July, favorable employment and
inflation reports led to strong rallies and lower municipal bond yields.
Evidence of stronger economic growth and a weaker dollar followed in August.
In September, new issues flooded the market as many municipalities chose to
NEW JERSEY MUNICIPAL BOND FUND
------------------------------
QUICK FUND FACTS
------------------------------
INCEPTION DATE:
MAY 16, 1994
PORTFOLIO SIZE:
$2.1 MILLION
SHARES OUTSTANDING:
202,830 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.6 YEARS
QUALITY DIVERSIFICATION
AAA 47%
AA 25%
NOT RATED 28%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
39
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] NJ MUNICIPAL BOND (CON'T.)
refinance existing bonds to take advantage of the low rates. On the positive
side, legislation did not repeal the De Minimis exemption. This repeal would
have made it less attractive for corporations to invest in municipals, and
therefore may have resulted in the loss of key corporate support.
After reacting to inflation fears in October, bond market yields moved
lower on expectations that the Asian crisis would slow the U.S. economy and the
belief that the Federal Reserve would not tighten credit. As government bonds
rallied, municipals lagged due to heavy new issuance.
For the six months, issuance was 31% higher vs. 1996, causing municipals to
consistently underperform U.S. Treasuries. As Treasuries benefited from a
world-wide flight to quality, the oversupply within the municipal market kept a
ceiling on how far prices could rise.
Looking ahead, we expect interest rates to remain stable, municipal
supply to come down, and municipal yields to tighten.
[BAR GRAPH]
6-MONTH TOTAL RETURN %
----------------------
NJ MUNICIPAL (CLASS Y) LEHMAN BROS. NJ BOND INDEX
5.55 5.54
YIELD 30-DAY %
--------------
NJ MUNICIPAL (CLASS Y) LEHMAN BROS. NJ BOND INDEX
4.72 4.32
PERFORMANCE
- ---------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 5.55% 4.72% $10.46
CLASS A W/O LOAD 5.42 4.72 10.45
CLASS A W/LOAD 0.37 4.26 10.97
LEHMAN BROS.
NJ BOND 5.54 4.32 --
- ---------------------------------------------
Our strategy is to manage duration to maximize opportunities. We will continue
to work to replace bonds that have reached their call prices with newer bonds.
[SQUARE BULLET]
- --------------------------------------------------------------------------------
40
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] TREASURY RESERVE
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 2.57% net of expenses for the six months
ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC Financial U.S. Treasury & REPO
Average, returned 2.47%, net of expenses, for the same period.
[SQUARE BULLET] Assets in the Fund declined 2% from $847.5 million to $831.3
million during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The average weighted maturity of the CoreFund Treasury Reserve remained stable
at 55 days during the semi-annual period. The Fund modestly outperformed its
benchmark, providing conservative money market investors with a competitive
yield.
Throughout the period, the one-year Treasury bill followed the rally in
the coupon sector. Tight supply and strong demand kept the T-bill market at very
rich levels. Three- and six-month bills decreased to their lowest yields since
February 1996. Stock market volatility, the Asian crisis, and the strong buying
of Central Banks have all contributed to the flight to quality and strong demand
for the short-term bills. During the period the dealer community and the central
banks controlled the bill market as there was very little retail buying.
Increases were made during the period to the percentage of holdings of
Treasury-bill alternatives such as old coupon notes and STRIPS, because they
offered a better spread over bills. The Fund also took advantage of higher
overnight yields by increasing its holdings in repurchase agreements.
The Treasury bill market should remain at very rich levels during the
first quarter of 1998. The tight supply/strong
COREFUND MONEY MARKET MANAGERS
[PHOTO OMITTED]
(LEFT TO RIGHT)
JOHN ACKLER
CASH RESERVE
FOLU ABIONA
TAX-FREE RESERVE
RONALD BRASTEN
TREASURY RESERVE
41
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
TREASURY RESERVE
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
NOVEMBER 21, 1988
PORTFOLIO SIZE:
$831.3 MILLION
AVERAGE WEIGHTED MATURITY:
55 DAYS
QUALITY DIVERSIFICATION
AAA 33%
NOT RATED 67%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] TREASURY RESERVE (CON'T.)
demand scenario we have experienced the past several months will continue to be
a factor in the money markets. Other factors, such as the financial crises in
Asia and Federal Reserve Chairman Alan Greenspan's recent comments about the
possibility of deflation, have led the market to believe that the Fed may have
shifted their bias toward an easing in monetary policy. The Fund will continue
its strategy of purchasing Treasury bill alternatives where there are
opportunities. When the technical factors subside and yields rise, the Fund will
go back to its proven laddered approach to investing. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
TREASURY RESERVE (CLASS Y) IBC FINANCIAL TREASURY & REPO INDEX
2.57 2.47
YIELD 7-DAY %
-------------
TREASURY RESERVE (CLASS Y) IBC FINANCIAL TREASURY & REPO INDEX
5.11 4.88
PERFORMANCE
- -------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)
- -------------------------------------------
CLASS Y 2.57% 5.11% 5.08%
CLASS C 2.44 4.86 4.83
IBC TREASURY/
REPO 2.47 4.88 4.89
- -------------------------------------------
42
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] CASH RESERVE
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 2.65% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the IBC Financial All-Taxable Money Fund
Average, returned 2.57% for the same period.
[SQUARE BULLET] Assets in the Fund grew 13% from $913.9 million to $1.04 billion
during the six months.
COMMENTARY
The CoreFund Cash Reserve provided money market investors with positive returns
for the semi-annual period. During the third quarter of 1997, inflation fears
subsided and the yield curve on short-term securities flattened in reaction to
dampened concerns about an impending increase in the Federal funds rate. Also,
as the U.S. moved closer to a budget surplus, there was a reduction in the
supply of Treasury securities coupled with a healthy demand, causing rates to
drop.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
CASH RESERVE (CLASS Y) IBC FINANCIAL ALL-TAXABLE INDEX
2.65 2.57
YIELD 7-DAY %
-------------
CASH RESERVE (CLASS Y) IBC FINANCIAL ALL-TAXABLE INDEX
2.65 2.57
PERFORMANCE
- --------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)
- --------------------------------------------
CLASS Y 2.65% 5.28% 5.27%
CLASS C 2.52 5.03 5.02
CLASS B* 0.50 4.30 4.28
IBC TAXABLE 2.57 5.12 5.10
- --------------------------------------------
*INCEPTION DATE 11/18/97
However, in anticipation of this drop and the further increased demand
for year-end liquidity trades, dealers purchased large blocks of Treasury bills,
further tightening yields. Also, foreign investors found dollar-denominated
securities attractive due to the strong U.S. currency and high real interest
rates relative to their own.
[GRAPHIC OF POINTER OMITTED]
During the fourth quarter, yields on money market securities were
driven up significantly by the financial crisis in Asia, an increased supply in
the Treasury market, and the anticipation of tight funds over year end. Also in
this quarter, U.S. Dollar short-term LIBOR Rates were driven higher and the
supply of Treasury Bills increased. Focus has been shifted from LIBOR floater
bonds to Federal Fund-based and Prime-based floater
CASH RESERVE
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
AUGUST 16, 1985
PORTFOLIO SIZE:
$1.04 BILLION
AVERAGE WEIGHTED MATURITY:
68 DAYS
QUALITY DIVERSIFICATION
AAA 2%
AA 7%
A 84%
NOT RATED 7%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
43
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] CASH RESERVE (CONTINUED)
bonds since these securities tend to fluctuate less. By the end of year the
market offered great opportunity for investors to buy.
Given these conditions, the Fund's strategy has been to maintain an
average weighted laddered maturity between 65 and 70 days while seeking products
that offer incremental yield. In anticipation of the flurry of year-end
liquidity trades, we placed securities to mature in December, making it possible
for us to buy a lot of longer-term paper during this favorable market.
Looking forward, we believe uncertainty due to the Asian crisis will
continue, which will keep money moving into the fixed-income market. However,
the impact of the crisis on domestic corporations is still unknown. We think
that economic conditions will cause money market yields to trend lower
throughout 1998. We will also increase our emphasis on credit quality while
maintaining our current duration structure. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[SQUARE BULLET] TAX-FREE RESERVE (CONTINUED)
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 1.63% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the IBC Financial Tax-Free Average,
returned 1.59% for the same period.
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] Assets in the Fund grew 35% from $122.8 million to $165.2
million during the six months.
COMMENTARY
Moderately outperforming its benchmark, the Tax-Free Reserve provided positive
tax-free returns to shareholders during this semi-annual period. The 7-day yield
for Class Y shares as of December 31, 1997 was 3.32%. At the end of the period,
the Fund had an average weighted maturity of 48 days.
Throughout the six months, we saw a continuation of the trend toward
changing money market volume seasonality patterns. Rates overall were lower due
to volatility.
Yields were unusually attractive in July. In August, yields were lower
as there was an increase in money moving into the
44
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
TAX-FREE RESERVE (CLASS Y) IBC FINANCIAL TAX-FREE INDEX
1.63 1.59
YIELD 7-DAY %
-------------
TAX-FREE RESERVE (CLASS Y) IBC FINANCIAL TAX-FREE INDEX
3.32 3.38
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)
- ------------------------------------------
CLASS Y 1.63% 3.32% 3.23%
CLASS C 1.49 3.22 2.97
IBC TAX-FREE 1.59 3.38 3.21
- ------------------------------------------
short tax-exempt market in reaction to volatility in both the stock and bond
markets.
In October, strength in the Treasury market, coupled with troubles in the
Asian economies, caused more money to move into the short tax-exempt market at
an unexpected time. We took advantage of opportunities for maturity extension in
November. In December, the market was more challenging due to light supply.
Looking into 1998, we plan to maintain our current longer duration
strategy. We believe rates will move lower as the Asian crisis drags on the U.S.
economy and we will work to take advantage of any opportunities created by the
market volatility. [SQUARE BULLET]
- --------------------------------------------------------------------------------
TAX-FREE RESERVE
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
APRIL 16, 1991
PORTFOLIO SIZE:
$165.2 MILLION
AVERAGE WEIGHTED MATURITY:
48 DAYS
QUALITY DIVERSIFICATION
AAA 13%
AA 9%
A 53%
NOT RATED 25%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
45
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
STATEMENT
OF
NET ASSETS
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND
[PIT CHART OMITTED]
MISCELLANEOUS 8%
UTILITIES 9%
RETAIL 7%
OIL-ENERGY 7%
FINANCIAL 17%
CHEMICALS & DRUGS 13%
CONSUMER PRODUCTS 13%
DURABLE GOODS 26%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 0.9%
Lockheed Martin 6,800 $ 670
Northrop Grumman 1,700 195
Raytheon Company, Class B* 8,900 449
Rockwell International 8,763 458
United Technologies 8,600 626
-----------
2,398
-----------
AGRICULTURE -- 0.1%
Pioneer Hi-Bred International 3,000 322
-----------
AIR TRANSPORTATION -- 0.5%
AMR* 2,800 360
Delta Air Lines 2,500 297
Federal Express* 4,000 244
US Air Group* 7,800 487
-----------
1,388
-----------
AIRCRAFT -- 0.9%
Boeing 38,470 1,883
General Dynamics 1,500 130
Textron 8,000 500
-----------
2,513
-----------
APPAREL/TEXTILES -- 0.3%
Liz Claiborne 5,000 209
Nike, Class B 10,000 392
Russell 3,100 82
-----------
683
-----------
AUTOMOTIVE -- 2.4%
Allied Signal 18,200 709
Chrysler 26,200 922
Dana 6,500 309
Echlin 8,300 300
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Ford Motor 43,400 $ 2,113
General Motors 27,600 1,673
Paccar 3,000 157
TRW 5,000 267
-----------
6,450
-----------
BANKS -- 8.6%
Banc One 20,944 1,138
Bank of New York 13,000 752
BankAmerica 25,600 1,869
BankBoston 4,500 423
Bankers Trust New York 3,800 427
Barnett Banks of Florida 6,800 489
BB&T 5,000 320
Chase Manhattan 15,766 1,726
Citicorp 16,800 2,124
Comerica 3,700 334
Fifth Third Bancorp 4,500 368
First Chicago 12,701 1,061
First Union 21,060 1,079
Fleet Financial Group 9,801 734
Golden West Financial 2,000 196
H.F. Ahmanson 2,000 134
J.P. Morgan 6,000 677
Keycorp 7,800 552
MBNA 17,887 489
National City 6,800 447
NationsBank 27,000 1,642
Norwest 30,600 1,182
PNC Bank 13,900 793
Providian Financial 2,300 104
State Street 6,000 349
Suntrust Banks 8,400 600
Synovus Financial 3,000 98
U.S. Bancorp 8,746 979
Wachovia 7,100 576
Washington Mutual 9,100 581
Wells Fargo 3,433 1,165
-----------
23,408
-----------
BEAUTY PRODUCTS -- 2.7%
Avon Products 3,200 196
Colgate Palmolive 10,492 771
Ecolab 5,000 277
Gillette 20,500 2,059
Procter & Gamble 50,800 4,054
-----------
7,357
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 1.0%
CBS 21,500 633
Clear Channel Communications* 2,000 159
Comcast, Class A 14,200 448
Tele-Communications, Class A* 18,424 515
U.S. West Media Group* 21,800 629
Viacom, Class B* 10,526 436
-----------
2,820
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.3%
Centex 2,400 $ 151
Fluor 1,900 71
Foster Wheeler 3,300 89
Halliburton 9,200 478
McDermott International 3,400 125
-----------
914
-----------
BUILDING MATERIALS -- 0.0%
Owens Corning 2,800 96
-----------
CHEMICALS -- 2.3%
Air Products & Chemical 3,100 255
Dow Chemical 8,150 827
E.I. DuPont de Nemours 40,000 2,402
Eastman Chemical 5,700 340
FMC* 2,200 148
Great Lakes Chemical 300 13
Hercules 2,700 135
Monsanto 19,500 819
Morton International 1,600 55
Nalco Chemical 5,700 226
Praxair 5,500 247
Rohm & Haas 2,500 239
Sigma Aldrich 10,600 421
W.R. Grace & Company 3,100 249
-----------
6,376
-----------
COMMUNICATIONS EQUIPMENT -- 2.6%
Andrew * 9,000 216
Cabletron Systems* 5,800 87
Cisco Systems* 36,900 2,057
ITT Industries 7,000 220
ITT* 3,600 298
Lucent Technologies 23,300 1,861
Motorola 20,600 1,175
NextLevel Systems* 5,800 104
Northern Telecom 8,300 739
Tellabs* 6,200 328
-----------
7,085
-----------
COMPUTERS, SOFTWARE & SERVICES-- 7.7%
3COM* 12,000 419
Adobe Systems 4,000 165
Automatic Data Processing 9,400 577
Bay Networks* 9,000 230
Ceridian* 3,400 156
Compaq Computer* 26,250 1,481
Computer Associates
International 18,075 956
Computer Sciences* 1,900 159
Dell Computer* 12,400 1,042
Digital Equipment* 3,900 144
EMC* 14,200 390
Equifax 6,000 213
First Data 15,400 450
Harris Computer Systems 3,200 147
Hewlett Packard 37,300 2,331
International Business Machines 35,000 3,660
Microsoft* 43,100 5,571
Novell* 29,300 220
Oracle Systems* 36,862 822
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Parametric Technology* 5,000 $ 237
Pitney Bowes 5,000 450
Seagate Technology* 7,200 139
Shared Medical Systems 2,400 158
Silicon Graphics* 21,000 261
Sun Microsystems* 11,200 447
Tandy 4,000 154
-----------
20,979
-----------
CONTAINERS & PACKAGING -- 0.2%
Crown Cork & Seal 3,700 185
Owens-Illinois* 9,000 341
-----------
526
-----------
DRUGS -- 8.4%
Abbott Labs 28,000 1,836
Allergan 4,300 144
American Home Products 22,800 1,744
Amgen* 9,600 520
Baxter International 9,800 494
Bristol-Myers Squibb 37,040 3,505
Eli Lilly 39,800 2,771
Merck 44,400 4,717
Pfizer 48,200 3,594
Pharmacia & Upjohn 16,255 595
Schering Plough 27,200 1,690
Warner Lambert 9,400 1,166
-----------
22,776
-----------
ELECTRICAL EQUIPMENT -- 3.5%
Emerson Electric 14,600 824
General Electric 117,700 8,636
W.W. Grainger 2,000 194
-----------
9,654
-----------
ELECTRICAL SERVICES -- 2.6%
American Electric Power 5,300 274
Baltimore Gas & Electric 4,700 160
Carolina Power & Light 10,600 450
Central & South West 5,400 146
Cinergy 4,600 176
Consolidated Edison of New York 5,300 217
Dominion Resources of Virginia 5,500 234
DTE Energy 4,200 146
Duke Power 12,986 719
Edison International 13,400 364
Entergy 10,200 305
Firstenergy* 5,000 145
FPL Group 6,100 361
GPU 4,200 177
Houston Industries 13,343 356
Niagara Mohawk Power* 26,200 275
Pacificorp 6,400 175
PECO Energy 16,000 388
PG&E 15,500 472
PP&L Resources 5,500 132
Public Service Enterprise Group 5,500 174
Southern 20,100 520
Texas Utilities 8,785 365
Unicom 4,800 148
Union Electric Power 4,300 186
-----------
7,065
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ENTERTAINMENT -- 1.1%
King World Productions 6,600 $ 381
Walt Disney 24,926 2,469
-----------
2,850
-----------
ENVIRONMENTAL SERVICES -- 0.3%
Browning Ferris Industries 5,900 218
Laidlaw 14,000 191
Waste Management 15,200 418
-----------
827
-----------
FINANCIAL SERVICES -- 3.9%
Allstate 15,700 1,427
American Express 16,600 1,482
Beneficial 2,400 199
Charles Schwab 9,600 403
Countrywide Credit Industries 6,000 257
FHLMC 30,200 1,267
FNMA 38,800 2,214
Green Tree Financial 5,900 155
Household International 4,100 523
Mellon Bank 11,400 691
Merrill Lynch 11,200 817
Morgan Stanley, Dean Witter,
Discover 19,330 1,143
-----------
10,578
-----------
FOOD, BEVERAGE & TOBACCO -- 8.0%
Anheuser Busch 16,400 722
Archer Daniels Midland 17,277 375
Campbell Soup 16,200 942
Coca Cola 91,600 6,103
ConAgra 14,600 479
Coors, Adolph, Class B 5,600 186
CPC International 5,400 583
Fortune Brands 6,700 248
General Mills 5,900 423
H.J. Heinz 16,650 846
Hershey Foods 4,000 248
Kellogg 15,200 754
Pepsico 56,800 2,070
Philip Morris 89,400 4,051
Ralston-Purina Group 3,900 362
Sara Lee 16,900 952
Seagram 12,300 397
Unilever 23,600 1,474
UST 10,200 377
Wrigley, William Jr. 4,000 318
-----------
21,910
-----------
GAS/NATURAL GAS -- 0.9%
Coastal 2,500 155
Columbia Gas Systems 3,500 275
Consolidated Natural Gas 6,000 363
Enron 11,200 465
Nicor 3,700 156
Oneok 5,900 238
Pacific Enterprises 3,800 143
Peoples Energy 4,100 161
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Sonat 6,800 $ 311
Williams 7,500 213
-----------
2,480
-----------
GLASS PRODUCTS -- 0.3%
Corning 7,300 271
PPG Industries 7,300 417
-----------
688
-----------
HOTELS & LODGING -- 0.2%
Harrah's Entertainment* 10,000 189
Hilton Hotels 8,500 253
Marriott International 2,900 201
-----------
643
-----------
HOUSEHOLD FURNITURE & FIXTURES-- 0.2%
Armstrong World Industries 1,600 120
Masco 3,500 178
Newell 3,600 153
Sherwin Williams 4,600 128
-----------
579
-----------
HOUSEHOLD PRODUCTS -- 0.3%
Clorox 5,800 459
Whirlpool 5,700 313
-----------
772
-----------
INSURANCE -- 4.6%
Aetna 5,308 375
American General 9,716 525
American International Group 25,500 2,773
AON 5,250 308
Chubb 6,600 499
Cigna 2,900 502
Cincinnati Financial 3,000 422
Conseco 5,600 254
General Re 2,400 509
Hartford Financial Services Group 3,100 290
Jefferson-Pilot 4,500 350
Lincoln National 2,100 164
Loews 3,400 361
Marsh and McLennan 7,400 552
MBIA 3,800 254
MGIC Investment 5,000 332
Progressive of Ohio 2,200 264
Safeco 8,400 409
Sunamerica 6,750 289
Transamerica 2,000 213
Travelers 39,579 2,132
United Healthcare 5,100 253
Unum 6,000 326
USF&G 13,500 298
-----------
12,654
-----------
LUMBER & WOOD PRODUCTS -- 0.1%
Georgia Pacific 2,700 164
Potlatch 2,100 90
Timber Group* 2,700 61
-----------
315
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
MACHINERY -- 1.8%
Baker Hughes 6,000 $ 262
Black & Decker 3,500 137
Brunswick 9,500 288
Case 3,000 181
Caterpillar 13,800 670
Crane 4,650 202
Deere 7,800 455
Dover 5,600 202
Dresser Industries 4,500 189
Eaton 2,000 179
Illinois Tool Works 8,200 493
Ingersoll Rand 3,600 146
Snap-On Tools 4,050 177
Stanley Works 3,600 170
Tenneco 5,000 198
Timken 5,000 172
Tyco International Limited 17,800 802
-----------
4,923
-----------
MEASURING DEVICES -- 0.6%
Honeywell 4,400 301
Johnson Controls 9,000 430
KLA-Tencor* 3,000 116
Millipore 3,400 115
Parker Hannifin 4,275 196
Perkin Elmer 2,000 142
Tektronix 5,250 208
Thermo Electron* 5,100 227
-----------
1,735
-----------
MEDICAL INFORMATION SYSTEMS-- 0.1%
HBO 7,500 360
-----------
MEDICAL PRODUCTS & SERVICES-- 2.7%
Bausch & Lomb 2,000 79
Biomet* 7,400 190
Boston Scientific* 5,800 266
Cardinal Health 4,000 301
Columbia/HCA Healthcare 22,850 677
Guidant 5,000 311
Healthsouth* 11,000 305
Humana* 8,500 176
Johnson & Johnson 48,000 3,162
Mallinckrodt 4,500 171
Medtronic 16,000 837
St. Jude Medical* 7,000 214
Tenet Healthcare* 12,900 427
U.S. Surgical 6,000 176
-----------
7,292
-----------
METALS & MINING -- 0.6%
Alcan Aluminum 7,700 213
Aluminum Company of America 5,200 366
Asarco 3,300 74
Cyprus AMAX Minerals 7,400 114
Freeport-McMoran Copper
and Gold, Class B 6,000 95
Inco 7,600 129
Newmont Mining 10,770 316
Phelps Dodge 1,600 100
Reynolds Metals 3,500 210
-----------
1,617
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 0.4%
Cendant* 28,502 $ 980
National Service Industries 3,000 149
-----------
1,129
-----------
MISCELLANEOUS CHEMICAL PRODUCTS-- 0.1%
Raychem 3,800 164
-----------
MISCELLANEOUS CONSUMER SERVICES-- 0.2%
H&R Block 7,000 314
Service International 5,800 214
-----------
528
-----------
MISCELLANEOUS MANUFACTURING-- 0.2%
Hasbro 3,600 113
Mattel 8,250 307
-----------
420
-----------
PAPER & PAPER PRODUCTS -- 1.7%
Avery Dennison 4,600 206
Champion International 2,200 100
Fort James 6,700 256
International Paper 12,035 519
Kimberly Clark 23,704 1,169
Mead 6,600 185
Minnesota Mining
& Manufacturing 14,600 1,198
Stone Container* 3,800 40
Temple Inland 1,000 52
Union Camp 4,750 255
Westvaco 3,150 99
Weyerhaeuser 6,006 295
Willamette Industries 3,800 122
-----------
4,496
-----------
PETROLEUM REFINING -- 8.0%
Amerada Hess 2,100 115
Amoco 17,400 1,481
Ashland 4,300 231
Atlantic Richfield 12,000 962
Burlington Resources 6,400 287
Chevron 23,300 1,794
Exxon 90,600 5,544
Helmerich and Payne 3,300 224
Mobil 28,800 2,079
Occidental Petroleum 9,900 290
Oryx Energy* 8,400 214
Phillips Petroleum 7,200 350
Rowan Companies* 10,000 305
Royal Dutch Petro 75,500 4,091
Schlumberger 17,800 1,433
Sun 8,200 345
Texaco 18,600 1,011
Union Pacific Resources Group 8,629 209
Unocal 8,900 345
USX Marathon Group 9,500 321
Western Atlas* 3,000 222
-----------
21,853
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES-- 0.6%
Eastman Kodak 11,300 $ 687
Polaroid 3,000 146
Xerox 10,800 797
-----------
1,630
-----------
PRECIOUS METALS -- 0.1%
Barrick Gold 12,000 224
Echo Bay Mines* 9,100 22
Placer Dome Group 5,400 69
-----------
315
-----------
PRINTING & PUBLISHING -- 1.3%
Deluxe 2,500 86
Donnelly R.R. & Sons 9,200 343
Gannett 9,600 593
Knight-Ridder 3,000 156
McGraw-Hill 2,200 163
Meredith 6,000 214
New York Times, Class A 3,200 212
Time Warner, Class A 19,800 1,228
Times Mirror, Class A 5,900 363
Tribune 3,000 187
-----------
3,545
-----------
PROFESSIONAL SERVICES -- 0.2%
Cognizant 11,000 490
Dun & Bradstreet 4,700 145
-----------
635
-----------
RAILROADS -- 0.7%
Burlington Northern Santa Fe 5,464 508
CSX 8,200 443
Norfolk Southern 13,800 425
Union Pacific 8,300 518
-----------
1,894
-----------
RESTAURANTS -- 0.6%
Darden Restaurants 11,800 148
McDonald's 24,900 1,189
Tricon Global Restaurants* 4,000 116
Wendy's International 5,900 142
-----------
1,595
-----------
RETAIL -- 4.8%
Albertson's 8,400 398
American Stores 6,400 132
Autozone* 10,000 290
Charming Shoppes* 20,000 94
Costco Companies* 10,900 486
CVS 6,400 410
Dayton-Hudson 7,800 527
Dillards, Class A 9,700 342
Federated Department Stores* 5,700 245
Gap 14,700 521
Giant Food, Class A 3,900 131
Harcourt General 5,300 290
Home Depot 25,599 1,507
J.C. Penney 8,600 519
K Mart* 16,950 196
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Kroger* 6,200 $ 229
Limited 9,500 242
Lowes 5,500 262
May Department Stores 6,900 364
Mercantile Stores 500 30
Nordstrom 6,000 362
Rite Aid 3,700 217
Sears Roebuck 13,500 611
TJX Companies 9,000 309
Toys R Us* 9,800 308
Wal Mart Stores 82,600 3,258
Walgreen 15,200 477
Winn Dixie Stores 5,000 218
Woolworth* 7,500 153
-----------
13,128
-----------
RUBBER & PLASTIC -- 0.3%
Goodyear Tire & Rubber 5,380 342
Reebok International 7,300 210
Rubbermaid 8,500 213
Tupperware 5,700 159
-----------
924
-----------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.3%
Advanced Micro Devices* 7,500 135
AMP 6,200 260
Applied Materials* 13,200 398
Intel 60,200 4,229
LSI Logic* 10,000 198
National Semiconductor* 5,600 145
Texas Instruments 13,200 594
Thomas & Betts 5,000 236
-----------
6,195
-----------
SPECIALTY MACHINERY -- 0.1%
Cooper Industries 6,000 294
-----------
STEEL & STEEL WORKS -- 0.2%
Allegheny Teledyne 8,300 215
Nucor 6,000 290
USX U.S. Steel Group 1,900 59
-----------
564
-----------
TELEPHONES & TELECOMMUNICATION-- 7.0%
AT&T 58,736 3,598
Airtouch Communications* 19,100 794
Alltel 6,000 246
Ameritech 21,800 1,755
Bell Atlantic 28,612 2,604
Bellsouth 36,100 2,033
GTE 33,600 1,756
MCI Communications 24,458 1,047
SBC Telecommunications 33,586 2,460
Sprint 14,000 821
US West 17,600 794
Worldcom* 36,500 1,104
-----------
19,012
-----------
TRUCKING -- 0.1%
Ryder System 5,000 164
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- --------------------------------------------------------
WHOLESALE -- 0.3%
Ikon Office Solutions 10,000 $ 281
Sysco 10,000 456
-----------
737
-----------
TOTAL COMMON STOCKS
(Cost $155,836) 272,255
-----------
REPURCHASE AGREEMENT -- 0.3%
Aubrey Lanston
6.50%, dated 12/31/97,
matures 01/02/98,
repurchase price $856,309
(collateralized by various U.S.
Treasury Notes, ranging
in par value $415,000-$440,000,
5.625%-8.25%, 07/15/98-
12/31/99; total market
value $876,803) $856 856
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $856) 856
-----------
TOTAL INVESTMENTS -- 100.2%
(Cost $156,692) 273,111
-----------
OTHER ASSETS AND LIABILITIES,
NET-- (0.2%) (425)
-----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 500 million authorized)
based on 6,628,613 outstanding shares 146,711
Portfolio Shares -- Class A ($0.001 par
value -- 500 million authorized)
based on 229,839 outstanding shares 8,338
Portfolio Shares -- Class B ($0.001 par
value -- 500 million authorized)
based on 18,981 outstanding shares 745
Accumulated Net Realized Gain
on Investments 469
Net Unrealized Appreciation
on Investments 116,419
Undistributed Net Investment Income 4
-----------
TOTAL NET ASSETS-- 100.0% $272,686
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $39.65
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $39.66
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $39.12
===========
* NON INCOME PRODUCING SECURITY
ADR --AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CORE EQUITY FUND
[PIE CHART OMITTED]
MISCELLANEOUS 9%
UTILITIES 9%
REAL ESTATE INVESTMENT TRUST 3%
OIL-ENERGY 7%
FINANCIAL 13%
CHEMICALS & DRUGS 8%
CONSUMER PRODUCTS 12%
DURABLE GOODS 39%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 99.5%
AIRCRAFT -- 2.1%
Boeing 165,500 $ 8,099
Textron 60,000 3,750
-----------
11,849
-----------
AEROSPACE & DEFENSE -- 0.0%
Raytheon Company, Class A* 1,434 71
-----------
AUTOMOTIVE -- 2.4%
Allied Signal 120,000 4,672
Ford Motor 155,000 7,547
General Motors 22,500 1,364
-----------
13,583
-----------
BANKS -- 2.1%
BankAmerica 42,000 3,066
NationsBank 153,200 9,316
-----------
12,382
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 0.6%
Emmis Broadcasting* 77,500 3,536
-----------
BUILDING & CONSTRUCTION -- 1.1%
Clayton Homes 250,000 4,500
Foster Wheeler 62,500 1,691
-----------
6,191
-----------
CHEMICALS -- 2.8%
Hercules 20,000 1,001
IMC Global 115,000 3,766
Monsanto 99,000 4,158
Praxair 155,000 6,975
-----------
15,900
CLEANING PRODUCTS -- 0.1%
USA Detergents* 56,500 459
-----------
52
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.2%
Lucent Technologies 89,000 $ 7,109
-----------
COMPUTERS, SOFTWARE & SERVICES -- 8.4%
3COM* 147,500 5,153
America Online* 35,000 3,122
Cabletron Systems* 86,000 1,290
Computer Associates
International 97,500 5,155
International Business
Machines 142,500 14,900
Microsoft* 93,000 12,020
Storage Technology* 111,400 6,900
-----------
48,540
-----------
CONTAINERS & PACKAGING -- 1.1%
Crown Cork & Seal 125,000 6,266
-----------
DRUGS -- 3.3%
Biogen* 165,000 6,002
Eli Lilly & Co. 109,400 7,617
Mylan Laboratories 265,000 5,548
-----------
19,167
-----------
ELECTRICAL SERVICES -- 2.1%
FPL Group 52,500 3,107
Pinnacle West Capital 125,000 5,297
Unicom 120,000 3,690
-----------
12,094
-----------
ENVIRONMENTAL SERVICES -- 1.5%
Browning Ferris Industries 240,000 8,880
-----------
FOOD, BEVERAGE & TOBACCO -- 9.2%
Canandaigua Wine, Class A* 195,005 10,798
Chiquita Brands International 700,000 11,419
Nabisco Holdings, Class A 375,400 18,183
Philip Morris 75,500 3,421
RJR Nabisco Holdings 249,300 9,349
-----------
53,170
-----------
GAS/NATURAL GAS -- 0.4%
Sonat 47,700 2,182
-----------
HEALTHCARE SERVICES -- 2.2%
Medpartners* 579,700 12,971
-----------
HOTELS & LODGING -- 1.7%
Felcor Suite Hotels 145,000 5,147
Hilton Hotels 150,000 4,463
-----------
9,610
-----------
INSURANCE -- 11.9%
Aetna 85,000 5,998
Conseco 270,000 12,268
Everest Reinsurance Holdings 284,000 11,715
General Re 34,000 7,208
Hartford Financial
Services Group 127,300 11,911
Hartford Life, Class A 108,000 4,894
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Travelers 170,000 $ 9,159
Travelers Property Casualty 119,500 5,258
-----------
68,411
-----------
MACHINERY -- 2.1%
Case 45,000 2,720
Cummins Engine 51,800 3,059
Harnischfeger Industries 95,000 3,355
Thermo Electron* 65,000 2,893
-----------
12,027
-----------
MEDICAL PRODUCTS & SERVICES-- 3.2%
Alza* 175,000 5,567
Boston Scientific* 140,200 6,432
Human Genome Sciences* 43,600 1,733
United States Surgical 156,400 4,584
-----------
18,316
-----------
METALS & MINING -- 1.1%
Freeport-McMoran Copper and
Gold, Class B 130,000 2,048
Potash of Saskatchewan 54,000 4,482
-----------
6,530
-----------
MISCELLANEOUS BUSINESS SERVICES -- 3.5%
Cendant 589,006 20,247
-----------
MISCELLANEOUS MANUFACTURING -- 3.3%
Metromedia International
Group* 275,000 2,613
General Electric 207,500 15,225
ITT Industries 47,500 1,490
-----------
19,328
-----------
PETROLEUM & FUEL PRODUCTS -- 3.2%
Apache 80,000 2,805
Reading & Bates* 70,000 2,931
Repsol ADR 18,800 800
Tidewater 75,000 4,134
Triton Energy* 70,000 2,043
USX Marathon Group 165,000 5,569
-----------
18,282
-----------
PETROLEUM REFINING -- 6.0%
Ashland 60,000 3,221
British Petroleum ADR 138,176 11,011
Mobil 245,000 17,686
Texaco 55,000 2,991
-----------
34,909
-----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.0%
Xerox 1,600 118
-----------
PRINTING & PUBLISHING -- 0.7%
Central Newspaper 21,500 1,590
News ADR 110,000 2,186
-----------
3,776
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
CORE EQUITY FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
RAILROADS -- 0.6%
CSX 37,000 $ 1,998
Union Pacific 25,000 1,561
-----------
3,559
-----------
REAL ESTATE -- 2.5%
Equity Residential
Properties Trust 105,000 5,309
Glenborough Realty Trust 202,400 5,996
Prentiss Properties Trust 110,000 3,073
-----------
14,378
-----------
RESTAURANTS -- 1.0%
Darden Restaurants 399,700 4,996
Lone Star Steakhouse
& Saloon* 45,000 788
-----------
5,784
-----------
RETAIL -- 4.7%
CML Group 275,000 911
Corporate Express* 95,000 1,223
Dillards, Class A 37,500 1,322
General Nutrition* 287,100 9,761
Lowes 110,000 5,246
Pep Boys - Manny,
Moe & Jack 185,000 4,417
Saks Holdings* 175,000 3,620
Staples* 15,100 419
-----------
26,919
-----------
RUBBER & PLASTIC -- 0.8%
Goodyear Tire & Rubber 70,000 4,454
-----------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.9%
Intel 150,000 10,538
National Semiconductor* 127,500 3,307
VLSI Technology* 135,000 3,189
-----------
17,034
-----------
TELEPHONES & TELECOMMUNICATION -- 8.7%
Airtouch Communications* 460,000 19,119
McLeodUSA, Class A* 127,500 4,080
Qualcomm* 101,800 5,141
Worldcom* 726,000 21,962
-----------
50,302
-----------
WATER TREATMENT -- 1.0%
U.S. Filter* 190,000 5,688
-----------
TOTAL COMMON STOCKS
(Cost $441,850) 574,022
-----------
TOTAL INVESTMENTS -- 99.5%
(Cost $441,851) 574,022
-----------
OTHER ASSETS AND LIABILITIES,
NET-- 0.5% 2,747
-----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 50 million authorized) based on
27,068,563 outstanding shares $ 415,785
Portfolio Shares -- Class A ($0.001 par
value -- 50 million authorized) based on
924,049 outstanding shares 13,559
Portfolio Shares -- Class B ($0.001 par
value -- 50 million authorized) based on
7,283 outstanding shares 149
Accumulated Net Realized Gain
on Investments 15,119
Net Unrealized Appreciation
on Investments 132,172
Distributions in Excess of Net
Investment Income (15)
-----------
TOTAL NET ASSETS-- 100.0% $576,769
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $20.60
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $20.61
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $18.31
===========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
[PIE CHART OMITTED]
Miscellaneous 5%
Utilities 2%
Retail 12%
Oil-Energy 3%
Financial 19%
Cash Equivalents 3%
Chemicals & Drugs 14%
Consumer Products 6%
Durable Goods 36%
% OF TOTAL INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 98.9%
BANKS -- 8.3%
BankAmerica 24,000 $ 1,752
Barnett Banks of Florida 50,000 3,594
Citicorp 13,643 1,725
Crestar Financial 73,000 4,161
Norwest 70,000 2,704
-----------
13,936
-----------
BEAUTY PRODUCTS -- 2.2%
Colgate Palmolive 24,400 1,793
Gillette 18,600 1,868
-----------
3,661
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 1.2%
CBS 70,400 2,072
-----------
COMMUNICATIONS EQUIPMENT -- 2.2%
Cisco Systems* 65,850 3,671
-----------
COMPUTERS, SOFTWARE & SERVICES-- 12.2%
America Online* 45,800 4,085
BMC Software* 68,000 4,463
Compaq Computer* 54,100 3,053
Computer Associates
International 65,889 3,484
Microsoft* 11,932 1,542
Peoplesoft* 100,000 3,900
-----------
20,527
-----------
DRUGS -- 7.3%
Johnson & Johnson 49,000 3,228
Merck 16,000 1,700
Schering Plough 56,000 3,479
SmithKline Beecham ADR 77,100 3,966
-----------
12,373
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ELECTRICAL EQUIPMENT -- 5.4%
General Electric 47,178 $ 3,462
Honeywell 47,500 3,254
Illinois Tool Works 40,000 2,405
-----------
9,121
-----------
FINANCIAL SERVICES -- 4.6%
FHLMC 85,000 3,565
FNMA 74,656 4,260
-----------
7,825
-----------
FOOD, BEVERAGE & TOBACCO -- 4.9%
ConAgra 89,000 2,920
CPC International* 16,300 1,760
Hershey Foods 56,900 3,524
-----------
8,204
-----------
HEALTHCARE SERVICES -- 2.8%
Health Management
Associates* 186,037 4,697
-----------
HOUSEHOLD PRODUCTS -- 1.6%
Sunbeam Oster 62,100 2,616
-----------
INSURANCE -- 4.3%
Allstate 47,400 4,307
American International Group 27,600 3,002
-----------
7,309
-----------
MEDICAL INFORMATION SYSTEMS -- 2.2%
HBO 77,000 3,696
-----------
MEDICAL PRODUCTS & SERVICES-- 4.3%
Cardinal Health 51,600 3,876
Guidant 27,000 1,681
Medtronic 33,000 1,726
-----------
7,283
-----------
MISCELLANEOUS CHEMICAL PRODUCTS-- 0.1%
Solutia* 6,820 182
-----------
MISCELLANEOUS CONSUMER SERVICES -- 0.9%
Corestaff* 54,000 1,431
-----------
PETROLEUM REFINING -- 3.5%
Halliburton 65,000 3,376
Schlumberger 30,200 2,431
-----------
5,807
-----------
PRINTING & PUBLISHING -- 2.1%
Gannett 58,500 3,616
-----------
RETAIL -- 14.4%
Costco* 82,000 3,659
Dayton-Hudson 76,500 5,164
Gap 135,000 4,784
Home Depot 61,000 3,591
Nordstrom 55,000 3,321
Walgreen 122,000 3,828
-----------
24,347
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
GROWTH EQUITY FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- --------------------------------------------------------
TECHNOLOGY, SERVICES -- 4.3%
Automatic Data Processing 60,400 $ 3,707
Paychex 69,000 3,493
-----------
7,200
-----------
TELEPHONES & TELECOMMUNICATION-- 10.1%
Brooks Fiber Properties* 60,459 3,325
ICG Communications* 68,100 1,856
McLeod USA, Class A* 82,000 2,624
Qualcomm* 53,000 2,677
Qwest Communications Int'l* 6,565 391
Teleport Communications
Group* 58,200 3,194
Worldcom* 100,300 3,034
-----------
17,101
-----------
TOTAL COMMON STOCKS
(Cost $111,339) 166,675
-----------
REPURCHASE AGREEMENTS -- 2.7%
Aubrey Lanston
6.50%, dated 12/31/97,
matures 01/02/98,
repurchase price $1,516,547
(collateralized by U.S. Treasury
Note, par value $1,550,000,
5.625%, 12/31/99; market
value $1,550,930) $1,516 1,516
Hong Kong Shanghai Bank
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$1,516,539 (collateralized by
U.S. Treasury Note, par value
$1,470,000, 6.625%, 07/31/01;
market value $1,554,819) 1,516 1,516
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $1,516,522
(collateralized by U.S. Treasury
Note, par value $1,555,000,
5.50%, 12/31/00; market
value $1,549,247) 1,516 1,516
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $4,548) 4,548
-----------
TOTAL INVESTMENTS -- 101.6%
(Cost $115,887) 171,223
-----------
OTHER ASSETS AND LIABILITIES,
NET-- (1.6%) (2,725)
-----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 9,962,047 outstanding shares $103,338
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 350,144 outstanding shares 4,018
Portfolio Shares -- Class B ($0.001 par
value -- 100 million authorized) based
on 6,248 outstanding shares 109
Accumulated Net Realized Gain
on Investments 5,833
Net Unrealized Appreciation
on Investments 55,336
Distributions in Excess of Net
Investment Income (136)
-----------
TOTAL NET ASSETS-- 100.0% $168,498
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $16.33
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $16.27
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $16.19
===========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
SPECIAL EQUITY FUND
[PIE CHART OMITTED]
Miscellaneous 11%
Utilities 3%
Retail 1%
Real Estate Investment Trust 6%
Financial 4%
Cash Equivalents 3%
Chemicals & Drugs 8%
Consumer Products 7%
Durable Goods 57%
% OF TOTAL INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 96.7%
AIR TRANSPORTATION -- 0.9%
Midway Airlines 46,500 $ 703
---------
AIRCRAFT -- 0.4%
Boeing 6,750 330
---------
APPAREL/TEXTILES -- 0.6%
Haggar 20,000 315
Mothers Work* 17,500 138
---------
453
---------
AUTOMOTIVE -- 1.9%
Earl Scheib* 4,900 39
Ford Motor 20,000 974
Noble International* 46,500 416
Walbro 3,000 40
---------
1,469
---------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 0.1%
@entertainment, Inc* 4,400 49
---------
BUILDING & CONSTRUCTION -- 3.9%
Comfort Systems USA Inc* 14,500 286
Foster Wheeler 20,000 541
Jacobs Engineering Group* 29,500 749
Royal Group Technologies Ltd* 27,500 638
Shaw Group* 35,000 805
---------
3,019
---------
CHEMICALS -- 0.2%
Kinark* 57,500 172
---------
COMMUNICATIONS EQUIPMENT -- 3.2%
Ciena* 10,700 654
ITT Industries 5,000 157
Scientific-Atlanta 31,000 519
VDI Media* 120,000 1,155
---------
2,485
---------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMPUTERS, SOFTWARE & SERVICES-- 4.6%
America Online* 8,000 $ 713
Box Hill Systems* 27,900 291
Cabletron Systems* 20,000 300
Computer Associates
International 6,000 317
Gametek* 10,000 --
International Business
Machines 4,500 471
Mecon* 62,000 442
Mylex* 75,000 675
Storage Technology* 4,900 303
---------
3,512
---------
CONTAINERS & PACKAGING -- 0.2%
Cronos Group* 25,900 129
Silgan Holdings* 1,000 32
---------
161
---------
DRUGS -- 9.9%
Anesta* 45,200 740
Aphton* 52,500 532
Cellegy Pharmaceuticals Inc* 46,500 389
ChiRex* 42,000 740
Collagenex Pharmaceuticals* 46,300 579
Flamel Technologies (ADR)* 97,700 177
Guilford Pharmaceuticals* 40,500 815
Hybridon* 4,500 13
Ilex Oncology* 31,500 232
Isis Pharmaceutical* 27,300 336
Megabios Corp* 41,850 596
Pharmaceutical Resources* 105,000 157
Roberts Pharmaceuticals* 12,500 120
Scios Nova* 218,200 2,182
---------
7,608
---------
ELECTRICAL EQUIPMENT -- 4.3%
Kuhlman 32,500 1,272
Magnetek* 65,000 1,268
UCAR International* 18,500 739
---------
3,279
---------
ELECTRONICS -- 0.5%
Lam Research* 12,700 371
Smartflex Systems* 2,300 22
---------
393
---------
ENTERTAINMENT -- 1.5%
Meridian Sports* 17,300 13
Mikohn Gaming* 110,000 784
Sports Club* 38,000 352
---------
1,149
---------
ENVIRONMENTAL SERVICES -- 1.1%
Harding Lawson
Associates Group* 40,300 413
Philip Services* 32,500 467
---------
880
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
SPECIAL EQUITY FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
FINANCIAL SERVICES -- 4.1%
Aames Financial 46,500 $ 602
Affiliated Managers Group* 11,160 324
Consolidation Cap Corp* 55,800 1,133
Delta Financial* 34,700 464
Imperial Credit* 41,800 611
---------
3,134
---------
FOOD, BEVERAGE & TOBACCO -- 0.9%
Cuisine Solutions* 21,000 21
Philip Morris 300 14
RJR Nabisco Holdings 16,700 626
---------
661
---------
HOTELS & LODGING -- 1.1%
American Skiing Corp* 4,650 69
John Q. Hammons Hotels* 9,600 86
Prime Hospitality* 31,500 642
U.S. Franchise Systems,
Class A* 4,500 45
---------
842
---------
HOUSEHOLD FURNISHINGS -- 1.4%
O'Sullivan 45,000 478
Winsloew Furniture* 44,180 641
---------
1,119
---------
INSURANCE -- 4.1%
Arm Financial 4,500 119
Conseco 14,000 636
Everest Reinsurance Holdings 21,300 879
Travelers 13,750 741
Travelers Property Casualty 18,100 796
---------
3,171
---------
MACHINERY -- 2.1%
Case 11,000 665
Cummins Engine 10,000 591
First Aviation* 45,000 335
---------
1,591
---------
MEASURING DEVICES -- 1.4%
Rofin-Sinar Technologies* 36,000 437
Teradyne* 21,300 682
---------
1,119
---------
MEDICAL PRODUCTS & SERVICES-- 10.4%
Acme United* 129,200 775
American Retirement 23,000 460
Centennial Heathcare 33,900 771
Computer Motion* 80,000 840
Emeritus* 27,000 344
Harborside Healthcare* 18,000 356
Innovasive Devices* 9,000 82
Genome Therapeutics* 45,000 284
Medpartners* 45,000 1,007
Metra Biosystems* 6,800 25
Molecular Dynamics* 1,400 23
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Pace Health Management
Systems* 43,500 $ 16
Possis Medical* 22,600 249
Progenics Pharmaceuticals* 69,750 977
Quest Medical* 9,000 63
Resound* 47,400 261
Spectranetics* 27,000 84
U.S. Surgical 15,400 451
Urologix* 26,500 480
Vision Twenty-One* 46,500 430
---------
7,978
---------
METALS & MINING -- 1.0%
Freeport-McMoran Copper
and Gold, Class B 25,000 394
Potash of Saskatchewan 4,300 357
---------
751
---------
MISCELLANEOUS BUSINESS SERVICES -- 2.5%
Cendant 48,062 1,652
Mac-Gray* 18,600 291
---------
1,943
---------
MISCELLANEOUS MANUFACTURING-- 1.3%
RMI Titanium* 35,000 700
Toymax International* 37,200 321
---------
1,021
---------
PETROLEUM & FUEL PRODUCTS -- 2.3%
Bayard Drilling Technologies* 9,300 151
Callon Petroleum (A)* 9,000 147
IRI International* 19,100 267
Meridian Resource* 68,256 653
Tidewater 10,000 551
---------
1,769
---------
PRINTING & PUBLISHING -- 0.2%
CMP Media Inc., Class A* 9,100 157
---------
PROFESSIONAL SERVICES -- 0.1%
Bright Horizons Inc* 4,650 87
---------
RAILROADS -- 0.6%
Union Pacific 7,000 437
---------
REAL ESTATE -- 5.5%
AMB Property* 53,600 1,347
Agree Realty 9,400 204
Liberty Property Trust 25,800 737
Pacific Gulf Properties 31,400 746
Prentiss Properties Trust* 34,000 950
Trammell Crow* 9,300 239
---------
4,223
---------
RESTAURANTS/FOOD SERVICES -- 1.6%
Darden Restaurants 47,900 599
Uno Restaurant* 90,000 619
---------
1,218
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
RETAIL -- 6.0%
Bon-Ton Stores* 46,300 $ 695
Corporate Express* 27,500 354
Chicos* 4,500 30
CML Group 92,200 305
Cross-Continent Auto
Retailers* 65,000 544
Drug Emporium* 92,100 363
Friendly Ice Cream 9,300 108
General Nutrition* 33,000 1,122
Hot Topic* 4,400 100
Microage* 22,500 339
Paper Warehouse * 18,600 142
Paul Harris Stores* 41,500 418
Sportmart* 14,400 33
Sportmart, Class A* 14,400 34
Strouds* 19,000 33
---------
4,620
---------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.1%
Ess Technology* 4,600 35
Intel 8,000 562
VLSI Technology* 45,000 1,063
---------
1,660
---------
SPECIALTY CONSTRUCTION -- 1.1%
Oakwood Homes 25,000 830
---------
STEEL & STEEL WORKS -- 0.5%
Ispat International PLC Nv,
Class A* 18,690 404
---------
TELEPHONES & TELECOMMUNICATION-- 12.1%
Airtouch Communications* 18,500 769
Amnex* 171,500 172
Clearnet, Class A* 40,000 455
Hybrid Networks* 44,600 496
Intermedia Communications
of Florida* 14,900 905
Lucent Technologies 16,500 1,318
McLeod, Class A* 15,000 480
Metrocall* 25,000 123
Metromedia Fiber Network* 46,500 773
Metronet Communication* 46,500 808
Nextlink Communications* 32,500 693
Qualcomm* 12,000 606
Viatel* 200,000 1,000
Worldcom* 25,000 756
---------
9,354
---------
WATER TREATMENT -- 1.0%
U.S. Filter* 25,000 748
---------
TOTAL COMMON STOCKS
(Cost $69,775) 74,499
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
REPURCHASE AGREEMENT -- 3.5%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $2,653,914
(collateralized by U.S. Treasury
Note, par value $2,725,000,
5.50%, 12/31/00; market
value $2,714,918) $2,653 $ 2,653
---------
TOTAL REPURCHASE AGREEMENT
(Cost $2,653) 2,653
---------
TOTAL INVESTMENTS -- 100.2%
(Cost $72,428) 77,152
---------
OTHER ASSETS AND LIABILITIES,
NET-- (0.2%) (147)
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 6,951,309 outstanding shares 67,555
Portfolio Shares -- Class A ($0.001 par
value -- 1 billion authorized) based
on 269,517 outstanding shares 2,885
Portfolio Shares -- Class B ($0.001 par
value -- 1 billion authorized) based
on 11,613 outstanding shares 139
Accumulated Net Realized Gain
on Investments 1,961
Net Unrealized Appreciation
on Investments 4,724
Distributions in Excess of Net
Investment Income (259)
---------
TOTAL NET ASSETS-- 100.0% $77,005
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.65
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.60
=========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $10.48
=========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
PLC --PUBLIC LIMITED COMPANY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
INTERNATIONAL GROWTH FUND
[PIE CHART OMITTED]
Miscelleaneous 18%
United Kingdom 25%
Switzerland 7%
Spain 3%
Australia 3%
France 7%
Germany 11%
Italy 3%
Japan 14%
Mexico 4%
Netherlands 5%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
FOREIGN STOCKS -- 91.2%
ARGENTINA -- 0.5%
Banco Frances ADR 6,025 $ 165
Irsa GDR 2,400 90
Perez Companc, Series B 83,643 597
-----------
852
-----------
AUSTRALIA -- 2.2%
Australian Gas Light 80,000 558
John Fairfax Holdings 230,000 480
Lend Lease 25,000 489
Mayne Nickless 107,000 565
QBE Insurance 187,500 844
Telstra Installment Receipts* 139,000 293
Woodside Petroleum 39,300 277
-----------
3,506
-----------
AUSTRIA -- 0.7%
VA Technologie 7,800 1,185
-----------
BELGIUM -- 1.0%
Generale Banque 3,500 1,524
-----------
BRAZIL -- 1.4%
Centrais Electricas GDR 750 81
Companhia Paranese 10,000 137
Companhia Brasileira de
Distribuicao Grupo de
Acucar ADR 6,000 116
Electrobras ADR 38,500 957
Telebras ADR 7,820 911
-----------
2,202
-----------
CHILE -- 0.6%
Compania de Telecom de
Chile ADR 32,000 956
Santa Isabel ADR 2,100 37
-----------
993
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
DENMARK -- 1.6%
Novo-Nordisk, Class B 16,200 $ 2,317
Sydbank 3,124 178
-----------
2,495
-----------
FINLAND -- 0.1%
Nokia AB, Series A 3,080 219
-----------
FRANCE -- 6.9%
Air Liquide 8,750 1,370
AXA 31,195 2,414
Cie Financiere de Paribas,
Class A 5,350 465
Cie Generale des Eaux 21,948 3,064
Cie Generale des Eaux
Warrants* 2,000 1
Dassault Systems 8,000 244
France Telecom* 6,000 218
Rhone Poulenc 51,500 2,308
Schneider 4,000 217
Societe Nationale Elf Aquitaine 3,590 418
Valeo 4,970 337
-----------
11,056
-----------
GERMANY -- 9.7%
Allianz 7,600 1,961
Bayer 7,500 278
BMW 2,550 1,907
Deutsche Bank 34,100 2,385
Fried Krupp 665 122
Hoechst 2 --
Mannesmann 5,000 2,510
Preussag 5,000 1,537
SGL Carbon 10,100 1,292
Veba 45,449 3,095
Volkswagen 900 503
-----------
15,590
-----------
GREECE -- 0.5%
Alpha Credit Bank 15,000 875
-----------
HONG KONG -- 2.0%
China Light & Power 82,000 455
Citic Pacific 84,500 336
First Pacific 186,000 90
Giordano 650,000 224
HSBC Holdings 20,681 510
Hutchison Whampoa 78,000 489
National Mutual Asia 600,000 596
New World Development 149,000 515
-----------
3,215
-----------
HUNGARY -- 1.0%
Richter Gedeon 2,500 284
Matav ADR* 45,000 1,170
Pannoplast 3,200 168
-----------
1,622
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
INDIA -- 1.8%
Himilayan Fund* 75,918 $ 812
ICICI GDR 60,000 746
Indian Opportunities Fund* 41,981 354
Mahanagar Telephone
Nigam GDR* 33,000 512
Videsh Sanchar Nigam GDR* 35,000 491
-----------
2,915
-----------
INDONESIA -- 0.4%
Bank Bali "F" 600,000 81
Indosat "F" 275,000 519
-----------
600
-----------
ISRAEL -- 1.3%
Near East Opportunity Fund* 59,000 928
Tadarin Limited 8,032 287
Teva Pharmaceuticals ADR 20,000 946
-----------
2,161
-----------
ITALY -- 2.5%
Autogrill* 65,010 348
Bulgari 46,000 234
ENI 255,967 1,452
INA 850,000 1,724
Telecom Italia 46,595 298
-----------
4,056
-----------
JAPAN -- 11.7%
77th Bank 33,000 235
Canon 62,000 1,444
Eiden Sakakiya 25,000 93
Hitachi 149,000 1,062
Honda Motor 36,000 1,321
Hoya 8,000 251
Ito Yokado 27,000 1,376
Kao 21,000 302
Kyocera 4,000 181
Mabuchi Motor 10,000 508
Marui Company 36,000 560
Mitsubishi Heavy Industries 171,000 713
Mitsui Fudosan 54,000 521
Nippon Express 73,000 364
Riso Kagaku Corporation 5,100 292
Rohm Company 13,000 1,325
Secom 16,000 1,022
Shimachu 17,000 267
Shin-Etsu Chemical 42,000 801
Sony Corporation 22,000 1,955
Sumitomo Electric 53,000 723
Suzuki Motor 24,000 217
Taisho Pharmaceutical 25,000 638
Toppan Printing 73,000 951
Toyota Motor 28,000 802
Yamanouchi Pharmaceutical 41,000 880
-----------
18,804
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
MALAYSIA -- 0.3%
AMMB Holdings 58,000 $ 38
AMMB Holdings Warrants* 10,000 1
Malaysian Oxygen 200,000 448
-----------
487
-----------
MEXICO -- 3.3%
ALFA, Series A 61,945 419
Cifra, Series C 520,000 1,160
Cifra, Series V 550,000 1,350
Grupo Elektra 60,000 106
Grupo Financiero Banamex
Accival, Series B* 280,000 836
Grupo Modelo, Series C 17,000 143
Grupo Radio Centro ADR 6,600 94
Industrias CH, Series B* 30,000 178
Panamerican Beverage, Series A 6,000 196
Telefonos de Mexico ADR,
Series L 14,500 813
-----------
5,295
-----------
NETHERLANDS -- 4.6%
Baan Company* 8,680 284
Elsevier 128,000 2,071
Fortis Amev 6,500 283
Gucci Group, NY
Registered Shares 26,520 1,111
ING Groep 35,005 1,475
Phillips Electronics 26,200 1,571
Royal Dutch Petroleum 5,190 285
Vendex International 4,000 221
Wolters Kluwer 800 103
-----------
7,404
-----------
NORWAY -- 0.2%
Tomra Systems 13,500 302
-----------
PERU -- 0.1%
Credicorp 4,230 76
-----------
PHILIPPINES -- 0.4%
Ayala Land, Series B 1,000,000 400
Belle* 5,200,000 203
Belle Warrants* 800,000 1
-----------
604
-----------
POLAND -- 0.1%
Bank Handlowy GDR* 14,000 186
-----------
SINGAPORE -- 0.3%
Development Bank of
Singapore "F" 57,000 488
-----------
SOUTH AFRICA -- 0.2%
NBS Boland Group 121,500 301
-----------
SOUTH KOREA -- 0.0%
Samsung Electronics 2,463 14
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
INTERNATIONAL GROWTH FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
SPAIN -- 2.7%
Argentaria 3,200 $ 195
Banco de Santander 59,400 1,985
Corp Financiera Reunida* 37,000 198
Telefonica de Espana 68,000 1,942
-----------
4,320
-----------
SWEDEN -- 2.2%
Ericsson Telephone ADR 8,360 312
Incentive AB, Series A 19,000 1,712
Nordbanken Holding AB* 216,000 1,222
SSAB, Series A 20,000 328
-----------
3,574
-----------
SWITZERLAND -- 6.2%
Credit Suisse Group 18,000 2,785
Disetronic Holding 130 285
Novartis 2,217 3,597
Roche Holding 306 3,039
Swiss Bank 850 264
-----------
9,970
-----------
TAIWAN -- 0.5%
Standard Foods Taiwan GDR* 75,000 863
-----------
THAILAND -- 0.2%
Ruam Pattana Fund II* 1,281,000 131
Siam Commercial Bank 100,000 115
Siam Commercial
Bank Rights* 33,333 6
-----------
252
-----------
UNITED KINGDOM -- 23.5%
3i Group 35,130 291
Brit-Borneo Petroleum
Syndicate 52,248 363
British Aerospace 14,475 412
British Sky Broadcasting 24,100 180
Cable & Wireless 206,000 1,810
General Electric 158,000 1,024
GKN 74,500 1,526
Glaxo Wellcome 81,000 1,915
Granada Group 102,750 1,569
JJB Sports 34,200 366
Ladbroke 401,430 1,740
Lasmo 265,318 1,202
Lloyds TSB Group 212,900 2,751
Logica 24,342 463
Manchester United 115,400 299
Marks & Spencer 164,000 1,613
McKechnie 76,500 578
National Power 33,420 329
National Westminster Bank 100,000 1,658
Next 24,500 278
NFC 333,000 828
Prudential 28,100 339
Railtrack Group 28,090 446
Reckitt & Coleman 122,500 1,921
- --------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- --------------------------------------------------------
Rentokil Group 79,000 $ 349
Royal Bank of Scotland 149,000 1,891
Safeway 158,144 891
Scottish Power 212,000 1,873
Shell Transportation
& Trading 350,050 2,529
Smithkline Beecham 54,660 560
Smiths Industries 97,782 1,362
Standard Chartered Bank 22,340 238
Tesco 55,750 453
Unilever 228,800 1,957
Wassall 119,625 658
Wolseley 98,000 777
Zeneca Group 10,820 380
-----------
37,819
-----------
VENEZUELA -- 0.5%
Cia Anonima Telecom ADR 21,000 874
-----------
TOTAL FOREIGN STOCKS
(Cost $128,227) 146,699
-----------
FOREIGN PREFERRED STOCKS -- 1.3%
AUSTRALIA -- 0.4%
Newscorp 130,000 643
-----------
BRAZIL -- 0.6%
Eletrobras ADR 6,000 156
Petroleo Brasileira ADR 35,000 796
-----------
952
-----------
GERMANY -- 0.3%
Fresenius 888 162
Wella 450 330
-----------
492
-----------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $1,902) 2,087
-----------
FOREIGN CONVERTIBLE BONDS -- 1.5%
JAPAN -- 1.5%
Mitsubishi Bank
3.000%, 11/30/02 $ 900 928
Namco
4.700%, 09/30/98 35,000 332
Nitto Denko
2.200%, 03/31/99 74,000 695
Sakura Finance
0.750%, 10/01/01 72,000 400
-----------
2,355
-----------
MALAYSIA -- 0.0%
AMMB Holdings ICULS
7.500%, 05/08/02 100 7
-----------
TOTAL FOREIGN CONVERTIBLE BONDS
(Cost $2,655) 2,362
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
FOREIGN BOND -- 0.0%
MALAYSIA -- 0.0%
AMMB Holdings
5.000%, 05/13/02 $ 100 $ 12
-----------
TOTAL FOREIGN BOND
(Cost $40) 12
-----------
DEMAND DEPOSIT -- 3.7%
Morgan Stanley
4.750%, 01/01/98 5,939 5,939
-----------
TOTAL DEMAND DEPOSIT
(Cost $5,939) 5,939
-----------
TOTAL INVESTMENTS -- 97.7%
(Cost $138,763) 157,099
-----------
OTHER ASSETS AND LIABILITIES,
NET-- 2.3% 3,647
-----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 25 million authorized) based
on 11,925,445 outstanding shares 142,047
Portfolio Shares -- Class A ($0.001 par
value -- 25 million authorized) based
on 175,016 outstanding shares 2,264
Portfolio Shares -- Class B ($0.001 par
value -- 25 million authorized) based
on 1,054 outstanding shares 15
Accumulated net realized loss
on investments (199)
Net unrealized depreciation on
forward foreign currency contracts,
foreign currency and translation
of other assets and liabilities
in foreign currency (15)
Net unrealized appreciation
on investments 18,336
Accumulated net investment loss (1,702)
-----------
TOTAL NET ASSETS-- 100.0% $160,746
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE-- CLASS Y $13.28
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $13.28
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $13.28
===========
* NON-INCOME PRODUCING SECURITY
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
ADR -- AMERICAN DEPOSITORY RECEIPT
"F" -- FOREIGN SHARES
GDR -- GLOBAL DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
BALANCED FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 18%
U.S. GOVERNMENT BACKED OBLIGATIONS 4%
U.S. AGENCY BACKED OBLIGATIONS 1%
CORPORATE OBLIGATIONS 7%
CASH EQUIVALENTS 6%
COMMON STOCK 64%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 64.9%
BANKS -- 3.0%
BankAmerica 15,700 $ 1,146
Citicorp 6,000 759
Crestar Financial 34,000 1,938
-----------
3,843
-----------
BEAUTY PRODUCTS -- 1.9%
Colgate Palmolive 10,000 735
Gillette 9,200 924
Kimberly Clark 8 --
Procter & Gamble 10,000 798
-----------
2,457
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 2.3%
CBS 47,000 1,384
Comcast, Class A 50,000 1,578
TCI Satellite Entertainment* 4,300 30
-----------
2,992
-----------
COMMUNICATIONS EQUIPMENT -- 1.3%
Cisco Systems* 29,400 1,639
-----------
COMPUTERS & SERVICES -- 4.5%
America Online* 18,000 1,605
Compaq Computer 26,100 1,473
Microsoft* 6,000 775
Peoplesoft* 47,000 1,833
-----------
5,686
-----------
DRUGS -- 4.1%
Glaxo ADR 29,400 1,408
Merck 7,600 807
Schering Plough 30,000 1,864
SmithKline Beecham ADR 23,600 1,214
-----------
5,293
-----------
ELECTRICAL EQUIPMENT -- 3.1%
Emerson Electric 17,300 976
General Electric 20,200 1,482
Honeywell 22,000 1,507
-----------
3,965
-----------
63
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
BALANCED FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ENTERTAINMENT -- 0.7%
Walt Disney 8,500 $ 842
-----------
FINANCIAL SERVICES -- 2.7%
FHLMC 44,000 1,845
FNMA 28,000 1,598
-----------
3,443
-----------
FOOD, BEVERAGE & TOBACCO -- 4.4%
CPC International 8,000 864
ConAgra 45,000 1,477
Hershey Foods 29,000 1,796
Philip Morris 13,500 612
Sara Lee 15,000 845
-----------
5,594
-----------
HEALTHCARE SERVICES -- 1.5%
Health Management Associates* 78,448 1,981
-----------
HOUSEHOLD PRODUCTS -- 0.6%
Sunbeam Oster 19,000 800
-----------
INSURANCE -- 3.1%
Allstate 17,000 1,545
American International Group 12,000 1,305
General Re 5,000 1,060
-----------
3,910
-----------
MACHINERY -- 0.8%
Deere 17,500 1,020
-----------
MEDICAL INFORMATION SYSTEMS -- 1.5%
HBO 39,000 1,872
-----------
MEDICAL PRODUCTS & SERVICES-- 3.3%
Cardinal Health 22,850 1,717
Guidant 13,000 809
Johnson & Johnson 13,200 870
Medtronic 16,000 837
-----------
4,233
-----------
PETROLEUM REFINING -- 5.3%
Amoco 12,400 1,056
Atlantic Richfield 12,000 961
Chevron 17,100 1,317
Exxon 19,500 1,193
Mobil 16,200 1,169
Texaco 20,000 1,087
-----------
6,783
-----------
PETROLEUM SERVICES -- 1.9%
Halliburton 22,000 1,143
Schlumberger 15,400 1,240
-----------
2,383
-----------
PRINTING & PUBLISHING -- 1.3%
Gannett 26,000 1,607
-----------
- ---------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- ---------------------------------------------------------
RETAIL -- 7.1%
Costco* 40,000 $ 1,785
Dayton-Hudson 38,000 2,565
Gap 45,000 1,595
Home Depot 26,400 1,554
Nordstrom 25,000 1,509
-----------
9,008
-----------
SOFTWARE -- 2.2%
BMC Software* 29,000 1,903
Computer Associates
International 18,000 952
-----------
2,855
-----------
TECHNOLOGY, SERVICES -- 3.4%
Automatic Data Processing 29,000 1,780
Corestaff* 28,000 742
Paychex 34,692 1,756
-----------
4,278
-----------
TELEPHONES & TELECOMMUNICATION-- 4.9%
ICG Communications* 29,300 798
McLeodUSA, Class A* 34,000 1,088
Qualcomm* 27,000 1,364
Qwest Communications Int'l* 3,623 216
Teleport Communications
Group* 28,000 1,537
Worldcom* 39,900 1,207
-----------
6,210
-----------
TESTING LABORATORIES -- 0.0%
Genzyme Corporation-
Tissue Repair* 900 6
-----------
TOTAL COMMON STOCKS
(Cost $60,675) 82,700
-----------
U.S. TREASURY OBLIGATIONS -- 16.0%
U.S. Treasury Bonds
6.000%, 08/15/99 $1,500 1,507
7.250%, 05/15/16 500 569
8.750%, 05/15/17 665 871
U.S. Treasury Notes
8.125%, 02/15/98 1,670 1,675
6.125%, 05/15/98 1,000 1,002
9.250%, 08/15/98 1,620 1,655
8.875%, 11/15/98 1,105 1,135
8.875%, 02/15/99 110 114
6.000%, 06/30/99 2,000 2,010
6.000%, 10/15/99 500 503
5.875%, 11/15/99 2,000 2,007
7.750%, 11/30/99 700 726
6.375%, 01/15/00 500 507
7.500%, 11/15/01 3,235 3,429
6.625%, 03/31/02 1,000 1,032
7.500%, 02/15/05 600 659
6.500%, 08/15/05 500 522
6.875%, 05/15/06 500 535
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $20,239) 20,458
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.4%
FHLMC
6.440%, 01/28/00 $ 500 $ 506
8.025%, 09/15/06 1,000 1,010
8.055%, 09/30/11 1,000 1,009
FNMA
5.940%, 12/12/05 500 497
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,998) 3,022
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 4.8%
FHLMC
6.000%, 05/01/08 640 630
5.500%, 11/01/08 546 527
FNMA
6.500%, 08/01/10 219 220
6.500%, 09/01/10 283 284
6.500%, 11/01/24 445 440
GNMA
7.500%, 10/15/11 2,273 2,342
9.000%, 10/15/19 146 156
7.500%, 03/15/26 1,471 1,507
----------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $6,023) 6,106
----------
CORPORATE OBLIGATIONS -- 6.6%
BANKS -- 1.3%
First Bank System
6.875%, 09/15/07 500 511
Midland Bank
6.950%, 03/15/11 200 205
NationsBank
6.500%, 03/15/06 200 201
Provident Bank
6.125%, 12/15/00 25 25
Royal Bank of Scotland
6.375%, 02/01/11 205 200
U.S. Bancorp
6.750%, 10/15/05 500 508
----------
1,650
----------
FINANCIAL SERVICES -- 2.9%
Chrysler Financial
6.950%, 03/25/02 500 512
CSR Finance
7.700%, 07/21/25 200 221
Donaldson Lufkin & Jenrette
6.875%, 11/01/05 185 189
Ford Motor Credit
6.375%, 04/15/00 500 504
6.250%, 11/08/00 500 501
7.500%, 01/15/03 1,000 1,053
MBNA
7.250%, 09/15/02 185 190
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Merrill Lynch
7.000%, 04/27/08 $ 250 $ 261
Noranda
8.125%, 06/15/04 195 211
Santander
7.250%, 11/01/15 100 104
----------
3,746
----------
INDUSTRIAL -- 2.0%
Arco Chemical
10.250%, 11/01/10 210 280
Coca Cola
6.000%, 07/15/03 1,000 991
Dayton Hudson
8.500%, 12/01/22 500 542
ITT
7.375%, 11/15/15 360 356
Laidlaw
8.750%, 04/15/25 75 90
MacMillan Bloedel
7.700%, 02/15/26 215 222
----------
2,481
----------
UTILITIES -- 0.4%
Bellsouth
7.000%, 02/01/05 500 523
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $8,164) 8,400
----------
REPURCHASE AGREEMENTS -- 6.2%
Aubrey Lanston
6.50%, dated 12/31/97,
matures 01/02/98,
repurchase price $3,957,429
(collateralized by various
U.S. Treasury Notes, ranging
in par value $1,920,000-
$2,025,000, 5.625%-8.200,
07/15/98-12/31/99; market
value $4,035,120) 3,956 3,956
Hong Kong Shainghai Bank
6.40%, dated 12/31/97,
matures 01/02/98,
repurchase price $1,977,703
(collateralized by U.S. Treasury
Note, par value $1,915,000,
6.625%, 07/31/01;
market value $2,016,540) 1,977 1,977
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $ 1,977,681
(collateralized by U.S. Treasury
Note, par value $2,030,000,
5.50%, 12/31/00; market
value $2,022,480) 1,977 1,977
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $7,910) 7,910
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
BALANCED FUND (CONCLUDED)
- ---------------------------------------------------------
DESCRIPTION VALUE (000)
- ---------------------------------------------------------
TOTAL INVESTMENTS -- 100.9%
(Cost $106,009) $128,596
----------
OTHER ASSETS AND LIABILITIES,
NET-- (0.9%) (1,189)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 8,920,348 outstanding shares 96,944
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 406,668 outstanding shares 4,763
Portfolio Shares -- Class B ($0.001 par
value -- 100 million authorized) based
on 42,424 outstanding shares 598
Accumulated Net Realized Gain
on Investments 2,510
Net Unrealized Appreciation
on Investments 22,587
Undistributed Net Investment Income 5
----------
TOTAL NET ASSETS-- 100.0% $127,407
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $13.60
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $13.60
==========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $13.51
==========
*NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 37%
U.S. AGENCY BACKED OBLIGATIONS 3%
CASH EQUIVALENTS 7%
CORPORATE OBLIGATIONS 53%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CORPORATE BONDS -- 31.7%
BANKING -- 7.7%
American Express
Centurion Bank (A)
6.019%, 01/21/98 $1,000 $ 1,001
5.999%, 01/23/98 1,000 1,000
Citicorp (A)
6.075%, 02/23/98 500 502
NationsBank
5.375%, 04/15/00 395 389
---------
2,892
---------
FINANCIAL SERVICES -- 20.8%
Associates Corporation
of North America
6.250%, 03/15/99 525 527
Bear Stearns
6.250%, 12/01/00 200 200
Chrysler Financial
6.375%, 01/28/00 510 513
Credit Suisse (A)
5.920%, 01/13/98 1,000 1,000
Fleet Mortgage Group
6.500%, 09/15/99 500 503
General Motors Acceptance (A)
5.906%, 03/09/98 700 699
Lehman Brothers Holdings
6.375%, 06/01/98 500 501
Mellon Financial
7.625%, 11/15/99 255 263
Morgan Stanley Group (A)
5.915%, 02/26/98 1,250 1,250
Morgan Stanley Group
5.625%, 03/01/99 1,000 996
Salomon
6.500%, 03/01/00 750 755
Sears Roebuck Acceptance
6.380%, 02/16/99 650 653
---------
7,860
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
INDUSTRIAL -- 1.9%
Time Warner
7.450%, 02/01/98 $ 735 $ 736
---------
TELEPHONES & TELECOMMUNICATION -- 1.3%
TCI Communications
6.375%, 09/15/99 500 500
---------
TOTAL CORPORATE BONDS
(Cost $11,964) 11,988
---------
U.S. TREASURY OBLIGATIONS -- 33.9%
U.S. Treasury Notes
6.125%, 03/31/98 500 501
5.875%, 04/30/98 2,000 2,003
6.125%, 05/15/98 1,000 1,002
6.000%, 05/31/98 1,000 1,002
6.125%, 08/31/98 1,000 1,003
6.000%, 09/30/98 2,250 2,257
5.875%, 10/31/98 1,000 1,002
5.750%, 12/31/98 1,000 1,002
6.375%, 01/15/99 1,000 1,008
5.875%, 01/31/99 1,000 1,002
6.000%, 08/15/00 1,000 1,007
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $12,760) 12,789
---------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 2.7%
FNMA
5.894%, 10/20/98 500 500
5.870%, 10/25/99 500 500
---------
TOTAL U.S. AGENCY MORTGAGE-
BACKED BONDS
(Cost $999) 1,000
---------
TIME DEPOSIT -- 1.8%
Den Danske Bank
6.500%, 01/02/98 694 694
---------
TOTAL TIME DEPOSIT
(Cost $694) 694
---------
INSURANCE FUNDING AGREEMENT -- 5.3%
Allstate (A)
5.696%, 01/01/98 2,000 2,000
---------
TOTAL INSURANCE FUNDING AGREEMENT
(Cost $2,000) 2,000
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
SHORT TERM INCOME FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 20.5%
Aames Mortgage Trust,
Series 1996-B, Class A1B
7.275%, 05/15/20 $215 $ 217
Banc One Auto Grantor Trust,
Series 1997-B, Class A
6.290%, 07/20/04 750 755
Cit Rv Owner Trust,
Series 1995-B, Class A
6.500%, 04/15/11 216 218
Contimortgage Home Equity Loan
Trust, Series 1996-4, Class A5
6.600%, 10/15/11 210 211
Contimortgage Home Equity Loan
Trust, Series 1997-4, Class A3
6.260%, 07/15/12 500 500
EQCC Home Equity Loan Trust,
Series 1996-2, Class A2
6.700%, 09/15/08 250 252
EQCC Home Equity Loan Trust,
Series 1996-4, Class A3
6.260%, 11/15/06 175 176
EQCC Home Equity Loan Trust,
Series 1997-1, Class A3
6.840%, 09/15/11 750 762
Firstplus Home Loan Equity Trust,
Series 1997-3, Class A3
6.570%, 10/10/10 500 503
Heller Equipment Asset Receivables
Trust, Series 1997-1, Class A2
6.390%, 05/25/05 750 754
Independent National Mortgage,
Series 1996-A, Class A1
6.710%, 09/25/26 315 318
Money Store Home Equity Loan
Trust, Series 1993-B, Class A1
5.400%, 08/15/05 250 250
Navistar Financial Owner Trust,
Series 1996-B, Class A3
6.330%, 04/21/03 310 312
Navistar Financial Owner Trust,
Series 1997-A, Class A2
6.350%, 01/15/00 447 448
Student Loan Marketing Association,
Series 1997-1, Class A1 (A)
5.889%, 01/25/98 671 671
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Union Acceptance,
Series 1996-A, Class A
5.400%, 04/07/03 $451 $ 447
Union Acceptance,
Series 1996-D, Class A2
6.170%, 10/09/02 250 251
Union Acceptance,
Series 1997-A, Class A
6.130%, 07/10/01 281 282
Vanderbilt Mortgage Finance,
Series 1997-B, Class 1A2
6.775%, 01/07/03 430 435
---------
TOTAL MORTGAGE RELATED
(Cost $7,735) 7,762
---------
TOTAL INVESTMENTS -- 95.9%
(Cost $36,152) 36,233
---------
OTHER ASSETS AND LIABILITIES -- 4.1%
Receivable - Investment Securities Sold 1,010
Other Assets and Liabilities 532
---------
TOTAL OTHER ASSETS AND LIABILITIES, NET 1,542
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 3,725,166 outstanding shares 37,207
Portfolio Shares -- Class A ($0.001 par
value -- 1 billion authorized) based
on 57,118 outstanding shares 568
Accumulated Net Realized Loss
on Investments (81)
Net Unrealized Appreciation
on Investments 81
---------
TOTAL NET ASSETS-- 100.0% $37,775
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.99
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.98
=========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 48%
U.S. GOVERNMENT BACKED OBLIGATIONS 2%
U.S. AGENCY BACKED OBLIGATIONS 1%
CASH EQUIVALENTS 3%
CORPORATE OBLIGATIONS 46%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 47.6%
U.S. Treasury Notes
5.125%, 03/02/98 $ 1,500 $ 1,499
6.000%, 05/31/98 12,145 12,169
7.125%, 10/15/98 17,290 17,490
8.875%, 02/15/99 1,755 1,816
6.500%, 04/30/99 15,035 15,198
5.875%, 07/31/99 1,993 1,999
6.000%, 10/15/99 2,200 2,213
5.625%, 10/31/99 4,750 4,745
7.750%, 12/31/99 2,450 2,545
7.750%, 01/31/00 8 8
7.125%, 02/29/00 5,715 5,880
6.750%, 04/30/00 1,630 1,667
8.000%, 05/15/01 5,280 5,639
6.625%, 07/31/01 5,310 5,458
6.125%, 08/15/07 3,852 3,958
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $81,925) 82,284
---------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 3.5%
FHLMC
6.500%, 07/01/04 1,711 1,717
6.750%, 03/15/07 1,755 1,786
FNMA
6.500%, 08/01/10 1,379 1,380
6.500%, 10/01/10 1,096 1,098
---------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $5,918) 5,981
---------
CORPORATE OBLIGATIONS -- 22.4%
BANKING -- 2.7%
Bank One
7.600%, 05/01/07 85 91
Banca Commerciale Italiana
8.250%, 07/15/07 819 905
- ---------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- ---------------------------------------------------------
Bank of Oklahoma
7.125%, 08/15/07 $1,815 $ 1,872
Bch Cayman Islands Limited
7.700%, 07/15/06 1,630 1,728
---------
4,596
---------
FINANCIAL SERVICES -- 11.0%
Associates Corporation
of North America
6.375%, 08/15/98 1,500 1,504
6.750%, 07/15/01 1,990 2,025
Bear Stearns
6.650%, 12/01/04 1,805 1,825
Dean Witter Discover
6.300%, 01/15/06 1,610 1,596
Lehman Brothers
6.710%, 10/12/99 75 76
7.250%, 04/15/03 2,720 2,812
Macsaver Financial
7.600%, 08/01/07 1,289 1,308
Paine Webber Group
6.500%, 11/01/05 1,745 1,719
Salomon
7.200%, 02/01/04 2,810 2,919
Security Pacific
11.500%, 11/15/00 2,050 2,329
Societe Generale
7.400%, 06/01/06 942 991
---------
19,104
---------
INDUSTRIALS -- 6.8%
Barrick Gold
7.500%, 05/01/07 1,780 1,880
CSR America
6.875%, 07/21/05 1,670 1,716
Loews
6.750%, 12/15/06 1,775 1,806
RJR Nabisco
8.750%, 04/15/04 1,710 1,832
Tele-Communications
7.250%, 08/01/05 985 1,012
Time Warner
7.750%, 06/15/05 1,770 1,876
USX
9.625%, 08/15/03 1,490 1,708
---------
11,830
---------
UTILITIES -- 1.9%
Penn Power and Light
7.750%, 05/01/02 1,280 1,347
Tosco
7.625%, 05/15/06 1,790 1,913
---------
3,260
---------
TOTAL CORPORATE OBLIGATIONS
(Cost $37,592) 38,790
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
SHORT-INTERMEDIATE BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 23.0%
Banc One Auto Grantor Trust,
Series 1997-B, Class A
6.290%, 07/20/04 $1,952 $ 1,964
Case Equipment Loan Trust,
Series 1997-5, Class A4
6.410%, 09/15/04 1,857 1,864
Citicorp Mortgage Securities,
Series 1997-1, Class A2
7.250%, 02/25/27 1,775 1,784
Contimortgage Home Equity
Loan Trust, Series 1997-2,
Class A9
7.090%, 04/15/28 3,185 3,254
Contimortgage Home Equity
Loan Trust, Series 1997-4,
Class A3
6.260%, 07/15/12 1,720 1,720
Countrywide Mortgage Broker
Services, Series 1997, Class A1
7.000%, 03/25/27 1,661 1,670
EQCC, Series 1996-4, Class A5
6.710%, 07/15/11 1,945 1,977
Firstplus Home Loan Trust,
Series 1997-3, Class A5
6.860%, 10/10/13 2,535 2,573
General Electric Capital
Mortgage Services,
Series 1997-3, Class A4
7.500%, 04/25/27 1,800 1,820
Heller Equipment Asset
Receivables Trust,
Series 1997-1, Class A2
6.390%, 05/25/05 1,780 1,790
IMC Home Equity Loan Trust,
Series 1997-2, Class A3
6.940%, 11/20/11 1,391 1,408
Metlife Captial Equipment Loan
Trust, Series 1997-A, Class A
6.850%, 05/20/08 1,675 1,712
Money Store Home Equity Loan
Trust, Series 1996-D, Class A9
7.000%, 04/15/28 2,447 2,515
Money Store Home Equity Loan
Trust, Series 1997-D, Class A7
6.485%, 12/15/28 1,500 1,500
Premier Auto Trust,
Series 1997-3, Class A5
6.340%, 01/06/02 2,265 2,271
Residential Asset Securization
Trust, Series 1997, Class A10
7.250%, 05/25/27 1,770 1,787
Sears Credit Account Master
Trust, Series 1995-3, Class A
7.000%, 10/15/04 3,000 3,062
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Standard Credit Card Master
Trust, Series 1995-6, Class A
6.750%, 06/07/00 $2,000 $ 2,007
Union Acceptance,
Series 1996-A, Class A
5.400%, 04/07/03 1,275 1,264
Vanderbilt Mortgage Finance,
Series 1997-C, Class 1A2
6.480%, 09/07/07 1,790 1,796
---------
TOTAL ASSET-BACKED SECURITIES
(Cost $39,391) 39,738
---------
REPURCHASE AGREEMENT -- 2.5%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $4,349,498
(collateralized by U.S. Treasury
Note, par value $4,465,000,
5.50%, 12/31/00; market
value $4,448,480) 4,348 4,348
---------
TOTAL REPURCHASE AGREEMENT
(Cost $4,348) 4,348
---------
TOTAL INVESTMENTS -- 99.0%
(Cost $169,174) 171,141
---------
OTHER ASSETS AND LIABILITIES,
NET-- 1.0% 1,680
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 17,076,303 outstanding shares 169,915
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 284,400 outstanding shares 3,423
Accumulated Net Realized Loss
on Investments (2,490)
Net Unrealized Appreciation
on Investments 1,967
Undistributed Net Investment Income 6
---------
TOTAL NET ASSETS-- 100.0% $172,821
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.95
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.95
=========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 32%
U.S. GOVERNMENT BACKED OBLIGATIONS 66%
CASH EQUIVALENTS 2%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 55.8%
GNMA
8.000%, 09/15/09 $ 552 $ 574
8.000%, 02/15/22 298 309
8.000%, 09/15/22 50 52
8.000%, 10/15/22 226 235
8.000%, 11/15/22 418 434
7.000%, 04/15/23 334 337
7.500%, 08/15/23 1,019 1,045
6.500%, 11/15/23 423 419
7.000%, 01/15/24 799 806
8.000%, 05/15/25 834 866
6.500%, 12/15/25 985 975
7.500%, 02/15/26 433 444
6.500%, 04/15/26 469 464
8.000%, 05/15/26 955 991
8.000%, 06/15/26 669 694
8.000%, 08/15/26 1,978 2,051
8.000%, 09/15/26 1,982 2,056
---------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $12,461) 12,752
---------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 10.2%
FHLMC
6.000%, 05/01/08 304 300
FNMA
7.000%, 10/01/22 644 649
7.000%, 11/01/26 386 389
7.500%, 05/01/27 965 988
---------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $2,293) 2,326
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 32.0%
U.S. Treasury Bonds
6.375%, 08/15/27 $2,300 $ 2,427
6.125%, 11/15/27 600 617
U.S. Treasury Notes
6.375%, 05/15/99 970 979
8.000%, 05/15/01 1,200 1,281
6.625%, 07/31/01 600 617
6.250%, 01/31/02 300 305
6.625%, 04/30/02 300 310
6.125%, 08/15/07 750 771
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,076) 7,307
---------
REPURCHASE AGREEMENT -- 1.4%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $332,114
(collateralized by U.S. Treasury
Note, par value $340,000,
5.50%, 12/31/00; market
value $338,742) 332 332
---------
TOTAL REPURCHASE AGREEMENT
(Cost $332) 332
---------
TOTAL INVESTMENTS -- 99.4%
(Cost $22,162) 22,717
---------
OTHER ASSETS AND LIABILITIES,
NET-- 0.6% 142
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 2,097,233 outstanding shares 20,757
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 182,133 outstanding shares 1,844
Accumulated Net Realized Loss
on Investments (297)
Net Unrealized Appreciation
on Investments 555
---------
TOTAL NET ASSETS-- 100.0% $22,859
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.03
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.03
=========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE CORPORATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE CORPORATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
BOND FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 27%
U.S. GOVERNMENT BACKED OBLIGATIONS 29%
CASH EQUIVALENTS 3%
CORPORATE OBLIGATIONS 40%
U.S. AGENCY BACKED OBLIGATIONS 1%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 26.4%
U.S. Treasury Bonds
6.500%, 11/15/26 $2,895 $ 3,090
6.375%, 08/15/27 5,511 5,815
6.125%, 11/15/27 3,193 3,282
U.S. Treasury Notes
8.875%, 02/15/99 6,470 6,694
6.500%, 04/30/99 3,305 3,341
5.875%, 07/31/99 1,950 1,956
5.625%, 10/31/99 2,135 2,133
7.750%, 01/31/00 503 523
6.750%, 04/30/00 5,525 5,649
8.000%, 05/15/01 3,795 4,053
6.625%, 07/31/01 2,548 2,619
7.500%, 11/15/01 3,835 4,064
6.250%, 02/28/02 442 450
6.125%, 08/15/07 2,515 2,584
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $45,367) 46,253
---------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 29.2%
FHLMC
6.750%, 03/15/07 2,355 2,396
7.500%, 10/01/10 2,363 2,425
8.000%, 07/01/25 3,145 3,255
FNMA
6.500%, 08/01/10 2,880 2,884
6.500%, 09/01/10 3,225 3,229
7.500%, 06/01/11 2,273 2,333
6.500%, 03/25/19 1,690 1,681
8.500%, 02/01/25 1,271 1,328
7.500%, 08/01/25 2,813 2,879
8.500%, 08/01/26 3,030 3,164
7.000%, 11/01/26 3,862 3,890
7.500%, 05/01/27 4,374 4,476
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
GNMA
7.500%, 12/15/25 $5,170 $ 5,298
6.500%, 04/15/26 5,719 5,661
7.000%, 06/15/26 1,826 1,848
8.000%, 12/15/26 1,881 1,951
7.500%, 06/15/27 2,455 2,516
---------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $50,030) 51,214
---------
ASSET-BACKED SECURITIES -- 13.5%
BankBoston RV Trust,
Series 1997-1, Class A8
6.540%, 02/15/09 1,855 1,877
Carco Auto Loan,
Series 1997-1, Class A
6.689%, 08/15/04 1,510 1,519
Case Equipment Loan Trust,
Series 1997-5, Class A4
6.410%, 09/15/04 1,955 1,962
EQCC, Series 1996-4, Class A5
6.710%, 07/15/11 2,000 2,033
First Plus Home Loan Trust,
Series 1997-2, Class A5
6.820%, 04/10/23 2,200 2,245
First Plus Home Loan Trust,
Series 1997-3, Class A5
6.860%, 10/10/13 2,755 2,796
Green Tree Financial,
Series 1993-3, Class A7
6.400%, 10/15/18 1,785 1,760
Heller Equipment Asset
Receivables Trust,
Series 1997-1, Class A2
6.390%, 05/25/05 1,855 1,865
Metlife Captial Equipment Loan
Trust, Series 1997-A, Class A
6.850%, 05/20/08 1,800 1,840
Money Store Home Equity Loan
Trust, Series 1997-1, Class A3
6.680%, 08/15/12 2,275 2,272
Money Store Home Equity Loan
Trust, Series 1997-D, Class A7
6.485%, 12/15/28 1,735 1,735
Vanderbilt Mortgage Finance,
Series 1997-B, Class 1A4
7.190%, 02/07/14 1,404 1,454
Vanderbilt Mortgage Finance,
Series 1997-C, Class 1A2
6.480%, 09/07/07 400 401
---------
TOTAL ASSET-BACKED SECURITIES
(Cost $23,519) 23,759
---------
NON-AGENCY MORTGAGE-BACKED BONDS -- 4.6%
Citicorp Mortgage Securities,
Series 1997-1, Class A2 CMO
7.250%, 02/25/27 2,060 2,071
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Countrywide Mortgage Broker
Services, Series 1997-A1,
Class A1 CMO
7.000%, 03/25/27 $1,844 $ 1,854
General Electric Capital
Mortgage Services,
Series 1997-3, Class A4 CMO
7.500%, 04/25/27 2,300 2,326
Residential Asset Securization
Trust, Series 1997-A3,
Class A10 CMO
7.250%, 05/25/27 1,835 1,852
---------
TOTAL NON-AGENCY MORTGAGE-BACKED BONDS
(Cost $7,977) 8,103
---------
CORPORATE BONDS -- 22.0%
BANKING -- 4.9%
Banca Commerciale Italiana
8.250%, 07/15/07 973 1,075
Banco Santiago
7.000%, 07/18/07 2,000 1,970
BankBoston
7.000%, 09/15/07 1,740 1,788
First Union Capital I
7.935%, 01/15/27 1,820 1,943
Keycorp
7.500%, 06/15/06 1,805 1,918
---------
8,694
---------
FINANCIAL SERVICES -- 5.8%
Associates Corporation
of North America
6.750%, 07/15/01 700 712
6.500%, 10/15/02 1,810 1,826
CNA Financial
7.250%, 11/15/23 725 742
Fairfax Financial Holdings
8.300%, 04/15/26 1,515 1,693
Lehman Brothers Holdings
7.375%, 05/15/04 1,320 1,371
Loews
6.750%, 12/15/06 1,880 1,913
Santander Finance
6.375%, 02/15/11 1,955 1,906
---------
10,163
---------
INDUSTRIAL -- 11.3%
American Stores
8.000%, 06/01/26 2,110 2,329
Barrick Gold
7.500%, 05/01/07 1,855 1,959
Belo A H
6.875%, 06/01/02 1,202 1,226
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Lasmo USA
6.750%, 12/15/07 $1,200 $ 1,209
Legrand S.A.
8.500%, 02/15/25 2,590 3,121
RJR Nabisco
8.750%, 04/15/04 1,935 2,073
Skandinaviska Enskilda
6.875%, 02/15/09 1,145 1,176
Tele-Communications
7.250%, 08/01/05 1,000 1,028
Time Warner
7.750%, 06/15/05 1,985 2,104
Tosco
7.625%, 05/15/06 2,185 2,335
Weyerhauser
6.950%, 08/01/17 1,244 1,267
---------
19,827
---------
TOTAL CORPORATE BONDS
(Cost $36,955) 38,684
---------
REPURCHASE AGREEMENT -- 3.1%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $5,476,886
(collateralized by U.S. Treasury
Note, par value $5,625,000,
5.50%, 12/31/00; market
value $5,604,188) 5,475 5,475
---------
TOTAL REPURCHASE AGREEMENT
(Cost $5,475) 5,475
---------
TOTAL INVESTMENTS -- 98.8%
(Cost $169,323) 173,488
---------
OTHER ASSETS AND LIABILITIES,
NET-- 1.2% 2,104
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 16,477,588 outstanding shares 169,665
Portfolio Shares -- Class A ($0.001 par
value -- 1 billion authorized) based
on 192,419 outstanding shares 2,020
Accumulated Net Realized Loss
on Investments (258)
Net Unrealized Appreciation
on Investments 4,165
---------
TOTAL NET ASSETS-- 100.0% $175,592
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.53
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.53
=========
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
GLOBAL BOND FUND
[PIE CHART OMITTED]
UNITED STATES 20%
UNITED KINGDOM 9%
SWEDEN 5%
NEW ZEALAND 10%
LUXEMBURG 6%
AUSTRALIA 4%
AUSTRIA 3%
CYPRUS 3%
DENMARK 8%
FRANCE 8%
GERMANY 17%
IRELAND 7%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
FOREIGN BONDS -- 48.8%
AUSTRALIA -- 3.5%
New South Wales Treasury
12.000%, 12/01/01 $ 1,600 $ 1,264
---------
DENMARK -- 7.7%
Kingdom of Denmark
7.000%, 11/10/24 16,850 2,737
---------
FRANCE -- 4.8%
Government of France OAT
6.000%, 10/25/25 10,250 1,726
---------
GERMANY -- 15.5%
Bundesrepublic
6.250%, 01/04/24 9,590 5,553
---------
NEW ZEALAND -- 4.0%
Government of New Zealand
8.000%, 11/15/06 2,320 1,430
---------
SWEDEN -- 4.6%
Government of Sweden
8.000%, 08/15/07 11,500 1,657
---------
UNITED KINGDOM -- 8.7%
Chubu Elecectric Power
6.750%, 08/10/99 950 1,543
Halifax Building
8.375%, 12/15/99 950 1,590
---------
3,133
---------
TOTAL FOREIGN BONDS
(Cost $17,415) 17,500
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
COMMERCIAL PAPER -- 26.3%
Bank of Austria
5.340%, 01/12/98 $ 1,000 $ 998
CEDEL Bank
5.720%, 01/16/98 1,000 987
CREGEM North America
5.310%, 01/20/98 1,000 997
DEPFA Bank of Europe
5.740%, 03/05/98 1,500 1,485
EFIC
5.490%, 02/02/98 1,000 995
Helaba Dublin
5.610%, 01/26/98 1,000 996
MTF Securities
5.130%, 01/07/98 1,000 999
New Zealand Dairy
Board Financial
5.700%, 02/26/98 1,000 991
Republic of Cyprus
5.700%, 02/17/98 1,000 993
---------
TOTAL COMMERCIAL PAPER
(Cost $9,441) 9,441
---------
U.S. TREASURY OBLIGATION -- 18.9%
U.S. Treasury Note
4.750%, 09/30/98 6,800 6,758
---------
TOTAL U.S. TREASURY OBLIGATION
(Cost $6,786) 6,758
---------
DEBT OPTIONS -- 0.9%
FRANCE -- 0.1%
Government of France
OAT 6.00% Put,
strike @ 96.93* 10,250,000 3
Government of France
OAT 7.50% Put,
strike @ 113.61* 23,000,000 19
---------
22
---------
GERMANY -- 0.2%
Bundesrepublic 7.375% Put,
strike @ 111.68* 7,300,000 14
Bundesrepublic 6.25% Put,
strike @ 105.00* 6,000,000 71
---------
85
---------
SWEDEN -- 0.1%
Government of Sweden
8.00% Put, strike
@ 113.75* 11,500,000 19
---------
UNITED STATES -- 0.5%
U.S. Treasury Note 6.375%
Call, strike @
101.734375* 5,000,000 192
---------
TOTAL DEBT OPTIONS
(Cost $423) 318
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CURRENCY OPTIONS -- 0.0%
GERMANY -- 0.0%
Deutsche Mark Call,
strike @ 1.7037* $7,000,000 $ 12
---------
JAPAN -- 0.0%
Yen Call, strike @ 122.00* 7,000,000 3
---------
TOTAL CURRENCY OPTIONS
(Cost $294) 15
---------
DEMAND DEPOSIT -- 3.1%
Morgan Stanley
4.750%, 01/01/98 1,119 1,119
---------
TOTAL DEMAND DEPOSIT
(Cost $1,119) 1,119
---------
TOTAL INVESTMENTS -- 98.0%
(Cost $35,478) 35,151
---------
OTHER ASSETS AND LIABILITIES,
NET-- 2.0% 720
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 25 million authorized) based
on 3,817,509 outstanding shares 37,800
Portfolio Shares -- Class A ($0.001 par
value -- 25 million authorized) based
on 26,337 outstanding shares 258
Accumulated net realized loss
on investments (2,014)
Net unrealized appreciation on
forward foreign currency contracts,
foreign currency and translation of
other assets and liabilities in
foreign currency 113
Net unrealized depreciation
on investments (327)
Accumulated net investment income 41
---------
TOTAL NET ASSETS-- 100.0% $35,871
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.33
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.32
=========
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INTERMEDIATE MUNICIPAL BOND FUND
[PIE CHART OMITTED]
REVENUE BONDS 48%
CASH EQUIVALENT 3%
GENERAL OBLIGATIONS 38%
PRE-REFUNDED SECURITIES 11%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 95.5%
COLORADO -- 1.1%
El Paso County, Colorado GO
5.200%, 12/01/02 $20 $ 21
---------
FLORIDA -- 2.8%
Jacksonville, Florida Electric
Authority Revenue Bond,
Series 3-A
5.200%, 10/01/02 50 52
---------
GEORGIA -- 3.9%
Atlanta, Georgia Water & Sewer
Revenue Bond FGIC
4.500%, 01/01/04 20 20
De Kalb County, Georgia Health
Facilities GO
5.300%, 01/01/03 50 53
---------
73
---------
HAWAII -- 2.8%
Hawaii State GO
5.200%, 06/01/04 50 52
---------
ILLINOIS -- 8.0%
Bloomingdale, Illinois GO
5.450%, 01/01/09 85 89
Illinois State Sales Tax Revenue
Bond, Series S
4.900%, 06/15/07 60 61
---------
150
---------
MARYLAND -- 2.8%
Maryland State Health &
Higher Education Facilities
Authority Revenue Bond,
Johns Hopkins Project
5.125%, 07/01/03 50 52
---------
MASSACHUSETTS -- 2.8%
Massachusetts Bay Transportation
Authority Revenue Bond, Series A
5.300%, 03/01/05 50 53
---------
75
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
INTERMEDIATE MUNICIPAL BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
NEW JERSEY -- 6.5%
Burlington County, New Jersey
Community Bridge Systems
Revenue Bond, Callable
10/01/03 at 101 CG
5.050%, 10/01/04 $ 50 $ 52
Medford Township, New Jersey
Board of Education GO FGIC
5.950%, 02/01/03 65 70
---------
122
---------
PENNSYLVANIA -- 64.8%
Allegheny County, Pennsylvania,
Series C-33, GO
7.450%, 02/15/98 50 50
Governor Mifflin, Pennsylvania
School District GO AMBAC
4.850%, 11/15/01 50 52
Lehigh County, Pennsylvania
GO FGIC
5.125%, 11/15/08 110 114
Luzerne County, Pennsylvania,
Series A, GO, Pre-Refunded
09/15/00 at 100 FGIC
5.850%, 09/15/02 50 52
Pennsylvania State Higher
Education Facilities Authority
Hospital Revenue Bond,
Thomas Jefferson University
Project, Pre-Refunded
01/01/98 at 102
8.000%, 01/01/18 85 87
Pennsylvania State Industrial
Development Authority
Revenue Bond AMBAC
5.000%, 07/01/04 100 104
Pennsylvania State Infrastructure
Authority Revenue Bond for
Pennvest Loan Pool Project MBIA
6.000%, 09/01/03 65 71
Pennsylvania State Turnpike
Commission Revenue Bond,
Series 1, Pre-Refunded
12/01/01 at 102 FGIC
7.150%, 12/01/11 50 56
Pennsylvania State Turnpike
Commission Revenue Bond,
Series F, Pre-Refunded 12/01/99
at 102 AMBAC
7.250%, 12/01/17 50 54
Philadelphia, Pennsylvania Airport
Parking Authority Revenue
Bond AMBAC
5.500%, 09/01/05 80 86
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pittsburgh, Pennsylvania School
District, Series A, GO FGIC
4.850%, 09/01/03 $100 $ 103
Pittsburgh, Pennsylvania Water
and Sewer Authority Revenue
Bond, Series A FGIC
4.800%, 09/01/06 70 72
Reading, Pennsylvania Parking
Authority Revenue Bond MBIA
4.950%, 11/15/02 50 52
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond for Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 50 52
University of Pittsburgh,
Pennsylvania Revenue Bond for
University Capital Projects FGIC
5.050%, 06/01/10 90 93
Wallenpaupack, Pennsylvania Area
School District, Series C, GO,
Callable 09/01/00 at 100 FGIC
6.000%, 09/01/03 50 52
West View, Pennsylvania Municipal
Water Authority Revenue
Bond FGIC
4.800%, 11/15/06 60 62
---------
1,212
---------
TOTAL MUNICIPAL BONDS
(Cost $1,731) 1,787
---------
CASH EQUIVALENT -- 2.8%
SEI Tax Exempt Trust Institutional
Tax Free Portfolio 52 52
---------
TOTAL CASH EQUIVALENT
(Cost $52) 52
---------
TOTAL INVESTMENTS -- 98.3%
(Cost $1,783) 1,839
---------
OTHER ASSETS AND LIABILITIES,
NET-- 1.7% 33
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 88,385 outstanding shares 919
Portfolio Shares -- Class A (unlimited
authorization -- no par value) based
on 94,207 outstanding shares 977
Accumulated Net Realized Loss
on Investments (80)
Net Unrealized Appreciation
on Investments 56
---------
TOTAL NET ASSETS-- 100.0% $1,872
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.25
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.25
=========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
[PIE CHART OMITTED]
TAX ANTICIPATION NOTES 3%
REVENUE BONDS 70%
CASH EQUIVALENT 1%
GENERAL OBLIGATIONS 25%
PRE-REFUNDED SECURITIES 1%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 102.2%
OHIO -- 2.9%
Cleveland, Ohio Bond Anticipation
Notes, Series B
4.500%, 10/01/99 $500 $ 503
---------
PENNSYLVANIA -- 99.3%
Allegheny County, Pennsylvania
GO, Series C-43, Callable
09/15/04 at 100 MBIA
5.875%, 09/15/10 60 64
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Mercy
Hospital of Pittsburgh AMBAC
6.450%, 04/01/01 200 214
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Montefiore
Hospital Association
5.800%, 10/01/03 110 116
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Presbyterian
Health Center, Series B, Callable
11/01/02 at 102 MBIA
6.000%, 11/01/12 25 27
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bonds for Allegheny
Health Center - UPMC
Health, Series B
5.000%, 07/01/16 500 489
Allegheny County, Pennsylvania
Redevelopment Authority
Revenue Bond for Home
Improvement Loan Project,
Series A, Callable 02/01/04
at 102 FHA
5.700%, 02/01/07 10 10
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Allegheny County, Pennsylvania
Sanitation Authority Sewer
Revenue Bond, Series B,
Pre-Refunded 06/01/99
at 100 FGIC
7.450%, 12/01/09 $130 $ 136
Berks County, Pennsylvania
Revenue Bond for Reading
Hospital & Medical Center,
Series B, Callable 10/01/04
at 102 MBIA
5.600%, 10/01/06 65 70
Bucks County, Pennsylvania
Community College Authority
Revenue Bond
5.500%, 06/15/14 300 314
Center City District, Pennsylvania
Business Improvement
Assessment Bond, Callable
12/01/07 at 100 AMBAC
5.600%, 12/01/08 60 65
Central Bucks, Pennsylvania
School District GO,
Callable 02/01/01 at 100
6.600%, 02/01/03 175 187
Crawford, Pennsylvania Central
School District GO FGIC
7.000%, 02/15/05 100 116
Dauphin County, Pennsylvania
Dauphin County General
Authority School District
Pooled Financing
Program II AMBAC
4.450%, 09/01/32 500 500
Delaware County, Pennsylvania GO
7.100%, 12/01/98 170 170
5.500%, 10/01/15 75 78
Delaware County, Pennsylvania
Revenue Bond for Villanova
University AMBAC
5.400%, 08/01/08 200 213
Dover Township, Pennsylvania
Sewer Authority Revenue Bond
6.250%, 05/01/12 20 22
Easton, Pennsylvania Area
Sewer Authority Revenue
Bonds, Series A FSA
4.200%, 12/01/01 575 574
5.000%, 12/01/14 500 496
Exeter Township, Pennsylvania
General Obligation Bonds,
Series B FGIC
4.800%, 07/15/09 500 509
Hampden Township, Pennsylvania
Sewer Authority Special
Obligation Bond, Callable
10/01/96 at 100
5.350%, 04/01/03 95 98
Hollidaysburg, Pennsylvania Sewer
Authority Revenue Bonds
5.000%, 12/01/18 1,000 979
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
77
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
PENNSYLVANIA MUNICIPAL BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Keystone Oaks, Pennsylvania
School District GO FGIC
5.000%, 09/01/11 $500 $ 506
Lehigh County, Pennsylvania
General Purpose Authority
Revenue Bonds for Muhlenberg
College Project AMBAC
4.150%, 08/01/02 300 298
Lower Burrell, Pennsylvania City
Municipal Sewer Authority
Revenue Bond AMBAC
5.125%, 02/01/16 250 250
Lower Merion Township,
Pennsylvania GO, Callable
08/01/02 at 100
5.625%, 08/01/05 100 105
Manheim, Pennsylvania Central
School District GO, Callable
05/15/04 at 100 FGIC
6.100%, 05/15/14 100 107
Millcreek Township, Pennsylvania
Sewer Authority Revenue Bond,
Callable 11/01/99 at 100 MBIA
6.000%, 11/01/06 150 155
Montgomery County, Pennsylvania
Higher Education and Health
Authority Revenue Bond for
Abington Memorial Hospital,
Series A AMBAC
5.125%, 06/01/14 250 250
Neshaminy, Pennsylvania
Neshaminy School District
GO FGIC
5.250%, 02/15/07 500 532
North Wales, Pennsylvania Water
Authority Revenue Bond
Pre-Refunded 11/01/04 at 100
6.750%, 11/01/10 100 114
Northampton County,
Pennsylvania Higher Education
Authority Revenue Bond for
Lehigh University, Series A MBIA
5.750%, 11/15/18 150 157
Pennsylvania Housing Finance
Agency Single Family
Mortgage - 55 Revenue Bond
4.700%, 10/01/01 100 102
Pennsylvania State Convention
Center Authority Revenue Bond,
Series A FGIC
6.700%, 09/01/16 75 89
Pennsylvania State GO
5.125%, 09/15/04 450 471
5.000%, 11/15/12 500 506
Pennsylvania State GO, Series 2
6.000%, 07/01/05 25 28
6.250%, 07/01/11 60 69
Pennsylvania State GO,
Third Series
5.000%, 09/01/07 250 259
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State GO,
Third Series, Callable
09/01/03 at 101
5.000%, 09/01/12 $350 $ 352
Pennsylvania State Higher
Education Facilities Authority
Health Services Revenue Bond
for Allegheny/Delaware Valley,
Series A MBIA
5.500%, 11/15/08 400 433
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for
Health Services, Series A,
Callable 01/01/04 at 102
6.000%, 01/01/10 100 109
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for Thomas
Jefferson University, Series A,
Callable 07/01/99 at 102
6.000%, 07/01/19 150 155
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for University of
Pennsylvania, Series B
5.700%, 01/01/11 150 159
5.850%, 09/01/13 100 106
Pennsylvania State Higher
Educational Facilities Authority
Revenue Bond for
University of Pennsylvania
Project, Series B
5.250%, 01/01/07 500 528
Pennsylvania State Housing
Finance Agency Revenue
Bond, Series C
6.400%, 07/01/12 300 318
Pennsylvania State Industrial
Development Authority
Revenue Bond AMBAC
5.800%, 07/01/09 250 276
6.000%, 07/01/09 305 342
6.000%, 01/01/12 100 108
Pennsylvania State Industrial
Development Authority
Revenue Bond for Economic
Development AMBAC
6.000%, 07/01/08 600 673
Pennsylvania State Industrial
Development Authority Revenue
Bond, State Infrastructure
Investment Authority for
Pennvest Loan Pool MBIA
6.000%, 09/01/04 400 438
Pennsylvania State Turnpike
Commission Revenue
Bond, Series P
5.800%, 12/01/06 75 80
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State Turnpike
Commission Revenue Bond,
Series O, Callable 12/01/02
at 102 FGIC
5.900%, 12/01/08 $125 $ 135
Pennsylvania State Turnpike
Commission Revenue
Bond, Series P
5.100%, 12/01/99 150 153
Pennsylvania State University
Revenue Bond,
Callable 03/01/04 at 100
6.150%, 03/01/05 185 201
Philadelphia, Pennsylvania Parking
Authority Revenue Bond
5.750%, 09/01/07 400 439
Philadelphia, Pennsylvania
Industrial Authority
Revenue Bond
5.250%, 11/15/09 500 519
Philadelphia, Pennsylvania
Hospitals and Higher Education
Facilities Authority Revenue
Bond for Pennsylvania
Hospital, Series A FGIC
5.250%, 02/15/14 100 101
Pittsburgh, Pennsylvania GO,
Series D, Callable 09/01/02
at 102 AMBAC
6.125%, 09/01/17 25 27
Radnor Township, Pennsylvania
GO, Callable 05/01/06 at 100
5.250%, 11/01/16 200 205
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 250 259
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bonds for Community
Medical Center Project
4.500%, 07/01/04 800 805
Scranton-Lackawanna,
Pennsylvania Health and
Welfare Authority Revenue
Bond for University of
Scranton, Series A
6.150%, 03/01/03 150 162
Seneca Valley, Pennsylvania GO
5.850%, 02/15/15 105 111
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
University of Pittsburgh,
Pennsylvania Unrefunded
Balance of Series A Revenue
Bonds MBIA
6.125%, 06/01/21 $ 40 $ 43
West View, Pennsylvania
Municipal Authority Water
Revenue Bonds FGIC
5.150%, 11/15/17 615 621
York, Pennsylvania City School
District GO, Callable
03/01/03 at 100 FGIC
5.600%, 03/01/07 75 79
----------
17,382
----------
TOTAL MUNICIPAL BONDS
(Cost $17,250) 17,885
----------
CASH EQUIVALENT -- 1.2%
SEI Tax Exempt Trust Institutional
Tax Free Portfolio 216 216
----------
TOTAL CASH EQUIVALENT
(Cost $216) 216
----------
TOTAL INVESTMENTS -- 103.4%
(Cost $17,466) 18,101
----------
OTHER ASSETS AND LIABILITIES -- (3.4%)
Liabilities - Investment Securities Purchased (980)
Other Assets and Liabilities 381
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (599)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized shares)
based on 1,198,485 outstanding shares 12,448
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized shares)
based on 425,928 outstanding shares 4,475
Accumulated Net Realized Loss
on Investments (57)
Net Unrealized Appreciation
on Investments 636
----------
TOTAL NET ASSETS-- 100.0% $17,502
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.77
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.78
==========
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FHA -- FEDERAL HOUSING AGENCY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
NEW JERSEY MUNICIPAL BOND FUND
[PIE CHART OMITTED]
REVENUE BONDS 45%
CASH EQUIVALENTS 3%
GENERAL OBLIGATIONS 52%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 96.1%
NEW JERSEY -- 96.1%
Bayonne, New Jersey GO FGIC
5.900%, 05/01/08 $150 $ 162
Burlington County, New Jersey GO
5.200%, 10/01/05 80 83
Cherry Hill Township,
New Jersey GO
5.900%, 06/01/05 50 54
Flemington-Raritan, New Jersey
Regional School District GO
5.700%, 05/01/06 50 54
Manalapan Township, New Jersey
Fire District Number 1 GO
5.300%, 12/15/99 80 82
Marlboro Township, New Jersey
Board of Education GO FGIC
5.500%, 07/15/09 40 42
Middlesex County New Jersey
Revenue Bond FGIC
5.125%, 12/01/16 70 70
Monmouth County, New Jersey
Improvement Authority
Revenue Bond CG
6.625%, 12/01/05 40 43
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Bridgeton Hospital Association
Project, Series B
6.000%, 07/01/13 50 55
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Burlington County Memorial
Hospital Project
6.000%, 07/01/12 50 54
New Jersey State Economic
Development Authority Revenue
Bond for Peddie School
Project, Series A
5.400%, 02/01/06 50 53
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
New Jersey State Economic
Development Authority Revenue
Bond for Rutgers State
University-Civic Square AMBAC
6.125%, 07/01/24 $ 55 $ 59
New Jersey State Educational
Facilities Authority Revenue
Bond for Princeton University
Project, Series A
5.500%, 07/01/04 100 108
New Jersey State Educational
Facilities Authority Revenue
Bond for University of Medicine
and Dentistry, Series B AMBAC
5.250%, 12/01/13 60 62
New Jersey State Transportation
Authority Revenue Bond MBIA
5.000%, 06/15/15 100 99
New York & New Jersey States
Port Authority Revenue
Bond, Series 81
5.700%, 08/01/07 50 53
North Bergen Township,
New Jersey GO AMBAC
5.000%, 08/15/09 75 78
North Brunswick Township,
New Jersey Board of
Education GO
6.300%, 02/01/12 150 167
North Brunswick Township,
New Jersey Board of Education
GO FGIC
5.000%, 02/01/12 100 101
North Brunswick Township,
New Jersey GO
6.125%, 05/15/04 24 26
North New Jersey District Water
Supply Revenue Bond MBIA
5.050%, 11/15/11 90 92
Ocean County, New Jersey GO
5.650%, 07/01/03 75 80
Ocean County, New Jersey
Utilities Authority Wastewater
Revenue Bond
5.125%, 01/01/11 75 77
Secaucus, New Jersey Utilities
Authority Sewer Revenue
Bond, Series A
6.100%, 12/01/10 60 67
South Brunswick Township,
New Jersey GO
5.950%, 08/01/14 100 108
South Monmouth, New Jersey
Regional Sewer Authority
Revenue Bond MBIA
5.550%, 01/15/06 50 54
West Windsor Township,
New Jersey Parking Authority
Revenue Bond
6.100%, 12/01/12 50 55
----------
2,038
----------
TOTAL MUNICIPAL BONDS
(Cost $1,934) 2,038
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
80
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CASH EQUIVALENT -- 2.8%
SEITax Exempt Trust Institutional
Tax Free Portfolio $58 $ 59
--------
TOTAL CASH EQUIVALENT
(Cost $59) 59
--------
TOTAL INVESTMENTS -- 98.9%
(Cost $1,993) 2,097
--------
OTHER ASSETS AND LIABILITIES,
NET-- 1.1% 23
--------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 153,520 outstanding shares 1,513
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 49,310 outstanding shares 507
Accumulated Net Realized Loss
on Investments (4)
Net Unrealized Appreciation
on Investments 104
--------
TOTAL NET ASSETS-- 100.0% $2,120
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $10.46
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.45
========
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FSA --FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
TREASURY RESERVE
[PIE CHART OMITTED]
U.S. TREASURY SECURITIES 34%
CASH EQUIVALENTS 66%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 34.4%
U.S. Treasury Bills+
5.700%, 01/08/98 $ 8,500 $ 8,491
5.180%, 01/22/98 39,000 38,884
5.587%, 02/05/98 7,000 6,964
5.650%, 03/05/98 10,000 9,906
5.797%, 04/02/98 10,000 9,861
5.793%, 04/30/98 10,000 9,818
5.580%, 05/28/98 10,000 9,783
5.530%, 06/25/98 10,000 9,744
5.572%, 07/23/98 10,000 9,703
5.544%, 08/20/98 10,000 9,658
U.S. Treasury Notes
5.580%, 01/31/98 10,000 9,995
5.600%, 01/31/98 15,000 15,000
5.690%, 07/31/98 15,000 14,962
5.780%, 08/15/98 10,000 10,005
5.610%, 08/31/98 15,000 15,004
5.630%, 09/30/98 5,000 4,969
5.640%, 09/30/98 10,000 10,026
5.650%, 10/31/98 10,000 10,017
5.730%, 11/15/98 15,000 14,970
5.740%, 11/30/98 15,000 14,985
U.S. Treasury STRIPS
5.710%, 02/15/98 10,000 9,933
5.725%, 05/15/98 14,600 14,305
5.735%, 08/15/98 20,000 19,319
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $286,302) 286,302
--------
REPURCHASE AGREEMENTS -- 65.8%
Aubrey Lanston
5.25%, dated 12/31/97, matures
01/02/98, repurchase price
$37,217,852 (collateralized by
U.S. Treasury Note, par value
$38,190,000 5.625%, 12/31/02;
market value $38,178,543) 37,207 37,207
81
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TREASURY RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Goldman Sachs
6.35%, dated 12/31/97, matures
01/02/98, repurchase price
$19,506,879 (collateralized by
U.S. Treasury Note, par value
$19,120,000, 6.875%,
03/31/00; market
value $19,945,984) $ 19,500 $ 19,500
Hong Kong Shanghai Bank
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$200,071,111 (collateralized
by various U.S. Treasury Notes,
ranging in par value $21,780,000-
50,000,000, 6.375%-7.125%,
04/30/99-04/30/00; total
market value $204,152,180) 200,000 200,000
Merrill Lynch
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$30,010,667 (collateralized by
various U.S. Treasury Notes,
ranging in par value $12,590,000-
$15,810,000, 8.00%,
05/15/01; total market
value $30,697,720) 30,000 30,000
Morgan Stanley
6.20%, dated 12/31/97, matures
01/02/98, repurchase price
$30,010,333 (collateralized by
U.S. Treasury Note, par value
$30,810,000, 5.50%, 12/31/00;
market value $30,696,003) 30,000 30,000
State Street Bank
5.50%, dated 12/31/97, matures
01/02/98, repurchase price
$200,061,111 (collateralized by
various U.S. Treasury Notes,
ranging in par value $13,990,000-
$50,000,000, 6.125%,
03/31/98; total market
value $204,152,580) 200,000 200,000
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Swiss Bank
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$30,010,667 (collateralized by
various U.S. Treasury Notes,
ranging in par value $12,790,000-
$15,675,000, 7.50%,
05/15/02; total market
value $30,736,507) $30,000 $ 30,000
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $546,707) 546,707
--------
TOTAL INVESTMENTS -- 100.2%
(Cost $833,009) 833,009
--------
OTHER ASSETS AND LIABILITIES,
NET-- (0.2%) (1,740)
--------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1,250 million authorized) based
on 806,957,000 outstanding shares 806,957
Portfolio Shares -- Class C ($0.001 par
value -- 1,250 million authorized) based
on 24,292,618 outstanding shares 24,292
Accumulated Net Realized Gain
on Investments 20
--------
TOTAL NET ASSETS-- 100.0% $831,269
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $1.00
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS C $1.00
========
+ EFFECTIVE YIELD
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL SECURITIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
CASH RESERVE
CASH RESERVE
[PIE CHART OMITTED]
U.S. GOVERNMENT OBLIGATIONS 6%
CASH EQUIVALENTS 14%
CORPORATE OBLIGATIONS 80%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
COMMERCIAL PAPER -- 50.7%
BANKING -- 6.0%
Banc One Funding
5.830%, 01/29/98 $ 9,262 $ 9,220
5.838%, 02/09/98 10,000 9,937
5.840%, 02/13/98 10,000 9,931
NationsBank
5.858%, 01/30/98 10,000 9,953
5.813%, 03/17/98 14,000 13,833
Society Generale
5.900%, 06/16/98 9,000 8,996
--------
61,870
--------
FINANCIAL SERVICES -- 30.7%
Aig Funding
5.806%, 07/31/98 12,100 11,704
Asset Securitization Coop
5.679%, 02/04/98 10,000 9,947
5.800%, 02/12/98 10,000 9,932
5.810%, 02/27/98 10,000 9,909
Caisse de Depots En
Consignations
5.678%, 03/17/98 20,000 19,770
Cafco
6.653%, 01/02/98 20,000 19,996
5.837%, 02/19/98 10,000 9,921
Ciesco
5.809%, 02/17/98 9,500 9,429
5.801%, 03/03/98 19,000 18,816
Credit Agricole USA
5.753%, 01/16/98 10,000 9,976
Eureka Securitization
5.701%, 02/03/98 10,000 9,949
5.854%, 02/25/98 10,000 9,912
5.835%, 03/23/98 15,000 14,806
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Goldman Sachs
5.709%, 05/07/98 $10,000 $ 9,806
Merrill Lynch
5.679%, 01/30/98 10,000 9,955
5.709%, 03/31/98 5,000 4,931
5.803%, 05/13/98 10,000 9,792
5.812%, 05/29/98 10,000 9,768
Morgan Stanley
5.673%, 01/21/98 5,000 4,984
5.679%, 02/04/98 10,000 9,947
Morgan Stanley (A)
5.915%, 01/13/98 15,500 15,500
Met Life Funding
5.757%, 01/13/98 10,000 9,981
5.758%, 01/27/98 10,000 9,959
5.937%, 02/05/98 4,050 4,027
New Center Asset Trust
5.674%, 01/30/98 7,000 6,968
5.784%, 03/09/98 10,000 9,894
5.699%, 03/30/98 14,000 13,810
Norwest Financial
5.661%, 01/20/98 15,250 15,205
Swedish Export Credit
5.818%, 05/07/98 10,000 9,801
--------
318,395
--------
INDUSTRIAL -- 12.4%
BP America
6.402%, 01/02/98 18,000 17,997
Campbell Soup
5.753%, 05/26/98 12,475 12,194
Ford Motor Credit
5.718%, 03/30/98 11,780 11,620
General Electric Capital
5.646%, 02/03/98 5,000 4,975
5.715%, 02/27/98 10,000 9,911
5.736%, 04/23/98 14,950 14,690
Mitsubishi International
5.826%, 01/12/98 13,300 13,277
Pitney Bowes Credit
6.066%, 01/14/98 2,016 2,012
5.656%, 01/20/98 15,000 14,956
Procter & Gamble
5.777%, 04/14/98 16,000 15,740
Southwestern Bell
5.631%, 01/29/98 11,000 10,953
--------
128,325
--------
UTILITIES -- 1.6%
National Rural Utilities
5.617%, 01/09/98 7,100 7,091
5.651%, 01/21/98 10,000 9,969
--------
17,060
--------
TOTAL COMMERCIAL PAPER
(Cost $525,650) 525,650
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
83
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
CASH RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.2%
FFCB (A)
5.520%, 01/02/98 $ 5,250 $ 5,248
FHLB (A)
5.899%, 01/07/98 4,200 4,199
FHLB
5.810%, 01/23/98 11,000 11,000
5.805%, 02/13/98 13,400 13,400
5.850%, 03/17/98 5,000 5,000
FNMA (A)
5.894%, 01/06/98 15,000 14,995
SLMA (A)
5.779%, 01/06/98 10,000 10,000
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $63,842) 63,842
--------
CORPORATE OBLIGATIONS -- 11.5%
BANKING -- 0.2%
Morgan Guaranty (A)
6.230%, 01/02/98 2,000 2,000
--------
FINANCIAL SERVICES -- 8.8%
Abbey National Treasury
Services (A)
5.575%, 01/02/98 20,000 19,983
5.650%, 01/02/98 17,000 16,999
Associates Corporation of
North America (A)
6.120%, 01/02/98 15,000 14,998
Credit Suisse First Boston (A)
5.670%, 01/02/98 10,000 10,000
5.921%, 01/13/98 10,000 10,000
Goldman Sachs
6.100%, 04/15/98 6,825 6,826
Paccar Financial (A)
5.841%, 01/20/98 12,000 11,997
--------
90,803
--------
INDUSTRIAL -- 2.5%
Ford Motor Credit
5.700%, 01/02/98 15,000 14,999
6.350%, 02/12/98 1,800 1,801
Exxon Capital
8.000%, 10/02/98 4,249 4,311
Merck
5.250%, 12/22/98 5,000 4,967
--------
26,078
--------
TOTAL CORPORATE OBLIGATIONS
(Cost $118,881) 118,881
--------
TIME DEPOSITS -- 6.8%
Banque Nationale de Paris
6.625%, 01/02/98 30,000 30,000
State Street Bank
5.500%, 01/02/98 40,000 40,000
--------
TOTAL TIME DEPOSITS
(Cost $70,000) 70,000
--------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MASTER NOTE -- 0.9%
Associates Corporation of
North America (A)
5.506%, 01/02/98 $ 8,950 $ 8,950
--------
TOTAL MASTER NOTE
(Cost $8,950) 8,950
--------
CERTIFICATES OF DEPOSIT -- 12.2%
Barclays Bank PLC
5.910%, 03/09/98 14,750 14,749
5.940%, 06/19/98 5,000 4,999
Credit Suisse
6.310%, 04/16/98 10,000 10,000
Deutche Bank
5.840%, 10/14/98 5,000 4,998
5.940%, 10/22/98 9,250 9,247
National Westminster Bank
5.860%, 03/10/98 10,000 9,999
5.940%, 06/26/98 15,000 14,996
5.830%, 10/14/98 5,000 4,999
Societe Generale
6.350%, 04/15/98 10,000 10,001
6.080%, 06/09/98 10,000 9,998
Swiss Bank
5.976%, 03/19/98 7,000 7,000
6.020%, 06/12/98 10,000 10,001
5.825%, 10/02/98 10,000 9,997
5.852%, 11/20/98 5,000 4,999
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $125,983) 125,983
--------
INSURANCE FUNDING AGREEMENTS -- 6.1%
Allstate (A)
5.696%, 01/01/98 18,000 18,000
Combined Insurance of
America (A)
5.959%, 01/01/98 20,000 20,000
Pacific Mutual Insurance (A)
6.076%, 01/01/98 25,000 25,000
--------
TOTAL INSURANCE FUNDING AGREEMENTS
(Cost $63,000) 63,000
--------
ASSET-BACKED SECURITIES -- 4.3%
Asset Backed Securities
Investment Trust, Series
1997-C, Class N (A)
5.961%, 01/15/98 15,000 15,000
Capita Equipment Receivables
Trust, Series 1996-1, Class A2
5.950%, 07/15/98 1,607 1,607
Case Equipment Loan Trust,
Series 1997-B, Class A1
5.612%, 10/13/98 9,544 9,544
Contimortgage Home Equity
Loan Trust, Series
1997-5, Class A1
5.906%, 12/15/98 8,500 8,500
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Key Auto Finance Trust,
Series 1997-2, Class A1
5.835%, 01/05/99 $10,000 $ 10,000
----------
TOTAL MORTGAGE RELATED
(Cost $44,651) 44,651
----------
BANKERS ACCEPTANCE -- 1.1%
Toronto Dominion Bank
5.735%, 03/23/98 12,000 11,847
----------
TOTAL BANKERS ACCEPTANCE
(Cost $11,847) 11,847
----------
TOTAL INVESTMENTS -- 99.7%
(Cost $1,032,804) 1,032,804
----------
OTHER ASSETS AND LIABILITIES,
NET-- 0.3% 3,356
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 956,501,408 outstanding shares 956,732
Portfolio Shares -- Class C ($0.001 par
value -- 1 billion authorized) based
on 79,278,426 outstanding shares 79,484
Portfolio Shares -- Class B ($0.001 par
value -- 1 billion authorized) based
on 80,044 outstanding shares 80
Accumulated Net Realized Loss
on Investments (136)
----------
TOTAL NET ASSETS-- 100.0% $1,036,160
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS C $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS B $1.00
==========
(A) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON
THE STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SLMA -- STUDENT LOAN MARKETING ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
TAX-FREE RESERVE
[PIE CHART OMITTED]
TAX-EXEMPT COMMERCIAL PAPER 21%
TAX ANTICIPATION NOTES 4%
GENERAL OBLIGATIONS 6%
PRE-REFUNDED SECURITIES 2%
REVENUE BONDS 67%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 99.1%
ALABAMA -- 0.9%
North Alabama Environmental
Improvement Authority
Reynold Metals Project
(A) (B) (C)
5.000%, 01/02/98 $1,500 $ 1,500
----------
ARIZONA -- 0.9%
Arizona State TRAN (B)
7.400%, 02/09/98 650 661
Flagstaff, Arizona TECP
3.700%, 04/08/98 750 750
----------
1,411
----------
CALIFORNIA -- 1.4%
Los Angeles County
California TRAN
4.500%, 06/30/98 2,000 2,006
Santa Clara, California Electric
Revenue Bond, Series A
(A) (B) (C)
3.400%, 01/07/98 340 340
----------
2,346
----------
COLORADO -- 0.3%
Colorado State TRAN, Series A
4.500%, 06/26/98 500 502
----------
DELAWARE -- 0.8%
Delaware State TECP
3.700%, 04/08/98 750 750
Wilmington, Delaware Franciscan
Health System (A) (B) (C) (D)
5.000%, 01/02/98 300 300
Wilmington, Delaware Hospital
Franciscan Health Systems
Project, Series A
(A) (B) (C) (D)
5.000%, 01/02/98 300 300
----------
1,350
----------
85
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TAX-FREE RESERVE (CONTINUED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
FLORIDA -- 2.5%
Broward County, Florida Housing
Financial Authority Multi-family
Housing Sanctuary Apartments
Project (A) (C)
4.250%, 02/01/09 $ 500 $ 500
Florida Municipal Power TECP
3.650%, 02/11/98 1,700 1,700
Sunshine State Florida TECP
3.750%, 03/27/98 2,000 2,000
----------
4,200
----------
ILLINOIS -- 10.9%
Chicago, Illinois O'Hare
International Airport Revenue
Industrial Lien, Series C (A) (B)
3.650%, 01/07/98 1,500 1,500
Illinois Development Finance
Authority Illinois Power
Company Project, Series B (A)
3.700%, 01/07/98 1,400 1,400
Illinois Development Finance
Authority Revenue Bond
(A) (B) (C)
3.650%, 01/07/98 1,800 1,800
Illinois State Pollution Control
Authority Amoco Oil
Company Project (A) (B)
4.950%, 01/02/98 900 900
Illinois State Sales Tax Revenue
Revenue Bond (B) (D)
8.000%, 06/15/98 3,000 3,115
Illinois State Toll Highway
Authority, Series B
MBIA (A) (B)
3.650%, 01/07/98 4,400 4,400
Schaumburg, Illinois Multi-family
Housing Revenue Bond
(A) (B) (C)
3.950%, 01/02/98 3,500 3,500
St. Charles, Illinois Revenue
Bond (A) (B) (C)
3.750%, 01/07/98 1,300 1,300
----------
17,915
----------
INDIANA -- 4.3%
Chesapeake, Indiana TECP
3.750%, 01/15/98 1,000 1,000
Mt. Vernon, Indiana TECP
3.750%, 04/07/98 1,900 1,900
Gary, Indiana Industrial
Environmental Improvement
Authority U.S. Steel
Corporation Project (A) (B) (C)
4.050%, 01/15/98 1,600 1,600
Hammond, Indiana Pollution
Control Amoco Oil Company
Project (A) (B)
4.950%, 01/02/98 300 300
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Sullivan, Indiana TECP
3.750%, 01/09/98 $1,050 $ 1,050
3.800%, 03/06/98 1,200 1,200
----------
7,050
----------
IOWA -- 0.2%
Des Moines, Iowa Commercial
Development Revenue Bond
Capitol Center III Project
(A) (B)
3.800%, 01/07/98 400 400
----------
KANSAS -- 4.7%
Burlington, Kansas TECP
3.750%, 01/08/98 1,450 1,450
3.700%, 01/16/98 600 600
3.850%, 03/09/98 2,500 2,500
3.850%, 03/10/98 1,200 1,200
3.700%, 04/08/98 600 600
Kansas City, Kansas Highway
Roads Revenue Bonds (B)
9.000%, 07/01/98 1,300 1,333
----------
7,683
----------
KENTUCKY -- 1.8%
Mayfield, Kentucky Multi-City
Lease Revenue Bond Kentucky
League of Cities Funding
Project (A)
3.900%, 01/07/98 2,000 2,000
Pendleton, Kentucky TECP
3.850%, 03/09/98 1,000 1,000
----------
3,000
----------
LOUISIANA -- 3.9%
De Soto Parish, Louisiana
Central Louisiana Electric
Company Pollution Control
Revenue Bond (A) (B)
3.600%, 01/07/98 700 700
Jefferson Parish, Louisiana
Industrial Development Board
George J. Ackel, Sr.
Project (A) (B)
3.850%, 01/07/98 1,850 1,850
Louisiana State Public
Facilities Authority Kenner
Hotel Project (A) (B) (C)
5.100%, 01/02/98 400 400
Saint Charles Parish, Louisiana
Pollution Control Revenue
Shell Oil Company Project,
Series B (A) (B)
4.900%, 01/02/98 1,550 1,550
South Louisiana Port Common
Marine Terminal Revenue
Bond (A) (B) (C)
3.650%, 01/07/98 2,000 2,000
----------
6,500
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- ---------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- ---------------------------------------------------------
MICHIGAN -- 1.8%
Delta County, Michigan
Environmental Improvement
Authority Revenue Bond,
Mead Escambia Paper,
Series C (A) (B)
5.100%, 01/02/98 $ 700 $ 700
Michigan State Consumers
Power Project (A) (B)
4.950%, 01/02/98 300 300
Michigan State Storage TECP
3.750%, 02/05/98 2,000 2,000
----------
3,000
----------
MINNESOTA -- 1.9%
Minnesota State GO (D)
6.600%, 08/01/98 3,150 3,199
----------
MISSISSIPPI -- 1.8%
Claiborne County,
Mississippi TECP
3.750%, 02/13/98 1,300 1,300
Jackson County, Mississippi
Chevron USA Incorporated
Project (A) (B)
4.950%, 01/02/98 1,600 1,600
----------
2,900
----------
MISSOURI -- 5.0%
Independence, Missouri TECP
3.850%, 01/16/98 1,050 1,050
Missouri State Development
Finance Board Revenue Bond
(A) (B) (C)
4.500%, 01/02/98 2,700 2,700
Missouri State Environmental
Improvement & Energy
Pollution Control Revenue
Bond (A) (B)
3.950%, 01/02/98 1,800 1,800
Missouri State Health and
Educational Facilities
Authority Washington
University, Series A (A) (B)
5.000%, 01/02/98 300 300
Missouri State Health and
Educational Facilities
Authority Washington
University Series A (A) (B) (C)
5.000%, 01/02/98 400 400
Missouri State Health and
Educational Facilities
Authority GO
4.500%, 09/14/98 2,000 2,008
----------
8,258
----------
MONTANA -- 0.7%
Forsyth, Montana Pollution
Control Portland General
Electric Project (A) (B)
3.700%, 01/07/98 200 200
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Forsyth, Montana Pollution
Control Portland General
Electric Project, Series B
(A) (B)
3.750%, 01/07/98 $ 100 $ 100
Forsyth, Montana Pollution
Control Pacificorp Project,
Series 1988 (A) (B) (C)
4.500%, 01/02/98 900 900
----------
1,200
----------
NEVADA -- 1.8%
Clark County, Nevada Industrial
Development Revenue
Series C (A) (B)
3.850%, 01/07/98 2,000 2,000
Las Vegas, Nevada GO,
Series A FGIC
4.750%, 11/01/98 1,000 1,007
----------
3,007
----------
NEW MEXICO -- 0.6%
Albuquerque, New Mexico
Gross Receipts Revenue
Bond (A) (B) (C)
3.700%, 01/07/98 1,000 1,000
----------
NEW YORK -- 2.1%
New York City, New York
GO (A) (B) (C)
4.000%, 01/02/98 1,500 1,500
4.150%, 01/02/98 1,900 1,900
----------
3,400
----------
NORTH CAROLINA -- 2.2%
Lexington, North Carolina
Lexington Memorial
Hospital Project (A) (B)
5.000%, 01/02/98 1,500 1,500
North Carolina Eastern
Municipal Power (B) (D)
8.000%, 01/02/98 1,305 1,331
Wake County, North Carolina
Carolina Power &
Light Company (A) (B)
3.700%, 01/07/98 800 800
----------
3,631
----------
OHIO -- 0.3%
Ohio State Air Quality Revenue
Bond, Series B (A) (B) (C)
4.500%, 01/02/98 300 300
Ohio State Water Development
Authority Environmental
Mead Company, Series B
(A) (B) (C)
5.000%, 01/02/98 200 200
----------
500
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
87
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TAX-FREE RESERVE (CONTINUED)
- ---------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- ---------------------------------------------------------
OREGON -- 0.7%
Port of Portland, Oregon
Pollution Control Revenue
Bond for Reynold Metals
Project (A) (B) (C)
5.000%, 01/02/98 $ 100 $ 100
Port of St. Helens Portland,
Oregon Pollution Control
Revenue Bond (A) (B)
4.950%, 01/02/98 600 600
Umatilla County, Oregon
Franciscan Health System
Revenue Bond, Series A
(A) (B) (C) (D)
5.000%, 01/02/98 300 300
Umatilla County, Oregon
Franciscan Health System
Revenue Bond, Series B
(A) (B) (C) (D)
5.000%, 01/02/98 200 200
----------
1,200
----------
PENNSYLVANIA -- 14.8%
Allegheny County, Pennsylvania
Hospital Development
Presbyterian University
Hospital Project, Series B2
(A) (B) (C)
4.250%, 01/02/98 2,600 2,600
Allegheny County, Pennsylvania
Hospital Development
Presbyterian University
Hospital Project, Series B1
(A) (B) (C)
4.250%, 01/02/98 2,000 2,000
Allegheny County, Pennsylvania
Hospital Development
Presbyterian University
Hospital Project,
Series B3 (A) (B)
4.250%, 01/02/98 1,305 1,305
Beaver County,
Pennsylvania TECP
3.750%, 03/05/98 1,100 1,100
Beaver County, Pennsylvania
Industrial Development
Authority Duquesne Light
Company Project, Series B
(A) (B) (C)
3.650%, 01/07/98 100 100
Lehigh County, Pennsylvania
Industrial Development
Authority Pollution Control
(A) (B)
3.800%, 01/02/98 200 200
Montgomery County,
Pennsylvania TECP
3.850%, 01/22/98 2,600 2,600
3.750%, 02/05/98 1,000 1,000
Montgomery County,
Pennsylvania TECP
3.750%, 02/09/98 2,500 2,500
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State Higher
Education Authority Carnegie
Mellon University Revenue
Bond, Series D (A) (B)
4.850%, 01/02/98 $ 700 $ 700
Pennsylvania State Higher
Educational Facilities
Authority Hospital Thomas
Jefferson University Project (D)
8.000%, 01/02/98 1,910 1,948
Temple University,
Pennsylvania GO
4.750%, 05/18/98 1,000 1,003
Washington County,
Pennsylvania Lease Revenue
Bond (A) (B) (C)
3.850%, 01/07/98 3,140 3,140
York County, Pennsylvania
Solid Waste and Refuse
Revenue Bonds FGIC
4.750%, 12/01/98 1,500 1,512
York, Pennsylvania General
Authority Revenue
Bond (A) (B)
4.200%, 01/02/98 2,750 2,750
----------
24,458
----------
SOUTH CAROLINA -- 1.1%
Berkley County, South Carolina
Pollution Control Amoco
Chemical Project (A) (B) (C)
4.950%, 01/02/98 900 900
North Charleston, South
Carolina GO (B) (D)
7.500%, 08/01/98 500 520
York County, South Carolina
Pollution Control Revenue
Bond Electric Project,
Series NRU-84N-2 (A) (B)
3.850%, 01/07/98 400 400
----------
1,820
----------
TEXAS -- 14.6%
Camp County, Texas Industrial
Development Corporation
Pollution Control Revenue
Bond Texas Oil and Gas
Project (A) (B)
3.900%, 01/07/98 500 500
Denton County, Texas TAN
5.500%, 09/01/98 930 940
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series A4 (A) (B) (C)
5.000%, 01/02/98 100 100
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series B4 (A) (B) (C)
5.000%, 01/02/98 900 900
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series A3 (A) (B) (C)
5.000%, 01/02/98 $ 400 $ 400
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series B1 (A) (B) (C)
5.000%, 01/02/98 1,500 1,500
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series B3 (A) (B) (C)
5.000%, 01/02/98 400 400
Grapevine, Texas Industrial
Development Corporation
American Airlines,
Series A1 (A) (B)
5.000%, 01/02/98 400 400
Grapevine, Texas Industrial
Development Corporation
American Airlines Project,
Series B2 (A) (B)
5.000%, 01/02/98 400 400
Hunt County, Texas Industrial
Development Authority Trico
Industries Incorporated
Project (A) (B)
3.800%, 01/06/98 2,100 2,100
North Central Texas Health
Facilities Development Baylor
Medical Center Project, Series A,
Pre-Refunded @ 102 (D)
7.900%, 05/15/98 500 517
Nueces County, Texas Health
Facilities Authority Driscoll
Childrens Foundation (A) (B)
3.850%, 01/07/98 4,425 4,425
Port Corpus Christi Texas
Industrial Development
Corporation Refunding
Revenue Bonds Series A (A) (B)
3.850%, 01/07/98 2,000 2,000
San Antonio, Texas Electric and
Gas Revenue Bond
Pre-Refunded @ 102 (D)
7.800%, 02/01/98 3,900 3,991
Texas State Higher Education
Authority University and
College Improvement,
Series B FGIC (A) (B)
3.800%, 01/07/98 1,945 1,945
Texas State Southwest Higher
Education Authority Southern
Methodist University
(A) (B) (C)
5.000%, 01/02/98 1,000 1,000
Texas State TRAN, Series A
4.750%, 08/31/98 2,500 2,514
----------
24,032
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
UTAH -- 1.3%
Intermountain Power
Agency TECP
3.750%, 02/17/98 $2,100 $ 2,100
----------
VERMONT -- 0.8%
Vermont State Student Loan
Assistance Corporation Student
Loan Revenue Bond (A) (B)
3.800%, 01/02/98 1,335 1,335
----------
VIRGINIA -- 10.2%
Alexandria, Virginia
Redevelopment & Housing
Authority Revenue Bonds,
Multi-Family First Mortgage,
Goodwin Project, Series B
(A) (B) (C)
5.000%, 01/02/98 3,900 3,900
Pennisula Ports, Virginia TECP
3.750%, 01/12/98 1,500 1,500
Petersburg, Virginia Hospital
Authority Revenue Bonds for
Southside Project (A) (B) (C)
5.000%, 01/02/98 1,800 1,800
Portsmouth, Virginia Housing
Development Authority
Revenue Bond (B) (C)
4.000%, 11/01/27 2,255 2,255
Richmond, Virginia Housing
Authority Old Manchester
Project, Series A (A) (B)
4.000%, 01/07/98 3,250 3,250
Virginia State Housing
Revenue Bonds
3.800%, 06/10/98 3,500 3,500
Waynesboro, Virginia
Residential Care Facilities
Revenue Bond (A) (B) (C)
5.000%, 01/02/98 685 685
----------
16,890
----------
WASHINGTON -- 1.5%
Port Kalama, Washington
Conagra Project (A) (B) (C)
3.700%, 01/02/98 1,900 1,900
Washington State Motor Vehicle
Fuel Tax, Series B
6.000%, 01/01/99 500 510
----------
2,410
----------
WEST VIRGINIA -- 0.1%
Putnam County, West Virginia
Industrial Development
Authority FMC Corporation
Project (A) (B)
3.800%, 01/02/98 200 200
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
89
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TAX-FREE RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
WISCONSIN -- 0.2%
Lac Du Flambeau, Wisconsin
Lake Superior Chippewa
Indians Special Obligation
Simpson Electric Project
(A) (B)
3.700%, 01/07/98 $ 400 $ 400
----------
WYOMING -- 3.0%
Gillette County, Wyoming TECP
3.800%, 01/15/98 1,400 1,400
Lincoln County, Wyoming
Pollution Control Revenue
Bond, Series 1984 B (A) (B)
5.100%, 01/02/98 1,200 1,200
Lincoln County, Wyoming
Pollution Control Exxon
Project (A) (B)
4.950%, 01/02/98 600 600
Lincoln County, Wyoming
Resource Recovery Exxon
Project, Series C (A) (B) (C)
5.100%, 01/02/98 500 500
Platte County, Wyoming
Pollution Control (A) (B)
4.500%, 01/02/98 1,100 1,100
Platte County, Wyoming
Pollution Control Revenue
Bond, Series A (A) (B) (C)
4.500%, 01/02/98 100 100
----------
4,900
----------
TOTAL MUNICIPAL BONDS
(Cost $163,697) 163,697
----------
TOTAL INVESTMENTS -- 99.1%
(Cost $163,697) 163,697
----------
OTHER ASSETS AND LIABILITIES,
NET-- 0.9% 1,521
----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 250 million authorized) based
on 152,872,746 outstanding shares $ 152,872
Portfolio Shares -- Class C ($0.001 par
value -- 250 million authorized) based
on 12,374,650 outstanding shares 12,398
Accumulated Net Realized Loss
on Investments (54)
Undistributed Net Investment Income 2
----------
TOTAL NET ASSETS-- 100.0% $165,218
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS C $1.00
==========
(A) VARIABLE RATE SECURITIES--THE RATE REFLECTED ON THE STATEMENT OF THE NET
ASSETS IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSOR OF THE
PUT DEMAND OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK OR FINANCIAL INSTITUTION.
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
TECP -- TAX EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------ -------------- --------------
EQUITY CORE EQUITY GROWTH
INDEX FUND FUND(3) EQUITY FUND
------------ -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 2,223 $ 3,344 $ 561
Interest 22 138 123
Less: Foreign taxes withheld -- -- --
-------- -------- ---------
Total investment income 2,245 3,482 684
-------- -------- ---------
EXPENSES:
Investment advisory fees 533 2,147 632
Less: waiver of investment advisory fees (318) -- --
Administrative fees 333 725 211
Less: waiver of administrative fees (119) (164) (76)
Transfer agent fees & expenses 36 51 13
Custodian fees -- -- --
Professional fees 5 23 3
Registration & filing fees 8 14 4
12b-1 fees--individual shares -- 23 7
Taxes--other than income 3 13 2
Printing fees 25 57 17
Organizational costs -- -- --
Miscellaneous -- 14 6
-------- -------- ---------
Total expenses 506 2,903 819
-------- -------- ---------
NET INVESTMENT INCOME (LOSS) 1,739 579 (135)
-------- -------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 5,184 40,986 11,173
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation) on investments 17,916 20,773 10,360
-------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $24,839 $62,338 $21,398
======== ======== =========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 39.65 $ 20.60 $ 16.33
======== ======== =========
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 39.66 20.61 16.27
-------- -------- ---------
2Offering price $ 41.97 $ 21.81 $ 17.22
======== ======== =========
CLASS B
4Net asset value and offering price $ 39.12 $ 18.31 $ 16.19
======== ======== =========
-------------- -------------- --------------
SPECIAL INTERNATIONAL BALANCED
EQUITY FUND GROWTH FUND FUND
-------------- -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 212 $ 1,039 $ 379
Interest 43 152 1,481
Less: Foreign taxes withheld -- (111) --
-------- ------- ------
Total investment income 255 1,080 1,860
-------- ------- ------
EXPENSES:
Investment advisory fees 607 666 444
Less: waiver of investment advisory fees (263) -- (76)
Administrative fees 101 208 158
Less: waiver of administrative fees (36) (75) (57)
Transfer agent fees & expenses 21 (10) 11
Custodian fees 5 6 --
Professional fees (5) 2 3
Registration & filing fees 9 (7) --
12b-1 fees--individual shares 4 3 7
Taxes--other than income 1 -- 1
Printing fees 11 2 16
Organizational costs -- -- 18
Miscellaneous 1 -- --
-------- ------- ------
Total expenses 456 795 525
-------- ------- ------
NET INVESTMENT INCOME (LOSS) (201) 285 1,335
-------- ------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 7,997 2,385 3,960
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- (411) --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- (12) --
Net change in unrealized appreciation (depreciation) on investments (1,796) (10,180) 3,388
-------- ------- ------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,000 (7,933) $8,683
======== ======= ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.65 $ 13.28 $13.60
======== ======= ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 10.60 13.28 13.60
-------- ------- ------
2Offering price $ 11.22 $ 14.05 $14.39
======== ======= ======
CLASS B
4Net asset value and offering price $ 10.48 $ 13.28 $13.51
======== ======= ======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0
1 NET ASSET VALUE PER SHARE, AS ILLUSTRATED, IS THE AMOUNT WHICH WOULD BE PAID
UPON THE REDEMPTION OR EXCHANGE OF SHARES.
2 THE OFFER PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE OF CLASS A BY 1
MINUS THE MAXIMUM SALES CHARGE OF 5.50%.
3 THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
4 CLASS B HAS A CONTINGENT DEFERRED SALES CHARGE. FOR A DESCRIPTION OF POSSIBLE
REDEMPTION CHARGE, SEE THE NOTES TO THE FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
92 & 93
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------------- -------------- -------------
SHORT TERM SHORT-
INCOME INTERMEDIATE GOVERNMENT
FUND BOND FUND INCOME FUND
-------------- -------------- -------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $1,120 $5,458 $ 758
------ ------ ------
Total Investment income 1,120 5,458 758
------ ------ ------
EXPENSES
Investment advisory fees 139 426 55
Less: waiver of investment advisory fees (92) (170) (2)
Administrative fees 47 213 28
Less:waiver of administrative fees (17) (77) (10)
Transfer agent fees & expenses 6 18 2
Custodian fees 6 -- --
Professional fees -- 4 1
Registration & filing fees (3) 6 1
12b-1 fees--individual shares 1 3 2
Trustee fees 1 2 --
Printing fees 2 11 1
Organizational costs 1 -- 3
Miscellaneous 1 6 1
------ ------ ------
Total expenses 92 442 82
------ ------ ------
NET INVESTMENT INCOME 1,028 5,016 676
------ ------ ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 8 461 88
Option transactions -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation)
on investments 68 1,670 515
------ ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,104 $7,147 $1,279
====== ====== ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.99 $ 9.95 $10.03
====== ====== ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 9.98 9.95 10.03
------ ------ ------
2Offering price $10.32 $10.28 $10.37
====== ====== ======
------------ -------------- ------------
GLOBAL INTERMEDIATE
BOND BOND MUNICIPAL
FUND FUND BOND FUND
------------ -------------- ------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $ 6,153 $1,055 $ 46
------- ------- -------
Total Investment income 6,153 1,055 46
------- ------- -------
EXPENSES
Investment advisory fees 675 108 5
Less: waiver of investment advisory fees (356) (18) (5)
Administrative fees 228 45 2
Less:waiver of administrative fees (82) (16) (1)
Transfer agent fees & expenses 7 (1) --
Custodian fees 11 1 --
Professional fees 8 1 --
Registration & filing fees 18 1 2
12b-1 fees-- individual shares 2 -- 1
Trustee fees -- -- --
Printing fees 10 -- --
Organizational costs -- 2 3
Miscellaneous 5 -- --
------- ------- -------
Total expenses 526 123 7
------- ------- -------
NET INVESTMENT INCOME 5,627 932 39
------- ------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 1,499 (41) 3
Option transactions -- (400) --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- 450 --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- (98) --
Net change in unrealized appreciation (depreciation)
on investments 3,530 (90) 35
------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,656 $ 753 $ 77
======= ======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.53 $ 9.33 $10.25
======= ======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.53 9.32 10.25
------- ------- -------
2Offering price $ 11.06 $ 9.78 $10.59
======= ======= =======
-------------- --------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
-------------- --------------
INVESTMENT INCOME
<S> <C> <C>
Interest $ 375 $ 53
------- -------
Total Investment income 375 53
------- -------
EXPENSES
Investment advisory fees 37 5
Less: waiver of investment advisory fees (37) (5)
Administrative fees 19 2
Less:waiver of administrative fees (19) (2)
Transfer agent fees & expenses 1 --
Custodian fees -- --
Professional fees -- --
Registration & filing fees 1 --
12b-1 fees--individual shares 4 1
Trustee fees -- --
Printing fees 1 --
Organizational costs 2 1
Miscellaneous -- --
------- -------
Total expenses 9 2
------- -------
NET INVESTMENT INCOME 366 51
------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 40 (1)
Option transactions -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- --
Net change in unrealized appreciation (depreciation)
on investments 378 57
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 784 $ 107
======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $10.77 $10.46
======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.78 10.45
------- -------
2Offering price $11.32 $10.97
======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
1 NET ASSET VALUE PER SHARE, AS ILLUSTRATED, IS THE AMOUNT WHICH WOULD BE PAID
UPON THE REDEMPTION OR EXCHANGE OF SHARES.
2 THE OFFER PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE OF CLASS A BY 1
MINUS THE MAXIMUM SALES CHARGE OF 3.25% FOR THE SHORT TERM INCOME, SHORT-
INTERMEDIATE BOND, GOVERNMENT INCOME AND INTERMEDIATE MUNICIPAL BOND FUNDS AND
4.75% FOR THE BOND, GLOBAL BOND, PENNSYLVANIA MUNICIPAL BOND AND NEW JERSEY
MUNICIPAL BOND FUNDS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
94 & 95
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------- ------- --------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------- ------- --------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest $ 24,754 $ 27,544 $ 2,735
-------- -------- -------
Total investment income 24,754 27,544 2,735
-------- -------- -------
EXPENSES:
Investment advisory fees 1,113 1,926 185
Less: waiver of investment advisory fees (401) (481) (67)
Administrative fees 1,781 1,204 296
Less: waiver of administrative fees (446) (433) (74)
Transfer agent fees & expenses 71 117 14
Custodian fees 1 1 --
Professional fees 25 10 3
Registration & filing fees 4 60 20
12b-1 fees 23 64 12
Trustee fees 10 11 5
Printing 65 77 5
Miscellaneous 63 32 (1)
-------- -------- -------
Total expenses 2,309 2,588 398
-------- -------- -------
NET INVESTMENT INCOME 22,445 24,956 2,337
-------- -------- -------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain from security
transactions 14 5 --
-------- -------- -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 22,459 $ 24,961 $ 2,337
======== ======== =======
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
96
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- -------------------
EQUITY CORE EQUITY
INDEX FUND FUND(2)
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 1,739 $ 3,256 $ 579 $ 2,927
Net realized gain on investments, forward foreign currency contracts and foreign
currency 5,184 3,591 40,986 66,598
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 17,916 55,389 20,773 67,597
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations 24,839 62,236 62,338 137,122
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,685) (3,225) (595) (2,858)
Class A (48) (28) -- (49)
Class B (2) -- -- --
Net realized gains:
Class Y (8,013) (1,484) (69,731) (35,253)
Class A (265) (6) (2,421) (977)
Class B (16) -- (17) --
-------- -------- -------- --------
Total dividends distributed (10,029) (4,743) (72,764) (39,137)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 24,068 -- 48,159 56,759
Reinvestment of cash distributions 8,774 -- 63,917 38,110
Cost of shares redeemed (25,937) -- (59,580) (89,855)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 6,905 -- 52,496 5,014
-------- -------- -------- --------
Class A:
Proceeds from shares issued 4,631 43,492 2,811 3,395
Reinvestment of cash distributions 330 4,960 2,403 1,038
Cost of shares redeemed (655) (30,407) (1,722) (2,376)
-------- -------- -------- --------
Increase in net assets from Class A transactions 4,306 18,045 3,492 2,057
-------- -------- -------- --------
Class B:
Proceeds from shares issued 732 4,101 132 --
Reinvestment of cash distributions 18 34 17 --
Cost of shares redeemed (5) (103) -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 745 4,032 149 --
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,956 22,077 56,137 7,071
-------- -------- -------- --------
Net increase (decrease) in net assets 26,766 79,570 45,711 105,056
-------- -------- -------- --------
NET ASSETS:
Beginning of period 245,920 166,350 531,058 426,002
-------- -------- -------- --------
End of period $272,686 $245,920 $576,769 $531,058
======== ======== ======== ========
------------------- ------------------
GROWTH SPECIAL
EQUITY FUND EQUITY FUND
------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ (135) $ 399 $ (201) $ 121
Net realized gain on investments, forward foreign currency contracts and foreign
currency 11,173 14,635 7,997 7,793
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 10,360 12,411 (1,796) 3,603
-------- -------- ------- -------
Net increase (decrease) in net assets resulting from operations 21,398 27,445 6,000 11,517
-------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y -- (393) -- (177)
Class A -- (3) -- (2)
Class B -- -- -- --
Net realized gains:
Class Y (11,719) (13,864) (350) (13,011)
Class A (400) (404) (9,099) (307)
Class B (7) -- (15) --
-------- -------- ------- -------
Total dividends distributed (12,126) (14,664) (9,464) (13,497)
-------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 18,945 -- 7,178 --
Reinvestment of cash distributions 10,162 -- 8,424 --
Cost of shares redeemed (23,121) -- (10,285) --
-------- -------- ------- -------
(Decrease) in net assets from Class Y transactions 5,986 -- 5,317 --
-------- -------- ------- -------
Class A:
Proceeds from shares issued 728 38,807 516 13,884
Reinvestment of cash distributions 400 12,752 349 13,074
Cost of shares redeemed (390) (36,303) (179) (16,684)
-------- -------- ------- -------
Increase in net assets from Class A transactions 738 15,256 686 10,274
-------- -------- ------- -------
Class B:
Proceeds from shares issued 102 1,712 124 1,020
Reinvestment of cash distributions 7 410 15 310
Cost of shares redeemed -- (1,001) -- (121)
-------- -------- ------- -------
Increase (decrease) in net assets from Class B transactions 109 1,121 139 1,209
-------- -------- ------- -------
Increase in net assets derived from capital share transactions 6,833 16,377 6,142 11,483
-------- -------- ------- -------
Net increase (decrease) in net assets 16,105 29,158 2,678 9,503
-------- -------- ------- -------
NET ASSETS:
Beginning of period 152,393 123,235 74,327 64,824
-------- -------- ------- -------
End of period $168,498 $152,393 $77,005 $74,327
======== ======== ======= =======
------------------- -------------------
INTERNATIONAL BALANCED
GROWTH FUND FUND
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 285 $ 969 $ 1,335 $ 3,139
Net realized gain on investments, forward foreign currency contracts and foreign
currency 1,974 5,290 3,960 7,717
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies (10,192) 15,689 3,388 6,601
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations (7,933) 21,948 8,683 17,457
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,958) (3,802) (1,280) (3,056)
Class A (22) (53) (48) (92)
Class B -- -- (2) --
Net realized gains:
Class Y (6,263) (8,375) (6,356) (5,885)
Class A (93) (130) (282) (184)
Class B (1) -- (28) --
-------- -------- -------- --------
Total dividends distributed (8,337) (12,360) (7,996) (9,217)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 43,065 34,899 11,645 --
Reinvestment of cash distributions 7,249 11,015 6,080 --
Cost of shares redeemed (38,992) (31,528) (10,793) --
-------- -------- -------- --------
(Decrease) in net assets from Class Y transactions 11,322 14,386 6,932 --
-------- -------- -------- --------
Class A:
Proceeds from shares issued 358 489 1,546 23,565
Reinvestment of cash distributions 11 178 323 8,737
Cost of shares redeemed (238) (506) (519) (29,150)
-------- -------- -------- --------
Increase in net assets from Class A transactions 131 161 1,350 3,152
-------- -------- -------- --------
Class B:
Proceeds from shares issued 14 -- 568 1,285
Reinvestment of cash distributions 1 -- 30 293
Cost of shares redeemed -- -- -- (833)
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 15 -- 598 745
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,468 14,547 8,880 3,897
-------- -------- -------- --------
Net increase (decrease) in net assets (4,802) 24,135 9,567 12,137
-------- -------- -------- --------
NET ASSETS:
Beginning of period 165,548 141,413 117,840 105,703
-------- -------- -------- --------
End of period $160,746 $165,548 $127,407 $117,840
======== ======== ======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE FINANCIAL STATEMENTS.
(2) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
98 & 99
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
---------------- ----------------- ----------------
SHORT-
SHORT TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
---------------- ----------------- ----------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 1,028 $ 1,757 $ 5,016 $ 10,074 $ 676 $ 1,293
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 8 (8) 461 (26) 88 (156)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 68 91 1,670 993 505 434
------- ------- -------- -------- ------- -------
Net increase in net assets resulting from operations 1,104 1,840 7,147 11,041 1,269 1,571
------- ------- -------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,015) (1,748) (4,933) (9,902) (624) (1,204)
Class A (13) (9) (77) (172) (51) (90)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
------- ------- -------- -------- ------- -------
Total dividends distributed (1,028) (1,757) (5,010) (10,074) (675) (1,294)
------- ------- -------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 6,147 16,475 20,016 45,113 3,060 8,152
Reinvestment of cash distributions 880 1,808 4,505 9,516 352 612
Cost of shares redeemed (6,908)(11,486) (19,785) (52,263) (1,936) (3,957)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class Y
transactions 119 6,797 4,736 2,366 1,476 4,807
------- ------- -------- -------- ------- -------
Class A:
Proceeds from shares issued 63 483 289 391 308 579
Reinvestment of cash distributions 13 9 59 143 43 85
Cost of shares redeemed -- (1) (305) (865) (229) (311)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class A
transactions 76 491 43 (331) 122 353
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 195 7,288 4,779 2,035 1,598 5,160
------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets 271 7,371 6,916 3,002 2,192 5,437
------- ------- -------- -------- ------- -------
NET ASSETS:
Beginning of period 37,504 30,133 165,905 162,903 20,667 15,230
------- ------- -------- -------- ------- -------
End of period $37,775 $37,504 $172,821 $165,905 $22,859 $20,667
======= ======= ======== ======== ======= =======
----------------- ----------------- ------------------
INTERMEDIATE
BOND GLOBAL MUNICIPAL
FUND BOND FUND BOND FUND
----------------- ----------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 5,627 $ 12,245 $ 931 $ 1,774 $ 39 $ 71
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 1,499 (735) 9 423 3 (6)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 3,530 2,749 (188) (149) 35 25
-------- -------- ------- ------- ------- -------
Net increase in net assets resulting from operations 10,656 14,259 753 2,048 77 90
-------- -------- ------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (5,574) (12,161) (1,509) (2,621) (20) (34)
Class A (53) (84) (10) (13) (19) (37)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Total dividends distributed (5,627) (12,245) (1,519) (2,634) (39) (71)
-------- -------- ------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 11,940 18,942 911 107 34 841
Reinvestment of cash distributions 5,007 12,215 1,285 2,670 7 12
Cost of shares redeemed (30,726) (49,397) (400) (602) (147) (269)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions (13,779) (18,240) 1,796 2,175 (106) 584
-------- -------- ------- ------- ------- -------
Class A:
Proceeds from shares issued 427 579 69 31 66 80
Reinvestment of cash distributions 46 78 10 15 17 37
Cost of shares redeemed (117) (323) (10) (13) (95) (186)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 356 334 69 33 (12) (69)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions (13,423) (17,906) 1,865 2,208 (118) 515
-------- -------- ------- ------- ------- -------
Net increase (decrease) in net assets (8,394) (15,892) 1,099 1,622 (80) 534
-------- -------- ------- ------- ------- -------
NET ASSETS:
Beginning of period 183,986 199,878 34,772 33,150 1,952 1,418
-------- -------- ------- ------- ------- -------
End of period $175,592 $183,986 $35,871 $34,772 $ 1,872 $ 1,952
======== ======== ======= ======= ======= =======
------------------ -----------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
------------------ -----------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 366 $ 583 $ 51 $ 81
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 40 20 (1) (3)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 378 240 57 24
------- ------- ------- -------
Net increase in net assets resulting from operations 784 843 107 102
------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (290) (521) (40) (65)
Class A (76) (62) (11) (16)
Net realized gains:
Class Y -- -- -- (8)
Class A -- -- -- (2)
------- ------- ------- -------
Total dividends distributed (366) (583) (51) (91)
------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 2,871 3,530 172 525
Reinvestment of cash distributions 126 297 14 14
Cost of shares redeemed (586) (2,772) (102) (388)
------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions 2,411 1,055 84 151
------- ------- ------- -------
Class A:
Proceeds from shares issued 2,567 1,341 168 99
Reinvestment of cash distributions 64 56 9 15
Cost of shares redeemed (133) (420) (72) (22)
------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 2,498 977 105 92
------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 4,909 2,032 189 243
------- ------- ------- -------
Net increase (decrease) in net assets 5,327 2,292 245 254
------- ------- ------- -------
NET ASSETS:
Beginning of period 12,175 9,883 1,875 1,621
------- ------- ------- -------
End of period $17,502 $12,175 $ 2,120 $ 1,875
======= ======= ======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
100 & 101
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- ------------------- ------------------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
------------------- ------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 22,445 $ 43,860 $ 24,956 $ 44,127 $ 2,337 $ 3,787
Net realized gain (loss) on securities transactions 14 8 5 1 -- (1)
---------- ---------- ---------- ---------- -------- ---------
Net increase in net assets resulting from operations 22,459 43,868 24,961 44,128 2,337 3,786
---------- ---------- ---------- ---------- -------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (22,007) (43,173) (23,686) (43,042) (2,224) (3,677)
Class C (438) (687) (1,270) (1,085) (135) (86)
---------- ---------- ---------- ---------- -------- ---------
Total dividends distributed (22,445) (43,860) (24,956) (44,127) (2,359) (3,763)
---------- ---------- ---------- ---------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued 1,198,732 2,548,964 1,003,078 2,154,887 170,940 392,069
Reinvestment of cash distributions 1,462 4,246 1,865 3,136 96 229
Cost of shares redeemed (1,228,616) (2,610,396) (961,599) (2,061,985) (137,772) (376,938)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class Y
transactions (28,422) (57,186) 70,344 96,038 33,264 15,360
---------- ---------- ---------- ---------- -------- ---------
Class C
Proceeds from shares issued 34,333 12,429 107,066 44,890 24,342 3,779
Reinvestment of cash distributions 272 264 1,229 1,023 132 79
Cost of shares redeemed (22,458) (19,933) (56,508) (37,956) (15,279) (3,506)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class C
transactions 12,147 (7,240) 51,787 7,957 9,195 352
---------- ---------- ---------- ---------- -------- ---------
Class B
Proceeds from shares issued -- -- 88 -- -- --
Reinvestment of cash distributions -- -- -- -- -- --
Cost of shares redeemed -- -- (8) -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase in net assets from Class B
transactions -- -- 80 -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets derived from
capital share transactions 16,275 (64,426) 122,211 103,995 42,459 15,712
---------- ---------- ---------- ---------- -------- ---------
Net (decrease) increase in net assets 16,261 (64,418) 122,216 103,996 42,437 15,735
---------- ---------- ---------- ---------- -------- ---------
NET ASSETS:
Beginning of period 847,530 911,948 913,944 809,948 122,781 107,046
---------- ---------- ---------- ---------- -------- ---------
End of period $ 831,269 $ 847,530 $1,036,160 $ 913,944 $165,218 $ 122,781
========== ========== ========== ========== ======== =========
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
102
<PAGE>
[This page intentionally left blank.]
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $37.39 $ 0.26 $ 3.50 $(0.26) $(1.24) $39.65 10.12%+ $262,831 0.37%
1997 28.47 0.51 9.16 (0.51) (0.24) 37.39 34.44 241,413 0.37
1996 23.79 0.51 5.47 (0.51) (0.79) 28.47 25.69 166,350 0.35
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45 112,533 0.37
1994 20.97 0.55 (0.43) (0.55) -- 20.54 0.55 72,552 0.35
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39 50,551 0.49
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59 20,166 0.57
19911 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+ 12,117 0.97
CLASS A
1997(A) $37.37 $ 0.26 $ 3.51 $(0.24) $(1.24) $39.66 2.74%+ $ 9,113 0.37%
1997(10) 29.62 0.32 8.05 (0.38) (0.24) 37.37 28.58+ 4,507 0.37
CLASS B
1997(A)(12) $39.16 $ 0.16 $ 1.27 $(0.23) $(1.24) $39.12 3.37%+ $ 742 1.37%
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) $21.11 $ -- $ 2.41 $ -- $(2.92) $20.60 11.87%+ $557,593 0.99%
1997 17.26 0.12 5.32 (0.12) (1.47) 21.11 33.10 515,015 0.98
1996 17.07 0.14 1.49 (0.14) (1.30) 17.26 19.24 414,824 0.97
INSTITUTIONAL CLASS*
1995 $15.00 $ 0.19 $ 2.87 $(0.19) $(0.80) $17.07 22.00% $378,352 1.05%
CLASS A*
1997(A) $21.13 $ -- $ 2.40 $ -- $(2.92) $20.61 11.70%+ $ 19,043 1.24%
1997 17.28 0.07 5.32 (0.07) (1.47) 21.13 32.74 16,043 1.23
1996 17.08 0.12 1.49 (0.11) (1.30) 17.28 19.11 11,178 1.22
RETAIL CLASS*
1995 $15.00 $ 0.18 $ 2.87 $(0.17) $(0.80) $17.08 21.94% $ 6,591 1.34%
PRIOR CLASS
1994 $15.39 $ 0.11 $ 0.22 $(0.11) $(0.61) $15.00 2.21% $ 50,128 1.49%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90 45,677 1.20
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27 28,103 0.92
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37 12,830 0.54
1990(2) 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.65
CLASS B
1997(A)(12) $23.05 $(4.44) $ 2.62 $ -- $(2.92) $18.31 (7.39)%+$ 133 1.99%
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y**
1997(A) $15.43 $ 0.01 $ 2.16 $ -- $(1.24) $16.33 14.11%+ $162,698 0.96%
1997 14.19 0.04 2.81 (0.04) (1.57) 15.43 21.67 147,700 0.96
1996 11.18 0.08 3.36 (0.08) (0.35) 14.19 31.36 120,073 0.89
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345 0.76
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877 0.69
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777 0.43
19923 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418 0.14
CLASS A**
1997(A) $15.39 $(0.03) $ 2.15 $ -- $(1.24) $16.27 14.02%+ $ 5,699 1.21%
1997 14.17 0.01 2.79 (0.01) (1.57) 15.39 21.29 4,693 1.21
1996 11.17 0.05 3.35 (0.05) (0.35) 14.17 31.00 3,162 1.14
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043 1.01
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,730 0.94
19934 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224 0.80
CLASS B
1997(A)(13) $17.32 $(0.02) $ 0.13 $ -- $(1.24) $16.19 0.85%+ $ 101 1.96%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) 1.30% 0.71% 0.96% 9% $0.0621
1997 1.63 0.71 1.29 11 0.0639
1996 1.94 0.71 1.59 13 0.0641
1995 2.48 0.76 2.09 27 N/A
1994 2.63 0.75 2.23 13 N/A
1993 2.82 0.88 2.43 4 N/A
1992 2.66 1.06 2.17 27 N/A
19911 1.79 1.20 1.56 -- N/A
CLASS A
1997(A) 1.05% 0.71% 0.71% 9% $0.0621
1997(10) 1.51 0.69 1.19 11 0.0639
CLASS B
1997(A)(12) 0.30% 1.71% (0.04)% 9% $0.0621
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) 0.21% 1.05% 0.15% 23% $0.0658
1997 0.63 1.03 0.58 79 0.0624
1996 1.15 1.01 1.11 114 0.0636
INSTITUTIONAL CLASS*
1995 1.44% 1.10% 1.44% 119% N/A
CLASS A*
1997(A) (0.04)% 1.30% (0.10)% 23% $0.0658
1997 0.38 1.28 0.33 79 0.0624
1996 0.89 1.26 0.85 114 0.0636
RETAIL CLASS*
1995 1.23% 1.53% 1.04% 119% N/A
PRIOR CLASS
1994 0.75% 1.51% 0.73% 35% N/A
1993 0.94 1.41 0.73 24 N/A
1992 1.47 1.23 1.17 39 N/A
1991 2.30 1.48 1.36 68 N/A
1990(2) 2.29 1.59 1.35 43 N/A
CLASS B
1997(A)(12) (0.79)% 2.30% (1.10)% 23% $0.0658
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y*
1997(A) (0.15)% 1.05% (0.24)% 41% $0.0602
1997 0.30 1.06 0.20 74 0.0600
1996 0.64 1.05 0.48 81 0.0601
1995 0.84 1.10 0.50 113 N/A
1994 0.48 1.11 0.06 127 N/A
1993 0.85 1.11 0.17 103 N/A
19923 1.38 1.12 0.40 66 N/A
CLASS A*
1997(A) (0.40)% 1.30% (0.49)% 41% $0.0602
1997 0.04 1.31 (0.06) 74 0.0600
1996 0.40 1.30 0.23 81 0.0601
1995 0.59 1.35 0.25 113 N/A
1994 0.23 1.36 (0.19) 127 N/A
19934 0.39 1.48 (0.29) 103 N/A
CLASS B
1997(A)(12) (1.15)% 2.05% (1.24)% 41% $0.0602
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED AS EITHER RETAIL OR INSTITUTIONAL SHARES. ON THAT DATE,
THE FUND'S NET INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS FOR THE PERIOD NOVEMBER 1, 1994 THROUGH FEBRUARY 20, 1995
WERE ALLOCATED TO EACH CLASS OF SHARES. THE BASIS FOR THE ALLOCATION WAS THE RELATIVE NET ASSETS OF EACH CLASS OF
SHARES AS OF FEBRUARY 21, 1995. THE RESULTS WERE COMBINED WITH THE RESULTS OF OPERATIONS AND DISTRIBUTIONS FOR EACH
APPLICABLE CLASS FOR THE PERIOD FEBRUARY 21, 1995 THROUGH OCTOBER 31, 1995. FOR THE YEAR ENDED OCTOBER 31, 1995, THE
FINANCIAL HIGHLIGHTS' RATIOS OF EXPENSES, NET INVESTMENT INCOME, TOTAL RETURN, AND THE PER SHARE INVESTMENT ACTIVITIES
AND DISTRIBUTIONS REFLECT THIS ALLOCATION. ADDITIONALLY, ON APRIL 15 & 22, 1996 THE CONESTOGA EQUITY AND SPECIAL EQUITY
FUNDS WERE ACQUIRED BY COREFUNDS, INC.; AT WHICH TIME THE INSTITUTIONAL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED
FOR CLASS Y SHARES AND THE RETAIL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED FOR CLASS A SHARES.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SPECIAL EQUITY FUND, WERE REDESIGNATED CLASS Y AND THE
SERIES B SHARES OF EACH FUND WERE REDESIGNATED CLASS A.
***FOR THE YEAR ENDED JUNE 30, 1996, TRANSACTIONS RELATING TO THE MERGER WERE EXCLUDED FROM THE CALCULATION OF THE
PORTFOLIO TURNOVER RATE.
+ THIS FIGURE HAS NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JUNE 1, 1991. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD
HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
104
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------------
SPECIAL EQUITY FUND(9)
- ----------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $11.27 $(0.03) $ 0.90 $ -- $(1.49) $10.65 8.14%+ $74,025 1.07%
1997 11.86 0.02 1.81 (0.03) (2.39) 11.27 17.94 71,980 0.84
1996 11.42 0.07 2.13 (0.07) (1.69) 11.86 22.27 63,680 0.34
INSTITUTIONAL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $57,396 0.32%
CLASS A*
1997(A) $11.25 $(0.03) $ 0.87 $ -- $(1.49) $10.60 7.88%+ $ 2,858 1.32%
1997 11.85 -- 1.81 (0.02) (2.39) 11.25 17.73 2,347 1.14
1996 11.42 0.08 2.11 (0.07) (1.69) 11.85 22.14 1,144 0.37
RETAIL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $ 734 0.27%
PRIOR CLASS
19945 $10.00 $ 0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $10,069 0.15%
CLASS B
1997(A)(12) $12.80 $(0.01) $(0.82) $ -- $(1.49) $10.48 (6.13)+% $ 122 2.07%
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
1997(A) $14.72 $0.01 $(0.73) $(0.17) $(0.55) $13.28 (4.89)%+ $158,408 0.95%
1997 13.97 0.14 1.84 (0.37) (0.86) 14.72 15.43 163,117 1.20
1996 12.29 0.16 1.86 (0.28) (0.06) 13.97 16.72 139,275 1.14
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838 1.05
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911 0.99
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655 0.99
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594 0.96
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582 0.99
19906 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513 1.22
CLASS A**
1997(A) $14.70 $(0.01) $(0.73) $(0.13) $(0.55) $13.28 (4.98)%+ $ 2,324 1.20%
1997 13.96 0.09 1.85 (0.34) (0.86) 14.70 15.09 2,431 1.45
1996 12.27 0.11 1.89 (0.25) (0.06) 13.96 16.54 2,138 1.39
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943 1.30
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019 1.24
19934 10.07 0.05 1.59 -- -- 11.71 16.29+ 344 1.15
CLASS B
1997(A)(15) $13.79 $(0.02) $ 0.22 $(0.16) $(0.55) $13.28 1.46%+ $ 14 2.16%
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997(A) $13.52 $0.15 $ 0.83 $(0.15) $(0.75) $13.60 7.31%+ $121,302 0.82%
1997 12.59 0.36 1.61 (0.36) (0.68) 13.52 16.44 113,642 0.78
1996 11.06 0.33 1.68 (0.33) (0.15) 12.59 18.41 102,515 0.81
1995 9.88 0.35 1.21 (0.35) (0.03) 11.06 16.21 61,092 0.73
1994 10.39 0.35 (0.51) (0.35) -- 9.88 (1.62) 42,429 0.62
19934 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45
CLASS A**
1997(A) $13.52 $0.12 $ 0.84 $(0.13) $(0.75) $13.60 7.19%+ $ 5,532 1.07%
1997 12.59 0.32 1.61 (0.32) (0.68) 13.52 16.15 4,198 1.03
1996 11.06 0.30 1.68 (0.30) (0.15) 12.59 18.13 3,188 1.06
1995 9.89 0.34 1.19 (0.33) (0.03) 11.06 15.84 2,344 0.98
1994 10.38 0.31 (0.49) (0.31) -- 9.89 (1.86) 2,222 0.87
19937 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55
CLASS B
1997(A)(14) $14.39 $0.09 $(0.09) $ 0.13 $(0.75) $13.51 (0.45)%+ $ 573 1.82%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------
SPECIAL EQU
- -----------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) (0.44)% 1.81% (1.18)% 32% $0.0628
1997 0.19 1.82 (0.79) 74 $0.0581
1996 0.94 1.79 (0.51) 72 0.0539
INSTITUTIONAL CLASS*
1995 1.14% 1.97% (0.51)% 129% N/A
CLASS A*
1997(A) (0.69)% 2.06% (1.43)% 32% $0.0628
1997 (0.12) 2.07 (1.05) 74 $0.0581
1996 0.91 1.82 (0.55) 72 0.0539
RETAIL CLASS*
1995 1.29% 2.24% (0.68)% 129% N/A
PRIOR CLASS
19945 1.06% 2.10% (0.89)% 39% N/A
CLASS B
1997(A)(12) (1.44)% 2.81% (2.18)% 32% $0.0628
- ------------------------------
INTERNATIONATIONAL GROWTH FUND
- ------------------------------
CLASS Y**
1997(A) 0.47% 1.04% 0.38% 25% $0.0024
1997 0.82 1.29 0.73 59 0.0080
1996 1.05 1.25 0.94 41 0.0270
1995 0.98 1.19 0.84 59 N/A
1994 0.23 1.18 0.04 67 N/A
1993 1.22 1.28 0.93 59 N/A
1992 1.67 1.40 1.23 87 N/A
1991 1.80 1.56 1.23 49 N/A
19906 2.57 1.99 1.80 20 N/A
CLASS A**
1997(A) 0.23% 1.29% 0.14% 25% $0.0024
1997 0.57 1.54 0.48 59 0.0080
1996 0.80 1.50 0.69 41 0.0270
1995 0.73 1.44 0.59 59 N/A
1994 0.05 1.43 (0.14) 67 N/A
19934 1.51 1.44 1.22 59 N/A
CLASS B
1997(A)(15) (1.15)% 2.23% (1.22%) 25% $0.0024
- -------------
BALANCED FUND
- -------------
CLASS Y**
1997(A) 2.12% 1.03% 1.91% 30% $0.0601
1997 2.79 1.00 2.57 54 0.0600
1996 2.79 1.03 2.57 74 0.0621
1995 3.51 1.07 3.17 46 N/A
1994 3.46 1.08 3.00 56 N/A
19934 3.38 1.39 2.45 21 N/A
CLASS A**
1997(A) 1.87% 1.28% 1.66% 30% $0.0601
1997 2.54 1.25 2.32 54 0.0600
1996 2.53 1.27 2.32 74 0.0621
1995 3.27 1.32 2.93 46 N/A
1994 3.21 1.33 2.75 56 N/A
19937 5.76 1.48 4.83 21 N/A
CLASS B
1997(A)(14) (1.12)% 2.03% 0.91% 30% $0.0601
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
5 COMMENCED OPERATIONS MARCH 15, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 12, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS MARCH 16, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 TOTAL RETURN DOES NOT REFLECT APPLICABLE SALES LOAD. ADDITIONALLY TOTAL RETURN FOR CLASS Y & CLASS A FOR THE CORE
EQUITY & SPECIAL EQUITY FUNDS FOR 1996 ARE FOR AN EIGHT MONTH PERIOD ENDED JUNE 30, 1997.
9 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR ENDED JUNE 30, 1996 REPRESENTS THE PERIOD FROM NOVEMBER 1, 1995 TO
JUNE 30, 1996. ALL PRIOR YEARS ARE FOR THE PERIODS NOVEMBER 1 TO OCTOBER 31.
10 COMMENCED OPERATIONS ON OCTOBER 9, 1996. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
11 AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
12 COMMENCED OPERATIONS ON NOVEMBER 7, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
13 COMMENCED OPERATIONS ON NOVEMBER 18, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
14 COMMENCED OPERATIONS ON NOVEMBER 5, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
15 COMMENCED OPERATIONS ON NOVEMBER 24, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
105
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET
ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.97 $0.28 $ 0.02 $(0.28) $ -- $ 9.99 3.00%+ $ 37,203 0.49%
1997 9.94 0.53 0.03 (0.53) -- 9.97 5.82 37,011 0.47
1996 10.05 0.36 (0.08) (0.38) (0.01) 9.94 2.78 30,132 0.51
INSTITUTIONAL CLASS*
19951 $10.00 $0.25 $ 0.03 $(0.23) $ -- $10.05 2.57%+ $ 36,059 0.63%
CLASS A*
1997(A) $ 9.96 $0.26 $ 0.02 $(0.26) $ -- $ 9.98 2.87%+ $ 570 0.74%
1997 9.93 0.51 0.03 (0.51) -- 9.96 5.59 493 0.73
1996 10.04 0.35 (0.10) (0.35) (0.01) 9.93 2.55 1 0.76
RETAIL CLASS*
19952 $10.01 $0.23 $0.02 $(0.22) $ -- $10.04 2.87%+ $ 11 0.88%
- -----------------------------
SHORT-INTERMEDIATE BOND FUND
- -----------------------------
CLASS Y**
1997(A) $ 9.83 $0.29 $ 0.12 $(0.29) $ -- $ 9.95 4.25%+ $169,990 0.51%
1997 9.76 0.59 0.07 (0.59) -- 9.83 6.90 163,153 0.49
1996 9.84 0.57 (0.08) (0.57) -- 9.76 5.05 159,841 0.55
1995 9.63 0.53 0.21 (0.53) -- 9.84 8.22 55,128 0.60
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379 0.58
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692 0.42
19923 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623 0.11
CLASS A**
1997(A) $ 9.83 $0.28 $ 0.12 $(0.28) $ -- $ 9.95 4.14%+ $ 2,831 0.76%
1997 9.76 0.56 0.07 (0.56) -- 9.83 6.64 2,752 0.74
1996 9.84 0.54 (0.08) (0.54) -- 9.76 4.79 3,062 0.81
1995 9.63 0.54 0.20 (0.53) -- 9.84 7.95 1,961 0.85
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365 0.83
19934 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752 0.75
- -----------------------
GOVERNMENT INCOME FUND
- -----------------------
CLASS Y**
1997(A) $ 9.76 $0.31 $ 0.27 $(0.31) $ -- $10.03 6.00%+ $ 21,032 0.73%
1997 9.62 0.62 0.14 (0.62) -- 9.76 8.15 19,007 0.70
1996 9.83 0.61 (0.21) (0.61) -- 9.62 4.09 13,943 0.64
1995 9.52 0.62 0.31 (0.62) -- 9.83 10.26 11,305 0.59
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089 0.50
19935 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323 0.44
CLASS A**
1997(A) $ 9.76 $0.30 $ 0.27 $(0.30) $ -- $10.03 5.86%+ $ 1,827 0.98%
1997 9.62 0.60 0.14 (0.60) -- 9.76 7.88 1,660 0.95
1996 9.84 0.58 (0.22) (0.58) -- 9.62 3.73 1,287 0.88
1995 9.51 0.61 0.33 (0.61) -- 9.84 10.23 1,374 0.85
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536 0.75
19938 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201 0.63
- ------------
BOND FUND11
- ------------
CLASS Y*
1997(A) $10.24 $0.32 $ 0.29 $(0.32) $ -- $10.53 6.06%+ $173,565 0.57%
1997 10.15 0.64 0.09 (0.64) -- 10.24 7.43 182,364 0.56
1996 10.55 0.43 (0.30) (0.45) (0.08) 10.15 1.23 198,605 0.55
INSTITUTIONAL CLASS*
1995 $ 9.81 $0.61 $ 0.71 $(0.58) $ -- $10.55 13.87% $194,442 0.71%
CLASS A*
1997(A) $10.24 $0.31 $ 0.29 $(0.31) $ -- $10.53 5.93%+ $ 2,027 0.82%
1997 10.15 0.62 0.09 (0.62) -- 10.24 7.15 1,622 0.81
1996 10.56 0.44 (0.33) (0.44) (0.08) 10.15 0.98 1,273 0.80
RETAIL CLASS*
1995 $ 9.81 $0.60 $ 0.72 $(0.57) $ -- $10.56 13.83% $ 1,373 0.97%
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377 1.01%
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346 0.88
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82 15,180 0.46
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255 0.47
19906 10.00 0.50 (0.04) (0.50) -- 9.96 4.64+ 4,593 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- ------------------------
SHORT TERM INCOME FUND11
- ------------------------
CLASS Y*
<S> <C> <C> <C> <C>
1997(A) 5.48% 1.07% 4.90% 28%
1997 5.37 1.05 4.79 99
1996 5.31 1.03 4.79 102
INSTITUTIONAL CLASS*
19951 5.43% 1.08% 4.98% 40%
CLASS A*
1997(A) 5.23% 1.32% 4.65% 28%
1997 5.18 1.32 4.59 99
1996 5.05 1.25 4.56 102
RETAIL CLASS*
19952 5.05% 1.33% 4.60% 40%
- ----------------------------
SHORT-INTERMEDIATE BOND FUND
- ----------------------------
CLASS Y**
1997(A) 5.37% 0.80% 5.08% 66%
1997 5.98 0.80 5.67 158
1996 5.80 0.81 5.54 257
1995 5.76 0.84 5.52 405
1994 4.30 0.86 4.02 299
1993 4.62 0.86 4.18 188
19923 5.73 0.84 5.00 51
CLASS A**
1997(A) 4.88% 1.05% 4.59% 66%
1997 5.73 1.05 5.42 158
1996 5.51 1.06 5.27 257
1995 5.27 1.09 5.03 405
1994 4.05 1.11 3.77 299
19934 3.78 1.19 3.34 188
- ----------------------
GOVERNMENT INCOME FUND
- ----------------------
CLASS Y**
1997(A) 6.16% 0.83% 6.06% 18%
1997 6.40 0.85 6.25 120
1996 6.17 0.89 5.92 131
1995 6.53 0.98 6.14 368
1994 4.93 1.00 4.43 157
19935 5.41 1.10 4.75 93
CLASS A**
1997(A) 5.91% 1.08% 5.81% 18%
1997 6.15 1.10 6.00 120
1996 5.93 1.14 5.67 131
1995 6.25 1.24 5.86 368
1994 4.68 1.25 4.18 157
19938 5.35 1.29 4.69 93
- -----------
BOND FUND11
- -----------
CLASS Y*
1997(A) 6.11% 1.04% 5.64% 71%
1997 6.29 1.04 5.81 210
1996 6.28 0.97 5.86 190
INSTITUTIONAL CLASS*
1995 6.09% 1.12% 5.68% 352%
CLASS A*
1997(A) 5.86% 1.29% 5.39% 71%
1997 6.05 1.29 5.57 210
1996 6.02 1.22 5.61 190
RETAIL CLASS*
1995 6.02% 1.44% 5.55% 352%
PRIOR CLASS*
1994 5.07% 1.60% 4.48% 232%
1993 5.16 1.49 4.55 158
1992 6.78 1.24 6.01 99
1991 7.71 1.41 6.78 47
19906 7.75 1.62 6.81 23
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
106
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------
GLOBAL BOND FUND
- ----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.54 $0.37 $(0.17) $(0.41) $ -- $ 9.33 2.06%+ $ 35,625 0.68%
1997 9.70 0.49 0.09 (0.74) -- 9.54 6.18 34,590 0.85
1996 9.62 0.47 0.30 (0.69) -- 9.70 8.00 32,998 0.71
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898 0.64
19947 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73
CLASS A**
1997(A) $ 9.52 $0.29 $(0.10) $(0.39) $ -- $ 9.32 2.05%+ $ 246 0.93%
1997 9.68 0.42 0.14 (0.72) -- 9.52 5.92 182 1.10
1996 9.61 0.61 0.12 (0.66) -- 9.68 7.74 152 0.96
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170 0.89
19947 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98
- ---------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.05 $0.21 $ 0.20 $(0.21) $ -- $10.25 4.13%+ $ 906 0.56%
1997 9.92 0.42 0.13 (0.42) -- 10.05 5.62 993 0.55
1996 9.83 0.37 0.09 (0.37) -- 9.92 4.74 403 0.81
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365 0.82
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088 0.63
19938 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009 0.58
CLASS A**
1997(A) $10.05 $0.20 $ 0.20 $(0.20) $ -- $10.25 4.00%+ $ 966 0.81%
1997 9.92 0.39 0.13 (0.39) -- 10.05 5.36 959 0.80
1996 9.83 0.35 0.09 (0.35) -- 9.92 4.48 1,015 1.08
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027 1.08
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311 0.88
19938 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166 0.81
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.47 $0.27 $ 0.30 $(0.27) $ -- $10.77 5.51%+ $ 12,912 0.08%
1997 10.22 0.54 0.25 (0.54) -- 10.47 7.92 10,171 0.08
1996 10.16 0.55 0.06 (0.55) -- 10.22 6.02 8,864 0.21
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272 0.39
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434 0.42
CLASS A**
1997(A) $10.47 $0.26 $ 0.31 $(0.26) $ -- $10.78 5.47%+ $ 4,590 0.33%
1997 10.22 0.51 0.25 (0.51) -- 10.47 7.65 2,004 0.33
1996 10.16 0.52 0.06 (0.52) -- 10.22 5.76 994 0.46
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317 0.64
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163 0.67
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997(A) $10.16 $0.26 $ 0.30 $(0.26) $ -- $10.46 5.55%+ $ 1,605 0.11%
1997 10.08 0.51 0.15 (0.51) (0.07) 10.16 6.70 1,477 0.21
1996 10.12 0.51 0.02 (0.51) (0.06) 10.08 5.28 1,317 0.37
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550 0.42
19949 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432 0.43
CLASS A**
1997(A) $10.15 $0.25 $ 0.30 $(0.25) $ -- $10.45 5.42%+ $ 51 0.36%
1997 10.07 0.48 0.15 (0.48) (0.07) 10.15 6.44 398 0.45
1996 10.12 0.48 0.01 (0.48) (0.06) 10.07 4.93 304 0.60
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24 0.68
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- -----------
GLOBAL BOND
- -----------
CLASS Y**
<S> <C> <C> <C> <C>
1997(A) 5.16% 0.87% 4.97% 7%
1997 5.14 1.03 4.96 90
1996 5.81 0.95 5.57 67
1995 6.84 1.03 6.45 133
19947 5.04 1.12 4.65 161
CLASS A**
1997(A) 4.91% 1.12% 4.72% 7%
1997 4.89 1.28 4.71 90
1996 5.56 1.20 5.32 67
1995 6.59 1.28 6.20 133
19947 4.79 1.37 4.40 161
- --------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.07% 1.07% 3.56% 8%
1997 4.20 1.02 3.73 22
1996 3.73 1.31 3.23 10
1995 3.91 1.26 3.47 9
1994 3.91 1.17 3.37 43
19938 2.74 1.45 1.87 10
CLASS A**
1997(A) 3.87% 1.32% 3.36% 8%
1997 3.92 1.23 3.49 22
1996 3.47 1.61 2.94 10
1995 3.65 1.52 3.21 9
1994 3.66 1.42 3.12 43
19938 2.51 1.68 1.64 10
- --------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.99% 0.82% 4.25% 17%
1997 5.23 0.83 4.48 39
1996 5.25 0.96 4.50 92
1995 5.26 1.14 4.51 18
19949 5.09 1.17 4.34 3
CLASS A**
1997(A) 4.74% 1.07% 4.00% 17%
1997 4.99 1.08 4.24 39
1996 4.93 1.21 4.18 92
1995 4.95 1.39 4.20 18
19949 4.84 1.42 4.09 3
- ------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- ------------------------------
CLASS Y**
1997(A) 4.96% 0.86% 4.21% 4%
1997 5.02 0.96 4.27 19
1996 4.93 1.12 4.18 21
1995 5.21 1.17 4.46 32
19949 5.07 1.35 4.15 13
CLASS A**
1997(A) 4.71% 1.11% 3.96% 4%
1997 4.81 1.20 4.06 19
1996 4.65 1.35 3.90 21
1995 4.97 1.44 4.21 32
19949 4.82 1.60 3.90 13
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED AS EITHER
RETAIL OR INSTITUTIONAL SHARES. ON THAT DATE, THE FUND'S NET INVESTMENT
INCOME, EXPENSES AND DISTRIBUTIONS FOR THE PERIOD NOVEMBER 1, 1994 THROUGH
FEBRUARY 20, 1995 WERE ALLOCATED TO EACH CLASS OF SHARES. THE BASIS FOR THE
ALLOCATION WAS THE RELATIVE NET ASSETS OF EACH CLASS OF SHARES AS OF FEBRUARY
21, 1995. THE RESULTS WERE COMBINED WITH THE RESULTS OF OPERATIONS AND
DISTRIBUTIONS FOR EACH APPLICABLE CLASS FOR THE PERIOD FEBRUARY 21, 1995
THROUGH OCTOBER 31, 1995. FOR THE YEAR ENDED OCTOBER 31, 1995, THE FINANCIAL
HIGHLIGHTS' RATIOS OF EXPENSES, NET INVESTMENT INCOME, TOTAL RETURN, AND THE
PER SHARE INVESTMENT ACTIVITIES AND DISTRIBUTIONS REFLECT THIS ALLOCATION.
ADDITIONALLY, ON APRIL 22, 1996 THE CONESTOGA SHORT-TERM INCOME AND BOND
FUNDS WERE ACQUIRED BY COREFUNDS, INC. AT WHICH TIME THE INSTITUTIONAL CLASS
OF SHARES OF THESE FUNDS WERE REDESIGNATED CLASS Y AND THE RETAIL CLASS OF
SHARES OF THESE FUNDS WERE REDESIGNATED CLASS A.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SHORT TERM
INCOME AND BOND FUNDS, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF
EACH FUND, EXCLUDING THE SHORT TERM INCOME AND BOND FUNDS, WERE REDESIGNATED
CLASS A.
***FOR THE YEAR ENDED JUNE 30, 1996, TRANSACTIONS RELATING TO THE MERGER WERE
EXCLUDED FROM THE CALCULATION OF THE PORTFOLIO TURNOVER RATE.
+ THIS FIGURE HAS NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS MAY 15, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
2 COMMENCED OPERATIONS MAY 17, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS APRIL 1, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS DECEMBER 15, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 COMMENCED OPERATIONS MAY 3, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
9 COMMENCED OPERATIONS MAY 16, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
10 TOTAL RETURN DOES NOT REFLECT THE SALES LOAD CHARGED ON THE CLASS A SHARES. ADDITIONALLY, TOTAL RETURN FOR CLASS Y &
CLASS A FOR THE SHORT TERM INCOME AND BOND FUNDS FOR 1996 ARE FOR THE EIGHT
MONTH PERIOD ENDED DECEMBER 31, 1996.
11 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR ENDED JUNE 30, 1996
REPRESENTS THE PERIOD FROM NOVEMBER 1, 1995 TO JUNE 30, 1996. ALL PRIOR YEARS
ARE FOR THE PERIODS NOVEMBER 1 TO OCTOBER 31.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
107
<PAGE>
FINANCIAL
HIGHLIGHTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
RATIO RATIO OF NET
NET RATIO OF EXPENSES INCOME
NET ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- --------------- ------------ -------- --------- ----------- ---------- ----------- ------------
- ----------------
TREASURY RESERVE
- ----------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $1.00 $0.03 $(0.03) $1.00 2.57%+ $806,855 0.51% 5.05% 0.70% 4.86%
1997 1.00 0.05 (0.05) 1.00 4.97 835,384 0.51 4.86 0.71 4.66
1996 1.00 0.05 (0.05) 1.00 5.20 892,562 0.50 5.02 0.77 4.75
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91 0.85 4.54
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87 0.86 2.49
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89 0.85 2.50
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58 0.82 4.14
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80 0.82 6.35
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03 0.84 7.56
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26 0.84 8.62
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.44%+ $ 24,414 0.76% 4.80% 0.95% 4.61%
1997 1.00 0.05 (0.05) 1.00 4.71 12,146 0.76 4.61 0.96 4.41
1996 1.00 0.05 (0.05) 1.00 4.94 19,386 0.75 4.81 1.03 4.53
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81 1.10 4.44
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62 1.11 2.24
19931 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46 1.14 2.07
- -------------
CASH RESERVE
- -------------
CLASS Y*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.65%+ $956,368 0.52% 5.20% 0.72% 5.00%
1997 1.00 0.05 (0.05) 1.00 5.09 886,251 0.50 4.99 0.70 4.79
1996 1.00 0.05 (0.05) 1.00 5.26 790,211 0.50 5.09 0.78 4.81
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04 0.85 4.67
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95 0.85 2.57
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97 0.85 2.58
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68 0.82 4.24
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94 0.82 6.49
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28 0.80 7.82
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62 0.90 8.05
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54 1.14 5.96
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.52%+ $ 79,712 0.77% 4.95% 0.97% 4.75%
1997 1.00 0.05 (0.05) 1.00 4.83 27,693 0.75 4.74 0.95 4.54
1996 1.00 0.05 (0.05) 1.00 5.00 19,736 0.75 4.86 1.03 4.58
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86 1.10 4.49
1994 1.00 0.03 (0.03) 1.00 2.74 11,451 0.72 2.70 1.10 2.32
19931 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52 1.15 2.13
CLASS B
1997(A)(4) $1.00 $ -- $ -- $1.00 0.50%+ $ 80 1.52% 4.20% 1.72% 4.00%
- ----------------
TAX-FREE RESERVE
- ----------------
CLASS Y*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.63%+ $ 152,822 0.52% 3.17% 0.71% 2.98%
1997 1.00 0.03 (0.03) 1.00 3.08 119,579 0.50 3.07 0.70 2.87
1996 1.00 0.03 (0.03) 1.00 3.20 104,196 0.48 3.14 0.76 2.86
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09 0.85 2.72
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00 0.87 1.62
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20 0.89 1.82
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39 0.88 2.88
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20 0.81 3.45
CLASS C*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.49%+ $ 12,396 0.77% 2.92% 0.96% 2.73%
1997 1.00 0.03 (0.03) 1.00 2.83 3,202 0.75 2.82 0.95 2.62
1996 1.00 0.03 (0.03) 1.00 2.95 2,850 0.73 2.94 1.02 2.65
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80 1.10 2.43
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75 1.12 1.37
19931 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71 1.14 1.33
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON APRIL 22, 1996, SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B
SHARES WERE REDESIGNATED CLASS C. + RETURNS ARE FOR THE PERIOD INDICATED AND
HAVE NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JANUARY 4, 1993. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS NOVEMBER 21, 1988. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS APRIL 16, 1991. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS NOVEMBER 18, 1997. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
108
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
1. ORGANIZATION
The CoreFund Equity Index Fund, Core Equity Fund, Growth Equity Fund, Special
Equity Fund, International Growth Fund, Balanced Fund (the Equity Funds), Short
Term Income Fund, Short-Intermediate Bond Fund, Government Income Fund, Bond
Fund, Global Bond Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal
Bond Fund, New Jersey Municipal Bond Fund (the Fixed Income Funds), Treasury
Reserve, Cash Reserve, and Tax-Free Reserve (the Money Market Funds) are
portfolios offered by CoreFunds, Inc. (The Company), an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Company is presently authorized to offers 20 separate portfolios (the Funds):
EQUITY PORTFOLIOS: MONEY MARKET PORTFOLIOS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Cash Reserve
International Growth Fund Elite Treasury Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME PORTFOLIOS:
Short Term Income Fund
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements of the Elite Cash Reserve, Elite Treasury Reserve
and Elite Tax-Free Reserve are not presented herein.
The assets of each Portfolio are segregated, and a Shareholder's interest
is limited to the Portfolio in which shares are held. The Funds' prospectus
provides a description of the Funds' investment objectives, policies and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investment securities of the Equity and Fixed Income
Funds that are listed on a securities exchange for which market quotations are
available are valued by an independent pricing service at the last quoted sales
price for such securities on each business day. If there is no such reported
sale, these securities and unlisted securities for which market quotations are
readily available are valued at the most recent quoted bid price using
procedures determined in good faith by the Board of Trustees. Debt obligations
with sixty days or less remaining until maturity may be valued at their
amortized cost. Under this valuation method, purchase discounts and premiums are
accreted and amortized ratably to maturity and are included in interest income.
Investment securities of the Money Market Funds are stated at amortized
cost, which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income.
The books and records of the International Growth Fund and Global Bond
Fund are maintained in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars on the following bases:
[BULLET] market value of investment securities, assets and liabilities at
the current rate of exchange; and
[BULLET] purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The International Growth Fund does not isolate the portion of gains or
losses on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Global Bond Fund does isolate the effect of fluctuations in foreign
currency rates when determining the gain or loss upon sale or maturity of
foreign currency denominated debt obligations for Federal income tax purposes.
109
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
The International Growth Fund and Global Bond Fund report certain foreign
currency related transactions as components of unrealized and realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for Federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--The International Growth Fund and
Global Bond Fund enter into forward foreign currency contracts as hedges against
either specific transactions or portfolio positions. The aggregate principal
amounts of the contracts are not recorded since the funds intend to settle the
contracts prior to delivery. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The funds realize gains or losses at the time forward
contracts are settled. Financial future contracts are valued at the settlement
price established each day by the board of trade on an exchange on which they
are traded.
SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period, which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on ex-dividend
date.
REPURCHASE AGREEMENTS--Securities pledged as collateral for repurchase
agreements are held by each Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements and procedures adopted by
the adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of collateral by
the Portfolio may be delayed or limited.
EXPENSES--Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Company are
pro-rated to the Funds on the basis of relative net assets. Class specific
expenses, such as the 12b-1 fees, are borne by that class. Income, other
expenses and accumulated realized and unrealized gains and losses of a Fund are
allocated to the respective class on the basis of the relative net asset value
each day.
DISTRIBUTION TO SHAREHOLDERS--The Equity Index Fund, Core Equity Fund,
Growth Equity Fund, Special Equity Fund, Balanced Fund and Global Bond Fund
declare and pay dividends on a quarterly basis. The International Growth Fund
declares and pays dividends periodically. Such dividends are reinvested in
additional shares unless otherwise requested. The Short Term Income Fund,
Short-Intermediate Bond Fund, Government Income Fund, Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Treasury Reserve, Cash Reserve and Tax-Free Reserve distributions from net
investment income are declared on a daily basis and are payable on the first
business day of the following month. Any net realized capital gains on sales of
securities for a Fund are distributed to its shareholders at least annually.
Distributions from net investment income and net realized capital gains are
determined in accordance with U.S. Federal income tax regulations, which may
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid in capital in the period that the difference arises.
Accordingly, for the International Growth Fund and Global Bond Fund as of
December 31, 1997, $(411,000) and $450,000 was reclassified from accumulated net
realized gain (loss)on investments to accumulated net investment income,
respectively.
FEDERAL INCOME TAXES--It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income tax is required.
OTHER--Organizational costs incurred with the start up of the Balanced
Fund, Government Income Fund, Short Term Income Fund, Intermediate Municipal
Bond Fund, Global Bond Fund, Pennsylvania Municipal Bond Fund and New Jersey
Municipal Bond Fund are being amortized on a straight line basis over a maximum
period of sixty months. If any or all of the shares representing initial capital
of each fund are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organizational cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
110
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
The Company has entered into an investment advisory agreement with
CoreStates Investment Advisers, Inc. ("CSIA") to provide investment advisory
services to each Fund. For its services CSIA receives a fee based on the annual
average daily net assets of each Fund as shown in the following table:
<TABLE>
<CAPTION>
ADVISER INVESTMENT ADVISORY ADVISER INVESTMENT ADVISORY
FUND FEE AGREEMENT DATE FUND FEE AGREEMENT DATE
- -------------------- ------- ------------------- -------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index 0.40% March 25, 1991 Short Term Income 0.74% April 12, 1996
Core Equity 0.74 April 12, 1996 Short-Intermediate Bond 0.50 March 25, 1991
Growth Equity 0.75 March 25, 1991 Government Income 0.50 March 25, 1991
Special Equity 1.50 April 12, 1996 Bond 0.74 April 12, 1996
International Growth 0.80 December 5, 1989 Global Bond 0.60 March 25, 1991
Balanced 0.70 March 25, 1991 Intermediate Municipal
Bond 0.50 March 25, 1991
Treasury Reserve 0.40 April 12, 1996 Pennsylvania Municipal
Cash Reserve 0.40 April 12, 1996 Bond 0.50 May 15, 1994
Tax-Free Reserve 0.40 April 12, 1996 New Jersey Municipal
Bond 0.50 May 15, 1994
</TABLE>
Advisory fees are computed daily and paid monthly for all Funds.
Additionally, for the period ended December 31, 1997, CSIA has voluntarily
waived a portion of their fees in order to assist the Funds in maintaining
competitive expense ratios.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, in
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
Sub-Advisory services are provided to the CoreStates Advisers for the
International Growth Fund by Martin Currie, Inc. and Aberdeen Managers (The
"Sub-Advisers"). Sub-Advisory services are provided for the Global Bond Fund by
Analytic TSA (formerly Alpha Global). CoreStates Advisers is responsible for the
supervision, and payment of fees to the Sub-Advisers in connection with their
services.
4. ADMINISTRATIVE, TRANSFER AGENT AND DISTRIBUTION SERVICES
Pursuant to an Administration agreement dated October 30, 1992, as amended
June 1, 1995, SEI Fund Resources ("SFR") acts as the Fund's Administrator. Under
the terms of such agreement, SFR is entitled to receive an annual fee of 0.25%
on the average net assets of the Funds. SFR voluntarily waives a portion of
their fees in order to assist the Funds in maintaining competitive expense
ratios.
Pursuant to a Transfer Agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS"), a wholly owned subsidiary of State Street Bank
and Trust Company acts as the Funds' Transfer Agent. As such, BFDS provides
transfer agency, dividend disbursing and shareholder servicing for the Funds.
On November 2, 1992, SEI Financial Services ("SFS"), a wholly owned
subsidiary of SEI, became the Funds' exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the "Plan") for those Funds
offering Class A, C and B shares. The Plan provides for the payment by the
Company to the Distributor of up to 0.25% of the daily net assets of each Class
A and C Portfolio and 1.00% of the daily net assets of each Class B Portfolio.
The Company has also adopted a Shareholder Servicing Plan for those Funds
offering Class B shares. The Shareholder Servicing Plan provides for the payment
by the Company to the Distributor of up to 25% of the daily net assets of each
Class B Portfolio to which the Plan is applicable. The Distributor is authorized
to use these fees as compensation for its distribution-related services and as
payment to certain securities broker/dealers and financial institutions that
enter into shareholder servicing agreements or broker agreements with the
Distributor. The Funds paid approximately $850,104 to affiliated brokers for
commissions earned on the sales of the shares of the Funds for the six month
period ended December 31, 1997.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Funds.
111
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
A contingent Deferred Sales Charge (CDSC) is imposed on redemptions made in
the Class B shares. The CDSC varies depending on the number of years from the
time of payment for the purchase of Class B shares until the redemption of such
shares.
Contingent Deferred Sales
Year Charges as a Percentage
Since of Dollar Amount
Purchase Subject to Charge
-------- ------------------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth None
Seventh Convert to Class A Shares
5. INVESTMENT TRANSACTIONS
During the six month period ended December 31, 1997, purchases of
securities and proceeds from sales of securities, other than temporary
investments in short-term securities, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
-------------------------------- -------------------------------
PURCHASES SALES
-------------------------------- -------------------------------
U.S. U.S.
PORTFOLIO INVESTMENT TRANSACTIONS (000) GOVERNMENT OTHER TOTAL GOVERNMENT OTHER TOTAL
---------- ----- ------- ---------- ------- --------
<S> <C> <C> <C> <C>
Equity Index Fund -- 26,703 26,703 -- 22,386 22,386
Core Equity Fund -- 132 132 -- 151,787 151,787
Growth Equity Fund -- 66,463 66,463 -- 71,272 71,272
Special Equity Fund -- 24,748 24,748 -- 30,293 30,293
International Growth Fund -- 38,930 38,930 -- 39,848 39,848
Balanced Fund -- 36,206 36,206 -- 34,822 34,822
Short Term Income Fund 2,753 5,191 7,944 4,333 5,139 9,472
Short-Intermediate Bond Fund 65,819 39,422 105,241 69,963 33,236 103,199
Government Income Fund 5,451 -- 5,451 3,814 -- 3,814
Bond Fund 81,637 39,056 120,693 105,566 65,138 170,704
Global Bond Fund -- 41,416 41,416 -- 4,688 4,688
Intermediate Municipal Fund -- 139 139 -- 232 232
Pennsylvania Municipal Bond Fund -- 7,890 7,890 -- 2,405 2,405
New Jersey Municipal Bond Fund -- 353 353 -- 76 76
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Certain net capital losses incurred subsequent to October 31, 1996 have
been deferred for tax purposes and will be recognized during the fiscal year
ended June 30, 1998. The Funds had capital loss carryforwards at December 31,
1997, as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES
6/30/97 2002 2003 2004 2005
------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Short Term Income Fund $ 88,520 $ -- $ -- $ -- $ 88,520
Short-Intermediate Bond Fund 2,907,103 -- 1,483,436 217,497 1,206,170
Government Income Fund 319,174 -- 222,660 4,127 92,387
Bond Fund 1,702,115 -- -- -- 1,702,115
Global Bond Fund 1,573,551 -- 844,493 -- 729,058
Intermediate Term Municipal Bond Fund 79,158 -- 41,918 34,827 2,413
Pennsylvania Municipal Bond Fund 96,691 73,679 95 8,784 14,133
Treasury Reserve 9,082 -- -- -- 9,082
Cash Reserve 167,012 134,628 23,362 9,022 --
Tax-Free Reserve 54,381 5,273 44,981 4,127 --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
At December 31, 1997 the total cost of securities and the net realized
gains or losses on securities sold for Federal income tax purposes was not
materially different from amounts reported for financial purposes. The aggregate
gross unrealized gain or loss on securities at December 31, 1997 for each fund
within the CoreFunds is as follows:
112
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------
AGGREGATE AGGREGATE
GROSS GROSS
AGGREGATE GROSS UNREALIZED GAIN (LOSS) (000) APPRECIATION DEPRECIATION NET
------------ ------------ --------
<S> <C> <C> <C>
Equity Index Fund $119,666 $ (3,247) $116,419
Core Equity Fund 149,108 (16,936) 132,172
Growth Equity Fund 57,102 (1,766) 55,336
Special Equity Fund 15,922 (11,198) 4,724
International Growth Fund 29,294 (10,958) 18,336
Balanced Fund 23,572 (985) 22,587
Short Term Income Fund 89 (8) 81
Short-Intermediate Bond Fund 1,991 (24) 1,967
Government Income Fund 570 (15) 555
Bond Fund 4,190 (25) 4,165
Global Bond Fund 554 (881) (327)
Intermediate Municipal Bond Fund 56 -- 56
Pennsylvania Municipal Bond Fund 640 (4) 636
New Jersey Municipal Bond Fund 104 -- 104
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
6. FORWARD FOREIGN CURRENCY CONTRACTS
The International Growth Fund and Global Bond Fund enter into forward
foreign currency contracts as hedges against portfolio positions. Such
contracts, which protect the value of a Fund's investment securities against a
decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at a
future date. Also, although such contracts tend to minimize the risk of loss due
to a decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such foreign
currency increase. The following forward foreign currency contracts were
outstanding at December 31, 1997:
- -------------------------------------------------------------------------------
GLOBAL BOND FUND:
Foreign Currency Sales:
Contracts to In Exchange Unrealized
Deliver/Receive For Appreciation
--------------- ----------- ------------
3/23/98 DM 10,750,000 $6,101,645 $ 96,870
3/23/98 DK 19,000,000 2,829,149 44,204
3/12/98 FF 10,500,000 1,761,036 8,991
3/12/98 GP 1,950,000 3,197,318 34,913
3/23/98 SK 13,600,000 1,763,451 46,185
---------
Net Unrealized Appreciation $ 231,163
=========
- --------------------------------------------------------------------------------
CURRENCY LEGEND
- ---------------
DM German Marks
DK Danish Kroner
FF French Francs
GP British Pounds
SK Swedish Krona
113
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
7. CONCENTRATION OF CREDIT RISK
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in debt instruments of
municipal issuers. Although these Funds maintain a diversified portfolio, with
the exception of the Pennsylvania Municipal Bond Fund and the New Jersey
Municipal Bond Fund, the issuers ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in securities that
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At December 31, 1997, the percentage of
portfolio investments by each revenue source was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------- --------
INTERMEDIATE PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL MUNICIPAL
BOND BOND BOND TAX-FREE
FUND FUND FUND RESERVE
------------ ------------ ---------- --------
REVENUE BONDS:
<S> <C> <C> <C> <C>
Education Bonds 17% 18% 15% 7%
Health Care Bonds 3 13 5 10
Transportation Bonds 12 5 7 7
Utility Bonds 14 16 17 4
Housing Bonds -- 2 -- 10
Pollution Control Bonds -- -- -- 10
Industrial Development Bonds 6 16 -- 8
Public Facility Bonds -- 1 2 3
Other 12 2 7 10
GENERAL OBLIGATIONS 36 24 47 6
TAX EXEMPT COMMERCIAL PAPER -- -- -- 21
TAX AND REVENUE ANTICIPATION NOTES -- -- -- 3
TAX ANTICIPATION NOTES -- 3 -- 1
----- ----- ----- ----
100% 100% 100% 100%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount on an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by the issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions). At December 31, 1997, the percentage of securities with credit
enhancements are as follows:
- ----------------------------------------------------------------------------
------- ---------
LETTERS
OF BOND
CREDIT INSURANCE
------- ---------
Intermediate Municipal Bond Fund -- 64.9%
Pennsylvania Municipal Bond Fund -- 62.1
New Jersey Municipal Bond Fund -- 38.4
Tax-Free Reserve 53.3% 27.6
- ----------------------------------------------------------------------------
114
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
8. SHARE TRANSACTIONS (000):
The following are the share transactions for the six month period ended December
31, 1997.
<TABLE>
<CAPTION>
------ ------- ------ ------- ------------- -------- -------- ------- --------
EQUITY CORE GROWTH SPECIAL INTERNATIONAL
INDEX EQUITY EQUITY EQUITY GROWTH BALANCED TREASURY CASH TAX-FREE
FUND FUND(1) FUND FUND FUND FUND RESERVE RESERVE RESERVE
------ ------- ------ ------- ------------- -------- -------- ------- --------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 613 2,134 1,130 590 3,024 830 1,198,732 1,030,078 170,940
Shares issued in lieu
of cash distributions 223 3,181 639 816 543 449 1,462 1,865 96
Shares redeemed (664) (2,642) (1,381) (841) (2,727) (766) (1,228,616) (961,599) (137,772)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 172 2,673 388 565 840 513 (28,422) 70,344 33,264
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS A/C
Shares issued 117 123 43 42 18 108 34,333 107,066 24,342
Shares issued in lieu
of cash distributions 8 120 25 34 9 24 272 1,229 132
Shares redeemed 16 (78) (23) (15) (17) (35) (22,458) (56,508) (15,279)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 109 165 45 61 10 97 12,147 51,787 9,195
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS B
Shares issued 19 6 6 10 1 40 -- 88 --
Shares issued in lieu
of cash distributions -- 1 -- 2 -- 2 -- -- --
Shares redeemed -- -- -- -- -- -- -- (8) --
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 19 7 6 12 1 42 -- 80 --
==== ====== ====== ==== ====== ==== ========== ========= ========
TOTAL SHARE ACTIVITY
FOR PERIOD 300 2,845 439 638 851 652 (16,275) 122,211 42,459
==== ====== ====== ==== ====== ==== ========== ========= ========
<FN>
(1) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
<TABLE>
<CAPTION>
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
SHORT TERM SHORT- GOVERNMENT GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
INCOME INTERMEDIATE INCOME BOND BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND FUND FUND FUND BOND FUND BOND FUND BOND FUND
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 616 2,018 309 1,147 95 3 270 17
Shares issued in lieu
of cash distributions 88 454 35 479 137 -- 12 1
Shares repurchased (692) (1,998) (195) (2,950) (42) (14) (55) (10)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 12 474 149 (1,324) 190 (11) 227 8
==== ====== ==== ====== === === === ===
CLASS A
Shares issued 7 29 31 42 7 6 241 16
Shares issued in lieu
of cash distributions 1 6 4 4 1 2 6 1
Shares repurchased -- (31) (23) (12) (1) (9) (12) (7)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 8 4 12 34 7 (1) 235 10
==== ====== ==== ====== === === === ===
TOTAL SHARE ACTIVITY
FOR PERIOD 20 478 161 (1,290) 197 (12) 462 18
==== ====== ==== ====== === === === ===
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
115
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONCLUDED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
9. SHAREHOLDER VOTING RIGHTS
There was a special meeting scheduled for December 15, 1997 at which the
shareholders of the International Growth Fund voted on to approve the selection
of Aberdeen Managers as a sub-adviser for a portion of the assets of the
International Growth Fund. The results are as follows:
Shares Voted % of Voted % of Total
----------- ---------- ----------
FOR 8,203,048.00 98.77% 70.55%
AGAINST 11,795.00 0.14% 0.10%
ABSTAIN 89,958.00 1.08% 0.77%
10. PROPOSED REORGANIZATION
On November 18, 1997, CoreStates Financial Corp. and First Union
Corporation jointly announced that they had signed a definitive agreement for
the merger of CoreStates Bank, N.A. and First Union Bank. The Advisor is
currently a wholly-owned subsidiary of CoreStates Bank, N.A. Subject to certain
conditions, it is anticipated that the transaction will close at the end of
April, 1998. Thereafter, the Advisor will be an indirect wholly-owned subsidiary
of First Union Bank. A special meeting of shareholders will be called to
consider certain proposed fund reorganizations.
116
<PAGE>
- --------------------------------------------------------------------------------
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF THE SHAREHOLDERS OF THE CORPORATION. THE REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE CORPORATION UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. SHARES IN THE FUNDS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CORESTATES BANK, N.A.,
THE PARENT CORPORATION OF EACH FUND'S INVESTMENT ADVISER. SUCH SHARES ARE ALSO
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF A MUTUAL FUND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. CORESTATES BANK, N.A.
SERVES AS CUSTODIAN FOR THE FUNDS. SEI FINANCIAL DISTRIBUTION CO. SERVES AS
DISTRIBUTOR AND IS NOT AFFILIATED WITH CORESTATES BANK, N.A.
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------ -------------- --------------
EQUITY CORE EQUITY GROWTH
INDEX FUND FUND(3) EQUITY FUND
------------ -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 2,223 $ 3,344 $ 561
Interest 22 138 123
Less: Foreign taxes withheld -- -- --
-------- -------- ---------
Total investment income 2,245 3,482 684
-------- -------- ---------
EXPENSES:
Investment advisory fees 533 2,147 632
Less: waiver of investment advisory fees (318) -- --
Administrative fees 333 725 211
Less: waiver of administrative fees (119) (164) (76)
Transfer agent fees & expenses 36 51 13
Custodian fees -- -- --
Professional fees 5 23 3
Registration & filing fees 8 14 4
12b-1 fees--individual shares -- 23 7
Taxes--other than income 3 13 2
Printing fees 25 57 17
Organizational costs -- -- --
Miscellaneous -- 14 6
-------- -------- ---------
Total expenses 506 2,903 819
-------- -------- ---------
NET INVESTMENT INCOME (LOSS) 1,739 579 (135)
-------- -------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 5,184 40,986 11,173
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation) on investments 17,916 20,773 10,360
-------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $24,839 $62,338 $21,398
======== ======== =========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 39.65 $ 20.60 $ 16.33
======== ======== =========
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 39.66 20.61 16.27
-------- -------- ---------
2Offering price $ 41.97 $ 21.81 $ 17.22
======== ======== =========
CLASS B
4Net asset value and offering price $ 39.12 $ 18.31 $ 16.19
======== ======== =========
-------------- -------------- --------------
SPECIAL INTERNATIONAL BALANCED
EQUITY FUND GROWTH FUND FUND
-------------- -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 212 $ 1,039 $ 379
Interest 43 152 1,481
Less: Foreign taxes withheld -- (111) --
-------- ------- ------
Total investment income 255 1,080 1,860
-------- ------- ------
EXPENSES:
Investment advisory fees 607 666 444
Less: waiver of investment advisory fees (263) -- (76)
Administrative fees 101 208 158
Less: waiver of administrative fees (36) (75) (57)
Transfer agent fees & expenses 21 (10) 11
Custodian fees 5 6 --
Professional fees (5) 2 3
Registration & filing fees 9 (7) --
12b-1 fees--individual shares 4 3 7
Taxes--other than income 1 -- 1
Printing fees 11 2 16
Organizational costs -- -- 18
Miscellaneous 1 -- --
-------- ------- ------
Total expenses 456 795 525
-------- ------- ------
NET INVESTMENT INCOME (LOSS) (201) 285 1,335
-------- ------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 7,997 2,385 3,960
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- (411) --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- (12) --
Net change in unrealized appreciation (depreciation) on investments (1,796) (10,180) 3,388
-------- ------- ------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,000 (7,933) $8,683
======== ======= ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.65 $ 13.28 $13.60
======== ======= ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 10.60 13.28 13.60
-------- ------- ------
2Offering price $ 11.22 $ 14.05 $14.39
======== ======= ======
CLASS B
4Net asset value and offering price $ 10.48 $ 13.28 $13.51
======== ======= ======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0
1 NET ASSET VALUE PER SHARE, AS ILLUSTRATED, IS THE AMOUNT WHICH WOULD BE PAID
UPON THE REDEMPTION OR EXCHANGE OF SHARES.
2 THE OFFER PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE OF CLASS A BY 1
MINUS THE MAXIMUM SALES CHARGE OF 5.50%.
3 THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
4 CLASS B HAS A CONTINGENT DEFERRED SALES CHARGE. FOR A DESCRIPTION OF POSSIBLE
REDEMPTION CHARGE, SEE THE NOTES TO THE FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
92 & 93
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------------- -------------- -------------
SHORT TERM SHORT-
INCOME INTERMEDIATE GOVERNMENT
FUND BOND FUND INCOME FUND
-------------- -------------- -------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $1,120 $5,458 $ 758
------ ------ ------
Total Investment income 1,120 5,458 758
------ ------ ------
EXPENSES
Investment advisory fees 139 426 55
Less: waiver of investment advisory fees (92) (170) (2)
Administrative fees 47 213 28
Less:waiver of administrative fees (17) (77) (10)
Transfer agent fees & expenses 6 18 2
Custodian fees 6 -- --
Professional fees -- 4 1
Registration & filing fees (3) 6 1
12b-1 fees--individual shares 1 3 2
Trustee fees 1 2 --
Printing fees 2 11 1
Organizational costs 1 -- 3
Miscellaneous 1 6 1
------ ------ ------
Total expenses 92 442 82
------ ------ ------
NET INVESTMENT INCOME 1,028 5,016 676
------ ------ ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 8 461 88
Option transactions -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation)
on investments 68 1,670 515
------ ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,104 $7,147 $1,279
====== ====== ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.99 $ 9.95 $10.03
====== ====== ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 9.98 9.95 10.03
------ ------ ------
2Offering price $10.32 $10.28 $10.37
====== ====== ======
------------ -------------- ------------
GLOBAL INTERMEDIATE
BOND BOND MUNICIPAL
FUND FUND BOND FUND
------------ -------------- ------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $ 6,153 $1,055 $ 46
------- ------- -------
Total Investment income 6,153 1,055 46
------- ------- -------
EXPENSES
Investment advisory fees 675 108 5
Less: waiver of investment advisory fees (356) (18) (5)
Administrative fees 228 45 2
Less:waiver of administrative fees (82) (16) (1)
Transfer agent fees & expenses 7 (1) --
Custodian fees 11 1 --
Professional fees 8 1 --
Registration & filing fees 18 1 2
12b-1 fees-- individual shares 2 -- 1
Trustee fees -- -- --
Printing fees 10 -- --
Organizational costs -- 2 3
Miscellaneous 5 -- --
------- ------- -------
Total expenses 526 123 7
------- ------- -------
NET INVESTMENT INCOME 5,627 932 39
------- ------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 1,499 (41) 3
Option transactions -- (400) --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- 450 --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- (98) --
Net change in unrealized appreciation (depreciation)
on investments 3,530 (90) 35
------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,656 $ 753 $ 77
======= ======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.53 $ 9.33 $10.25
======= ======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.53 9.32 10.25
------- ------- -------
2Offering price $ 11.06 $ 9.78 $10.59
======= ======= =======
-------------- --------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
-------------- --------------
INVESTMENT INCOME
<S> <C> <C>
Interest $ 375 $ 53
------- -------
Total Investment income 375 53
------- -------
EXPENSES
Investment advisory fees 37 5
Less: waiver of investment advisory fees (37) (5)
Administrative fees 19 2
Less:waiver of administrative fees (19) (2)
Transfer agent fees & expenses 1 --
Custodian fees -- --
Professional fees -- --
Registration & filing fees 1 --
12b-1 fees--individual shares 4 1
Trustee fees -- --
Printing fees 1 --
Organizational costs 2 1
Miscellaneous -- --
------- -------
Total expenses 9 2
------- -------
NET INVESTMENT INCOME 366 51
------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 40 (1)
Option transactions -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- --
Net change in unrealized appreciation (depreciation)
on investments 378 57
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 784 $ 107
======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $10.77 $10.46
======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.78 10.45
------- -------
2Offering price $11.32 $10.97
======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
1 NET ASSET VALUE PER SHARE, AS ILLUSTRATED, IS THE AMOUNT WHICH WOULD BE PAID
UPON THE REDEMPTION OR EXCHANGE OF SHARES.
2 THE OFFER PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE OF CLASS A BY 1
MINUS THE MAXIMUM SALES CHARGE OF 3.25% FOR THE SHORT TERM INCOME, SHORT-
INTERMEDIATE BOND, GOVERNMENT INCOME AND INTERMEDIATE MUNICIPAL BOND FUNDS AND
4.75% FOR THE BOND, GLOBAL BOND, PENNSYLVANIA MUNICIPAL BOND AND NEW JERSEY
MUNICIPAL BOND FUNDS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
94 & 95
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------- ------- --------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------- ------- --------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest $ 24,754 $ 27,544 $ 2,735
-------- -------- -------
Total investment income 24,754 27,544 2,735
-------- -------- -------
EXPENSES:
Investment advisory fees 1,113 1,926 185
Less: waiver of investment advisory fees (401) (481) (67)
Administrative fees 1,781 1,204 296
Less: waiver of administrative fees (446) (433) (74)
Transfer agent fees & expenses 71 117 14
Custodian fees 1 1 --
Professional fees 25 10 3
Registration & filing fees 4 60 20
12b-1 fees 23 64 12
Trustee fees 10 11 5
Printing 65 77 5
Miscellaneous 63 32 (1)
-------- -------- -------
Total expenses 2,309 2,588 398
-------- -------- -------
NET INVESTMENT INCOME 22,445 24,956 2,337
-------- -------- -------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain from security
transactions 14 5 --
-------- -------- -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 22,459 $ 24,961 $ 2,337
======== ======== =======
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
96
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- -------------------
EQUITY CORE EQUITY
INDEX FUND FUND(2)
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 1,739 $ 3,256 $ 579 $ 2,927
Net realized gain on investments, forward foreign currency contracts and foreign
currency 5,184 3,591 40,986 66,598
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 17,916 55,389 20,773 67,597
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations 24,839 62,236 62,338 137,122
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,685) (3,225) (595) (2,858)
Class A (48) (28) -- (49)
Class B (2) -- -- --
Net realized gains:
Class Y (8,013) (1,484) (69,731) (35,253)
Class A (265) (6) (2,421) (977)
Class B (16) -- (17) --
-------- -------- -------- --------
Total dividends distributed (10,029) (4,743) (72,764) (39,137)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 24,068 -- 48,159 56,759
Reinvestment of cash distributions 8,774 -- 63,917 38,110
Cost of shares redeemed (25,937) -- (59,580) (89,855)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 6,905 -- 52,496 5,014
-------- -------- -------- --------
Class A:
Proceeds from shares issued 4,631 43,492 2,811 3,395
Reinvestment of cash distributions 330 4,960 2,403 1,038
Cost of shares redeemed (655) (30,407) (1,722) (2,376)
-------- -------- -------- --------
Increase in net assets from Class A transactions 4,306 18,045 3,492 2,057
-------- -------- -------- --------
Class B:
Proceeds from shares issued 732 4,101 132 --
Reinvestment of cash distributions 18 34 17 --
Cost of shares redeemed (5) (103) -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 745 4,032 149 --
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,956 22,077 56,137 7,071
-------- -------- -------- --------
Net increase (decrease) in net assets 26,766 79,570 45,711 105,056
-------- -------- -------- --------
NET ASSETS:
Beginning of period 245,920 166,350 531,058 426,002
-------- -------- -------- --------
End of period $272,686 $245,920 $576,769 $531,058
======== ======== ======== ========
------------------- ------------------
GROWTH SPECIAL
EQUITY FUND EQUITY FUND
------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ (135) $ 399 $ (201) $ 121
Net realized gain on investments, forward foreign currency contracts and foreign
currency 11,173 14,635 7,997 7,793
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 10,360 12,411 (1,796) 3,603
-------- -------- ------- -------
Net increase (decrease) in net assets resulting from operations 21,398 27,445 6,000 11,517
-------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y -- (393) -- (177)
Class A -- (3) -- (2)
Class B -- -- -- --
Net realized gains:
Class Y (11,719) (13,864) (350) (13,011)
Class A (400) (404) (9,099) (307)
Class B (7) -- (15) --
-------- -------- ------- -------
Total dividends distributed (12,126) (14,664) (9,464) (13,497)
-------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 18,945 -- 7,178 --
Reinvestment of cash distributions 10,162 -- 8,424 --
Cost of shares redeemed (23,121) -- (10,285) --
-------- -------- ------- -------
(Decrease) in net assets from Class Y transactions 5,986 -- 5,317 --
-------- -------- ------- -------
Class A:
Proceeds from shares issued 728 38,807 516 13,884
Reinvestment of cash distributions 400 12,752 349 13,074
Cost of shares redeemed (390) (36,303) (179) (16,684)
-------- -------- ------- -------
Increase in net assets from Class A transactions 738 15,256 686 10,274
-------- -------- ------- -------
Class B:
Proceeds from shares issued 102 1,712 124 1,020
Reinvestment of cash distributions 7 410 15 310
Cost of shares redeemed -- (1,001) -- (121)
-------- -------- ------- -------
Increase (decrease) in net assets from Class B transactions 109 1,121 139 1,209
-------- -------- ------- -------
Increase in net assets derived from capital share transactions 6,833 16,377 6,142 11,483
-------- -------- ------- -------
Net increase (decrease) in net assets 16,105 29,158 2,678 9,503
-------- -------- ------- -------
NET ASSETS:
Beginning of period 152,393 123,235 74,327 64,824
-------- -------- ------- -------
End of period $168,498 $152,393 $77,005 $74,327
======== ======== ======= =======
------------------- -------------------
INTERNATIONAL BALANCED
GROWTH FUND FUND
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 285 $ 969 $ 1,335 $ 3,139
Net realized gain on investments, forward foreign currency contracts and foreign
currency 1,974 5,290 3,960 7,717
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies (10,192) 15,689 3,388 6,601
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations (7,933) 21,948 8,683 17,457
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,958) (3,802) (1,280) (3,056)
Class A (22) (53) (48) (92)
Class B -- -- (2) --
Net realized gains:
Class Y (6,263) (8,375) (6,356) (5,885)
Class A (93) (130) (282) (184)
Class B (1) -- (28) --
-------- -------- -------- --------
Total dividends distributed (8,337) (12,360) (7,996) (9,217)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 43,065 34,899 11,645 --
Reinvestment of cash distributions 7,249 11,015 6,080 --
Cost of shares redeemed (38,992) (31,528) (10,793) --
-------- -------- -------- --------
(Decrease) in net assets from Class Y transactions 11,322 14,386 6,932 --
-------- -------- -------- --------
Class A:
Proceeds from shares issued 358 489 1,546 23,565
Reinvestment of cash distributions 11 178 323 8,737
Cost of shares redeemed (238) (506) (519) (29,150)
-------- -------- -------- --------
Increase in net assets from Class A transactions 131 161 1,350 3,152
-------- -------- -------- --------
Class B:
Proceeds from shares issued 14 -- 568 1,285
Reinvestment of cash distributions 1 -- 30 293
Cost of shares redeemed -- -- -- (833)
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 15 -- 598 745
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,468 14,547 8,880 3,897
-------- -------- -------- --------
Net increase (decrease) in net assets (4,802) 24,135 9,567 12,137
-------- -------- -------- --------
NET ASSETS:
Beginning of period 165,548 141,413 117,840 105,703
-------- -------- -------- --------
End of period $160,746 $165,548 $127,407 $117,840
======== ======== ======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE FINANCIAL STATEMENTS.
(2) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
98 & 99
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
---------------- ----------------- ----------------
SHORT-
SHORT TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
---------------- ----------------- ----------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 1,028 $ 1,757 $ 5,016 $ 10,074 $ 676 $ 1,293
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 8 (8) 461 (26) 88 (156)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 68 91 1,670 993 505 434
------- ------- -------- -------- ------- -------
Net increase in net assets resulting from operations 1,104 1,840 7,147 11,041 1,269 1,571
------- ------- -------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,015) (1,748) (4,933) (9,902) (624) (1,204)
Class A (13) (9) (77) (172) (51) (90)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
------- ------- -------- -------- ------- -------
Total dividends distributed (1,028) (1,757) (5,010) (10,074) (675) (1,294)
------- ------- -------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 6,147 16,475 20,016 45,113 3,060 8,152
Reinvestment of cash distributions 880 1,808 4,505 9,516 352 612
Cost of shares redeemed (6,908)(11,486) (19,785) (52,263) (1,936) (3,957)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class Y
transactions 119 6,797 4,736 2,366 1,476 4,807
------- ------- -------- -------- ------- -------
Class A:
Proceeds from shares issued 63 483 289 391 308 579
Reinvestment of cash distributions 13 9 59 143 43 85
Cost of shares redeemed -- (1) (305) (865) (229) (311)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class A
transactions 76 491 43 (331) 122 353
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 195 7,288 4,779 2,035 1,598 5,160
------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets 271 7,371 6,916 3,002 2,192 5,437
------- ------- -------- -------- ------- -------
NET ASSETS:
Beginning of period 37,504 30,133 165,905 162,903 20,667 15,230
------- ------- -------- -------- ------- -------
End of period $37,775 $37,504 $172,821 $165,905 $22,859 $20,667
======= ======= ======== ======== ======= =======
----------------- ----------------- ------------------
INTERMEDIATE
BOND GLOBAL MUNICIPAL
FUND BOND FUND BOND FUND
----------------- ----------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 5,627 $ 12,245 $ 931 $ 1,774 $ 39 $ 71
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 1,499 (735) 9 423 3 (6)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 3,530 2,749 (188) (149) 35 25
-------- -------- ------- ------- ------- -------
Net increase in net assets resulting from operations 10,656 14,259 753 2,048 77 90
-------- -------- ------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (5,574) (12,161) (1,509) (2,621) (20) (34)
Class A (53) (84) (10) (13) (19) (37)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Total dividends distributed (5,627) (12,245) (1,519) (2,634) (39) (71)
-------- -------- ------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 11,940 18,942 911 107 34 841
Reinvestment of cash distributions 5,007 12,215 1,285 2,670 7 12
Cost of shares redeemed (30,726) (49,397) (400) (602) (147) (269)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions (13,779) (18,240) 1,796 2,175 (106) 584
-------- -------- ------- ------- ------- -------
Class A:
Proceeds from shares issued 427 579 69 31 66 80
Reinvestment of cash distributions 46 78 10 15 17 37
Cost of shares redeemed (117) (323) (10) (13) (95) (186)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 356 334 69 33 (12) (69)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions (13,423) (17,906) 1,865 2,208 (118) 515
-------- -------- ------- ------- ------- -------
Net increase (decrease) in net assets (8,394) (15,892) 1,099 1,622 (80) 534
-------- -------- ------- ------- ------- -------
NET ASSETS:
Beginning of period 183,986 199,878 34,772 33,150 1,952 1,418
-------- -------- ------- ------- ------- -------
End of period $175,592 $183,986 $35,871 $34,772 $ 1,872 $ 1,952
======== ======== ======= ======= ======= =======
------------------ -----------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
------------------ -----------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 366 $ 583 $ 51 $ 81
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 40 20 (1) (3)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 378 240 57 24
------- ------- ------- -------
Net increase in net assets resulting from operations 784 843 107 102
------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (290) (521) (40) (65)
Class A (76) (62) (11) (16)
Net realized gains:
Class Y -- -- -- (8)
Class A -- -- -- (2)
------- ------- ------- -------
Total dividends distributed (366) (583) (51) (91)
------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 2,871 3,530 172 525
Reinvestment of cash distributions 126 297 14 14
Cost of shares redeemed (586) (2,772) (102) (388)
------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions 2,411 1,055 84 151
------- ------- ------- -------
Class A:
Proceeds from shares issued 2,567 1,341 168 99
Reinvestment of cash distributions 64 56 9 15
Cost of shares redeemed (133) (420) (72) (22)
------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 2,498 977 105 92
------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 4,909 2,032 189 243
------- ------- ------- -------
Net increase (decrease) in net assets 5,327 2,292 245 254
------- ------- ------- -------
NET ASSETS:
Beginning of period 12,175 9,883 1,875 1,621
------- ------- ------- -------
End of period $17,502 $12,175 $ 2,120 $ 1,875
======= ======= ======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
100 & 101
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- ------------------- ------------------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
------------------- ------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 22,445 $ 43,860 $ 24,956 $ 44,127 $ 2,337 $ 3,787
Net realized gain (loss) on securities transactions 14 8 5 1 -- (1)
---------- ---------- ---------- ---------- -------- ---------
Net increase in net assets resulting from operations 22,459 43,868 24,961 44,128 2,337 3,786
---------- ---------- ---------- ---------- -------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (22,007) (43,173) (23,686) (43,042) (2,224) (3,677)
Class C (438) (687) (1,270) (1,085) (135) (86)
---------- ---------- ---------- ---------- -------- ---------
Total dividends distributed (22,445) (43,860) (24,956) (44,127) (2,359) (3,763)
---------- ---------- ---------- ---------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued 1,198,732 2,548,964 1,003,078 2,154,887 170,940 392,069
Reinvestment of cash distributions 1,462 4,246 1,865 3,136 96 229
Cost of shares redeemed (1,228,616) (2,610,396) (961,599) (2,061,985) (137,772) (376,938)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class Y
transactions (28,422) (57,186) 70,344 96,038 33,264 15,360
---------- ---------- ---------- ---------- -------- ---------
Class C
Proceeds from shares issued 34,333 12,429 107,066 44,890 24,342 3,779
Reinvestment of cash distributions 272 264 1,229 1,023 132 79
Cost of shares redeemed (22,458) (19,933) (56,508) (37,956) (15,279) (3,506)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class C
transactions 12,147 (7,240) 51,787 7,957 9,195 352
---------- ---------- ---------- ---------- -------- ---------
Class B
Proceeds from shares issued -- -- 88 -- -- --
Reinvestment of cash distributions -- -- -- -- -- --
Cost of shares redeemed -- -- (8) -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase in net assets from Class B
transactions -- -- 80 -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets derived from
capital share transactions 16,275 (64,426) 122,211 103,995 42,459 15,712
---------- ---------- ---------- ---------- -------- ---------
Net (decrease) increase in net assets 16,261 (64,418) 122,216 103,996 42,437 15,735
---------- ---------- ---------- ---------- -------- ---------
NET ASSETS:
Beginning of period 847,530 911,948 913,944 809,948 122,781 107,046
---------- ---------- ---------- ---------- -------- ---------
End of period $ 831,269 $ 847,530 $1,036,160 $ 913,944 $165,218 $ 122,781
========== ========== ========== ========== ======== =========
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
102
<PAGE>
[This page intentionally left blank.]
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $37.39 $ 0.26 $ 3.50 $(0.26) $(1.24) $39.65 10.12%+ $262,831 0.37%
1997 28.47 0.51 9.16 (0.51) (0.24) 37.39 34.44 241,413 0.37
1996 23.79 0.51 5.47 (0.51) (0.79) 28.47 25.69 166,350 0.35
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45 112,533 0.37
1994 20.97 0.55 (0.43) (0.55) -- 20.54 0.55 72,552 0.35
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39 50,551 0.49
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59 20,166 0.57
19911 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+ 12,117 0.97
CLASS A
1997(A) $37.37 $ 0.26 $ 3.51 $(0.24) $(1.24) $39.66 2.74%+ $ 9,113 0.37%
1997(10) 29.62 0.32 8.05 (0.38) (0.24) 37.37 28.58+ 4,507 0.37
CLASS B
1997(A)(12) $39.16 $ 0.16 $ 1.27 $(0.23) $(1.24) $39.12 3.37%+ $ 742 1.37%
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) $21.11 $ -- $ 2.41 $ -- $(2.92) $20.60 11.87%+ $557,593 0.99%
1997 17.26 0.12 5.32 (0.12) (1.47) 21.11 33.10 515,015 0.98
1996 17.07 0.14 1.49 (0.14) (1.30) 17.26 19.24 414,824 0.97
INSTITUTIONAL CLASS*
1995 $15.00 $ 0.19 $ 2.87 $(0.19) $(0.80) $17.07 22.00% $378,352 1.05%
CLASS A*
1997(A) $21.13 $ -- $ 2.40 $ -- $(2.92) $20.61 11.70%+ $ 19,043 1.24%
1997 17.28 0.07 5.32 (0.07) (1.47) 21.13 32.74 16,043 1.23
1996 17.08 0.12 1.49 (0.11) (1.30) 17.28 19.11 11,178 1.22
RETAIL CLASS*
1995 $15.00 $ 0.18 $ 2.87 $(0.17) $(0.80) $17.08 21.94% $ 6,591 1.34%
PRIOR CLASS
1994 $15.39 $ 0.11 $ 0.22 $(0.11) $(0.61) $15.00 2.21% $ 50,128 1.49%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90 45,677 1.20
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27 28,103 0.92
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37 12,830 0.54
1990(2) 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.65
CLASS B
1997(A)(12) $23.05 $(4.44) $ 2.62 $ -- $(2.92) $18.31 (7.39)%+$ 133 1.99%
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y**
1997(A) $15.43 $ 0.01 $ 2.16 $ -- $(1.24) $16.33 14.11%+ $162,698 0.96%
1997 14.19 0.04 2.81 (0.04) (1.57) 15.43 21.67 147,700 0.96
1996 11.18 0.08 3.36 (0.08) (0.35) 14.19 31.36 120,073 0.89
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345 0.76
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877 0.69
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777 0.43
19923 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418 0.14
CLASS A**
1997(A) $15.39 $(0.03) $ 2.15 $ -- $(1.24) $16.27 14.02%+ $ 5,699 1.21%
1997 14.17 0.01 2.79 (0.01) (1.57) 15.39 21.29 4,693 1.21
1996 11.17 0.05 3.35 (0.05) (0.35) 14.17 31.00 3,162 1.14
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043 1.01
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,730 0.94
19934 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224 0.80
CLASS B
1997(A)(13) $17.32 $(0.02) $ 0.13 $ -- $(1.24) $16.19 0.85%+ $ 101 1.96%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) 1.30% 0.71% 0.96% 9% $0.0621
1997 1.63 0.71 1.29 11 0.0639
1996 1.94 0.71 1.59 13 0.0641
1995 2.48 0.76 2.09 27 N/A
1994 2.63 0.75 2.23 13 N/A
1993 2.82 0.88 2.43 4 N/A
1992 2.66 1.06 2.17 27 N/A
19911 1.79 1.20 1.56 -- N/A
CLASS A
1997(A) 1.05% 0.71% 0.71% 9% $0.0621
1997(10) 1.51 0.69 1.19 11 0.0639
CLASS B
1997(A)(12) 0.30% 1.71% (0.04)% 9% $0.0621
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) 0.21% 1.05% 0.15% 23% $0.0658
1997 0.63 1.03 0.58 79 0.0624
1996 1.15 1.01 1.11 114 0.0636
INSTITUTIONAL CLASS*
1995 1.44% 1.10% 1.44% 119% N/A
CLASS A*
1997(A) (0.04)% 1.30% (0.10)% 23% $0.0658
1997 0.38 1.28 0.33 79 0.0624
1996 0.89 1.26 0.85 114 0.0636
RETAIL CLASS*
1995 1.23% 1.53% 1.04% 119% N/A
PRIOR CLASS
1994 0.75% 1.51% 0.73% 35% N/A
1993 0.94 1.41 0.73 24 N/A
1992 1.47 1.23 1.17 39 N/A
1991 2.30 1.48 1.36 68 N/A
1990(2) 2.29 1.59 1.35 43 N/A
CLASS B
1997(A)(12) (0.79)% 2.30% (1.10)% 23% $0.0658
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y*
1997(A) (0.15)% 1.05% (0.24)% 41% $0.0602
1997 0.30 1.06 0.20 74 0.0600
1996 0.64 1.05 0.48 81 0.0601
1995 0.84 1.10 0.50 113 N/A
1994 0.48 1.11 0.06 127 N/A
1993 0.85 1.11 0.17 103 N/A
19923 1.38 1.12 0.40 66 N/A
CLASS A*
1997(A) (0.40)% 1.30% (0.49)% 41% $0.0602
1997 0.04 1.31 (0.06) 74 0.0600
1996 0.40 1.30 0.23 81 0.0601
1995 0.59 1.35 0.25 113 N/A
1994 0.23 1.36 (0.19) 127 N/A
19934 0.39 1.48 (0.29) 103 N/A
CLASS B
1997(A)(12) (1.15)% 2.05% (1.24)% 41% $0.0602
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED AS EITHER RETAIL OR INSTITUTIONAL SHARES. ON THAT DATE,
THE FUND'S NET INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS FOR THE PERIOD NOVEMBER 1, 1994 THROUGH FEBRUARY 20, 1995
WERE ALLOCATED TO EACH CLASS OF SHARES. THE BASIS FOR THE ALLOCATION WAS THE RELATIVE NET ASSETS OF EACH CLASS OF
SHARES AS OF FEBRUARY 21, 1995. THE RESULTS WERE COMBINED WITH THE RESULTS OF OPERATIONS AND DISTRIBUTIONS FOR EACH
APPLICABLE CLASS FOR THE PERIOD FEBRUARY 21, 1995 THROUGH OCTOBER 31, 1995. FOR THE YEAR ENDED OCTOBER 31, 1995, THE
FINANCIAL HIGHLIGHTS' RATIOS OF EXPENSES, NET INVESTMENT INCOME, TOTAL RETURN, AND THE PER SHARE INVESTMENT ACTIVITIES
AND DISTRIBUTIONS REFLECT THIS ALLOCATION. ADDITIONALLY, ON APRIL 15 & 22, 1996 THE CONESTOGA EQUITY AND SPECIAL EQUITY
FUNDS WERE ACQUIRED BY COREFUNDS, INC.; AT WHICH TIME THE INSTITUTIONAL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED
FOR CLASS Y SHARES AND THE RETAIL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED FOR CLASS A SHARES.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SPECIAL EQUITY FUND, WERE REDESIGNATED CLASS Y AND THE
SERIES B SHARES OF EACH FUND WERE REDESIGNATED CLASS A.
***FOR THE YEAR ENDED JUNE 30, 1996, TRANSACTIONS RELATING TO THE MERGER WERE EXCLUDED FROM THE CALCULATION OF THE
PORTFOLIO TURNOVER RATE.
+ THIS FIGURE HAS NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JUNE 1, 1991. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD
HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
104
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------------
SPECIAL EQUITY FUND(9)
- ----------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $11.27 $(0.03) $ 0.90 $ -- $(1.49) $10.65 8.14%+ $74,025 1.07%
1997 11.86 0.02 1.81 (0.03) (2.39) 11.27 17.94 71,980 0.84
1996 11.42 0.07 2.13 (0.07) (1.69) 11.86 22.27 63,680 0.34
INSTITUTIONAL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $57,396 0.32%
CLASS A*
1997(A) $11.25 $(0.03) $ 0.87 $ -- $(1.49) $10.60 7.88%+ $ 2,858 1.32%
1997 11.85 -- 1.81 (0.02) (2.39) 11.25 17.73 2,347 1.14
1996 11.42 0.08 2.11 (0.07) (1.69) 11.85 22.14 1,144 0.37
RETAIL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $ 734 0.27%
PRIOR CLASS
19945 $10.00 $ 0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $10,069 0.15%
CLASS B
1997(A)(12) $12.80 $(0.01) $(0.82) $ -- $(1.49) $10.48 (6.13)+% $ 122 2.07%
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
1997(A) $14.72 $0.01 $(0.73) $(0.17) $(0.55) $13.28 (4.89)%+ $158,408 0.95%
1997 13.97 0.14 1.84 (0.37) (0.86) 14.72 15.43 163,117 1.20
1996 12.29 0.16 1.86 (0.28) (0.06) 13.97 16.72 139,275 1.14
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838 1.05
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911 0.99
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655 0.99
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594 0.96
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582 0.99
19906 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513 1.22
CLASS A**
1997(A) $14.70 $(0.01) $(0.73) $(0.13) $(0.55) $13.28 (4.98)%+ $ 2,324 1.20%
1997 13.96 0.09 1.85 (0.34) (0.86) 14.70 15.09 2,431 1.45
1996 12.27 0.11 1.89 (0.25) (0.06) 13.96 16.54 2,138 1.39
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943 1.30
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019 1.24
19934 10.07 0.05 1.59 -- -- 11.71 16.29+ 344 1.15
CLASS B
1997(A)(15) $13.79 $(0.02) $ 0.22 $(0.16) $(0.55) $13.28 1.46%+ $ 14 2.16%
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997(A) $13.52 $0.15 $ 0.83 $(0.15) $(0.75) $13.60 7.31%+ $121,302 0.82%
1997 12.59 0.36 1.61 (0.36) (0.68) 13.52 16.44 113,642 0.78
1996 11.06 0.33 1.68 (0.33) (0.15) 12.59 18.41 102,515 0.81
1995 9.88 0.35 1.21 (0.35) (0.03) 11.06 16.21 61,092 0.73
1994 10.39 0.35 (0.51) (0.35) -- 9.88 (1.62) 42,429 0.62
19934 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45
CLASS A**
1997(A) $13.52 $0.12 $ 0.84 $(0.13) $(0.75) $13.60 7.19%+ $ 5,532 1.07%
1997 12.59 0.32 1.61 (0.32) (0.68) 13.52 16.15 4,198 1.03
1996 11.06 0.30 1.68 (0.30) (0.15) 12.59 18.13 3,188 1.06
1995 9.89 0.34 1.19 (0.33) (0.03) 11.06 15.84 2,344 0.98
1994 10.38 0.31 (0.49) (0.31) -- 9.89 (1.86) 2,222 0.87
19937 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55
CLASS B
1997(A)(14) $14.39 $0.09 $(0.09) $ 0.13 $(0.75) $13.51 (0.45)%+ $ 573 1.82%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------
SPECIAL EQU
- -----------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) (0.44)% 1.81% (1.18)% 32% $0.0628
1997 0.19 1.82 (0.79) 74 $0.0581
1996 0.94 1.79 (0.51) 72 0.0539
INSTITUTIONAL CLASS*
1995 1.14% 1.97% (0.51)% 129% N/A
CLASS A*
1997(A) (0.69)% 2.06% (1.43)% 32% $0.0628
1997 (0.12) 2.07 (1.05) 74 $0.0581
1996 0.91 1.82 (0.55) 72 0.0539
RETAIL CLASS*
1995 1.29% 2.24% (0.68)% 129% N/A
PRIOR CLASS
19945 1.06% 2.10% (0.89)% 39% N/A
CLASS B
1997(A)(12) (1.44)% 2.81% (2.18)% 32% $0.0628
- ------------------------------
INTERNATIONATIONAL GROWTH FUND
- ------------------------------
CLASS Y**
1997(A) 0.47% 1.04% 0.38% 25% $0.0024
1997 0.82 1.29 0.73 59 0.0080
1996 1.05 1.25 0.94 41 0.0270
1995 0.98 1.19 0.84 59 N/A
1994 0.23 1.18 0.04 67 N/A
1993 1.22 1.28 0.93 59 N/A
1992 1.67 1.40 1.23 87 N/A
1991 1.80 1.56 1.23 49 N/A
19906 2.57 1.99 1.80 20 N/A
CLASS A**
1997(A) 0.23% 1.29% 0.14% 25% $0.0024
1997 0.57 1.54 0.48 59 0.0080
1996 0.80 1.50 0.69 41 0.0270
1995 0.73 1.44 0.59 59 N/A
1994 0.05 1.43 (0.14) 67 N/A
19934 1.51 1.44 1.22 59 N/A
CLASS B
1997(A)(15) (1.15)% 2.23% (1.22%) 25% $0.0024
- -------------
BALANCED FUND
- -------------
CLASS Y**
1997(A) 2.12% 1.03% 1.91% 30% $0.0601
1997 2.79 1.00 2.57 54 0.0600
1996 2.79 1.03 2.57 74 0.0621
1995 3.51 1.07 3.17 46 N/A
1994 3.46 1.08 3.00 56 N/A
19934 3.38 1.39 2.45 21 N/A
CLASS A**
1997(A) 1.87% 1.28% 1.66% 30% $0.0601
1997 2.54 1.25 2.32 54 0.0600
1996 2.53 1.27 2.32 74 0.0621
1995 3.27 1.32 2.93 46 N/A
1994 3.21 1.33 2.75 56 N/A
19937 5.76 1.48 4.83 21 N/A
CLASS B
1997(A)(14) (1.12)% 2.03% 0.91% 30% $0.0601
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
5 COMMENCED OPERATIONS MARCH 15, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 12, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS MARCH 16, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 TOTAL RETURN DOES NOT REFLECT APPLICABLE SALES LOAD. ADDITIONALLY TOTAL RETURN FOR CLASS Y & CLASS A FOR THE CORE
EQUITY & SPECIAL EQUITY FUNDS FOR 1996 ARE FOR AN EIGHT MONTH PERIOD ENDED JUNE 30, 1997.
9 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR ENDED JUNE 30, 1996 REPRESENTS THE PERIOD FROM NOVEMBER 1, 1995 TO
JUNE 30, 1996. ALL PRIOR YEARS ARE FOR THE PERIODS NOVEMBER 1 TO OCTOBER 31.
10 COMMENCED OPERATIONS ON OCTOBER 9, 1996. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
11 AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
12 COMMENCED OPERATIONS ON NOVEMBER 7, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
13 COMMENCED OPERATIONS ON NOVEMBER 18, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
14 COMMENCED OPERATIONS ON NOVEMBER 5, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
15 COMMENCED OPERATIONS ON NOVEMBER 24, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
105
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET
ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.97 $0.28 $ 0.02 $(0.28) $ -- $ 9.99 3.00%+ $ 37,203 0.49%
1997 9.94 0.53 0.03 (0.53) -- 9.97 5.82 37,011 0.47
1996 10.05 0.36 (0.08) (0.38) (0.01) 9.94 2.78 30,132 0.51
INSTITUTIONAL CLASS*
19951 $10.00 $0.25 $ 0.03 $(0.23) $ -- $10.05 2.57%+ $ 36,059 0.63%
CLASS A*
1997(A) $ 9.96 $0.26 $ 0.02 $(0.26) $ -- $ 9.98 2.87%+ $ 570 0.74%
1997 9.93 0.51 0.03 (0.51) -- 9.96 5.59 493 0.73
1996 10.04 0.35 (0.10) (0.35) (0.01) 9.93 2.55 1 0.76
RETAIL CLASS*
19952 $10.01 $0.23 $0.02 $(0.22) $ -- $10.04 2.87%+ $ 11 0.88%
- -----------------------------
SHORT-INTERMEDIATE BOND FUND
- -----------------------------
CLASS Y**
1997(A) $ 9.83 $0.29 $ 0.12 $(0.29) $ -- $ 9.95 4.25%+ $169,990 0.51%
1997 9.76 0.59 0.07 (0.59) -- 9.83 6.90 163,153 0.49
1996 9.84 0.57 (0.08) (0.57) -- 9.76 5.05 159,841 0.55
1995 9.63 0.53 0.21 (0.53) -- 9.84 8.22 55,128 0.60
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379 0.58
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692 0.42
19923 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623 0.11
CLASS A**
1997(A) $ 9.83 $0.28 $ 0.12 $(0.28) $ -- $ 9.95 4.14%+ $ 2,831 0.76%
1997 9.76 0.56 0.07 (0.56) -- 9.83 6.64 2,752 0.74
1996 9.84 0.54 (0.08) (0.54) -- 9.76 4.79 3,062 0.81
1995 9.63 0.54 0.20 (0.53) -- 9.84 7.95 1,961 0.85
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365 0.83
19934 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752 0.75
- -----------------------
GOVERNMENT INCOME FUND
- -----------------------
CLASS Y**
1997(A) $ 9.76 $0.31 $ 0.27 $(0.31) $ -- $10.03 6.00%+ $ 21,032 0.73%
1997 9.62 0.62 0.14 (0.62) -- 9.76 8.15 19,007 0.70
1996 9.83 0.61 (0.21) (0.61) -- 9.62 4.09 13,943 0.64
1995 9.52 0.62 0.31 (0.62) -- 9.83 10.26 11,305 0.59
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089 0.50
19935 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323 0.44
CLASS A**
1997(A) $ 9.76 $0.30 $ 0.27 $(0.30) $ -- $10.03 5.86%+ $ 1,827 0.98%
1997 9.62 0.60 0.14 (0.60) -- 9.76 7.88 1,660 0.95
1996 9.84 0.58 (0.22) (0.58) -- 9.62 3.73 1,287 0.88
1995 9.51 0.61 0.33 (0.61) -- 9.84 10.23 1,374 0.85
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536 0.75
19938 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201 0.63
- ------------
BOND FUND11
- ------------
CLASS Y*
1997(A) $10.24 $0.32 $ 0.29 $(0.32) $ -- $10.53 6.06%+ $173,565 0.57%
1997 10.15 0.64 0.09 (0.64) -- 10.24 7.43 182,364 0.56
1996 10.55 0.43 (0.30) (0.45) (0.08) 10.15 1.23 198,605 0.55
INSTITUTIONAL CLASS*
1995 $ 9.81 $0.61 $ 0.71 $(0.58) $ -- $10.55 13.87% $194,442 0.71%
CLASS A*
1997(A) $10.24 $0.31 $ 0.29 $(0.31) $ -- $10.53 5.93%+ $ 2,027 0.82%
1997 10.15 0.62 0.09 (0.62) -- 10.24 7.15 1,622 0.81
1996 10.56 0.44 (0.33) (0.44) (0.08) 10.15 0.98 1,273 0.80
RETAIL CLASS*
1995 $ 9.81 $0.60 $ 0.72 $(0.57) $ -- $10.56 13.83% $ 1,373 0.97%
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377 1.01%
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346 0.88
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82 15,180 0.46
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255 0.47
19906 10.00 0.50 (0.04) (0.50) -- 9.96 4.64+ 4,593 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- ------------------------
SHORT TERM INCOME FUND11
- ------------------------
CLASS Y*
<S> <C> <C> <C> <C>
1997(A) 5.48% 1.07% 4.90% 28%
1997 5.37 1.05 4.79 99
1996 5.31 1.03 4.79 102
INSTITUTIONAL CLASS*
19951 5.43% 1.08% 4.98% 40%
CLASS A*
1997(A) 5.23% 1.32% 4.65% 28%
1997 5.18 1.32 4.59 99
1996 5.05 1.25 4.56 102
RETAIL CLASS*
19952 5.05% 1.33% 4.60% 40%
- ----------------------------
SHORT-INTERMEDIATE BOND FUND
- ----------------------------
CLASS Y**
1997(A) 5.37% 0.80% 5.08% 66%
1997 5.98 0.80 5.67 158
1996 5.80 0.81 5.54 257
1995 5.76 0.84 5.52 405
1994 4.30 0.86 4.02 299
1993 4.62 0.86 4.18 188
19923 5.73 0.84 5.00 51
CLASS A**
1997(A) 4.88% 1.05% 4.59% 66%
1997 5.73 1.05 5.42 158
1996 5.51 1.06 5.27 257
1995 5.27 1.09 5.03 405
1994 4.05 1.11 3.77 299
19934 3.78 1.19 3.34 188
- ----------------------
GOVERNMENT INCOME FUND
- ----------------------
CLASS Y**
1997(A) 6.16% 0.83% 6.06% 18%
1997 6.40 0.85 6.25 120
1996 6.17 0.89 5.92 131
1995 6.53 0.98 6.14 368
1994 4.93 1.00 4.43 157
19935 5.41 1.10 4.75 93
CLASS A**
1997(A) 5.91% 1.08% 5.81% 18%
1997 6.15 1.10 6.00 120
1996 5.93 1.14 5.67 131
1995 6.25 1.24 5.86 368
1994 4.68 1.25 4.18 157
19938 5.35 1.29 4.69 93
- -----------
BOND FUND11
- -----------
CLASS Y*
1997(A) 6.11% 1.04% 5.64% 71%
1997 6.29 1.04 5.81 210
1996 6.28 0.97 5.86 190
INSTITUTIONAL CLASS*
1995 6.09% 1.12% 5.68% 352%
CLASS A*
1997(A) 5.86% 1.29% 5.39% 71%
1997 6.05 1.29 5.57 210
1996 6.02 1.22 5.61 190
RETAIL CLASS*
1995 6.02% 1.44% 5.55% 352%
PRIOR CLASS*
1994 5.07% 1.60% 4.48% 232%
1993 5.16 1.49 4.55 158
1992 6.78 1.24 6.01 99
1991 7.71 1.41 6.78 47
19906 7.75 1.62 6.81 23
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
106
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------
GLOBAL BOND FUND
- ----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.54 $0.37 $(0.17) $(0.41) $ -- $ 9.33 2.06%+ $ 35,625 0.68%
1997 9.70 0.49 0.09 (0.74) -- 9.54 6.18 34,590 0.85
1996 9.62 0.47 0.30 (0.69) -- 9.70 8.00 32,998 0.71
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898 0.64
19947 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73
CLASS A**
1997(A) $ 9.52 $0.29 $(0.10) $(0.39) $ -- $ 9.32 2.05%+ $ 246 0.93%
1997 9.68 0.42 0.14 (0.72) -- 9.52 5.92 182 1.10
1996 9.61 0.61 0.12 (0.66) -- 9.68 7.74 152 0.96
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170 0.89
19947 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98
- ---------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.05 $0.21 $ 0.20 $(0.21) $ -- $10.25 4.13%+ $ 906 0.56%
1997 9.92 0.42 0.13 (0.42) -- 10.05 5.62 993 0.55
1996 9.83 0.37 0.09 (0.37) -- 9.92 4.74 403 0.81
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365 0.82
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088 0.63
19938 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009 0.58
CLASS A**
1997(A) $10.05 $0.20 $ 0.20 $(0.20) $ -- $10.25 4.00%+ $ 966 0.81%
1997 9.92 0.39 0.13 (0.39) -- 10.05 5.36 959 0.80
1996 9.83 0.35 0.09 (0.35) -- 9.92 4.48 1,015 1.08
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027 1.08
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311 0.88
19938 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166 0.81
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.47 $0.27 $ 0.30 $(0.27) $ -- $10.77 5.51%+ $ 12,912 0.08%
1997 10.22 0.54 0.25 (0.54) -- 10.47 7.92 10,171 0.08
1996 10.16 0.55 0.06 (0.55) -- 10.22 6.02 8,864 0.21
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272 0.39
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434 0.42
CLASS A**
1997(A) $10.47 $0.26 $ 0.31 $(0.26) $ -- $10.78 5.47%+ $ 4,590 0.33%
1997 10.22 0.51 0.25 (0.51) -- 10.47 7.65 2,004 0.33
1996 10.16 0.52 0.06 (0.52) -- 10.22 5.76 994 0.46
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317 0.64
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163 0.67
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997(A) $10.16 $0.26 $ 0.30 $(0.26) $ -- $10.46 5.55%+ $ 1,605 0.11%
1997 10.08 0.51 0.15 (0.51) (0.07) 10.16 6.70 1,477 0.21
1996 10.12 0.51 0.02 (0.51) (0.06) 10.08 5.28 1,317 0.37
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550 0.42
19949 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432 0.43
CLASS A**
1997(A) $10.15 $0.25 $ 0.30 $(0.25) $ -- $10.45 5.42%+ $ 51 0.36%
1997 10.07 0.48 0.15 (0.48) (0.07) 10.15 6.44 398 0.45
1996 10.12 0.48 0.01 (0.48) (0.06) 10.07 4.93 304 0.60
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24 0.68
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- -----------
GLOBAL BOND
- -----------
CLASS Y**
<S> <C> <C> <C> <C>
1997(A) 5.16% 0.87% 4.97% 7%
1997 5.14 1.03 4.96 90
1996 5.81 0.95 5.57 67
1995 6.84 1.03 6.45 133
19947 5.04 1.12 4.65 161
CLASS A**
1997(A) 4.91% 1.12% 4.72% 7%
1997 4.89 1.28 4.71 90
1996 5.56 1.20 5.32 67
1995 6.59 1.28 6.20 133
19947 4.79 1.37 4.40 161
- --------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.07% 1.07% 3.56% 8%
1997 4.20 1.02 3.73 22
1996 3.73 1.31 3.23 10
1995 3.91 1.26 3.47 9
1994 3.91 1.17 3.37 43
19938 2.74 1.45 1.87 10
CLASS A**
1997(A) 3.87% 1.32% 3.36% 8%
1997 3.92 1.23 3.49 22
1996 3.47 1.61 2.94 10
1995 3.65 1.52 3.21 9
1994 3.66 1.42 3.12 43
19938 2.51 1.68 1.64 10
- --------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.99% 0.82% 4.25% 17%
1997 5.23 0.83 4.48 39
1996 5.25 0.96 4.50 92
1995 5.26 1.14 4.51 18
19949 5.09 1.17 4.34 3
CLASS A**
1997(A) 4.74% 1.07% 4.00% 17%
1997 4.99 1.08 4.24 39
1996 4.93 1.21 4.18 92
1995 4.95 1.39 4.20 18
19949 4.84 1.42 4.09 3
- ------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- ------------------------------
CLASS Y**
1997(A) 4.96% 0.86% 4.21% 4%
1997 5.02 0.96 4.27 19
1996 4.93 1.12 4.18 21
1995 5.21 1.17 4.46 32
19949 5.07 1.35 4.15 13
CLASS A**
1997(A) 4.71% 1.11% 3.96% 4%
1997 4.81 1.20 4.06 19
1996 4.65 1.35 3.90 21
1995 4.97 1.44 4.21 32
19949 4.82 1.60 3.90 13
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED AS EITHER
RETAIL OR INSTITUTIONAL SHARES. ON THAT DATE, THE FUND'S NET INVESTMENT
INCOME, EXPENSES AND DISTRIBUTIONS FOR THE PERIOD NOVEMBER 1, 1994 THROUGH
FEBRUARY 20, 1995 WERE ALLOCATED TO EACH CLASS OF SHARES. THE BASIS FOR THE
ALLOCATION WAS THE RELATIVE NET ASSETS OF EACH CLASS OF SHARES AS OF FEBRUARY
21, 1995. THE RESULTS WERE COMBINED WITH THE RESULTS OF OPERATIONS AND
DISTRIBUTIONS FOR EACH APPLICABLE CLASS FOR THE PERIOD FEBRUARY 21, 1995
THROUGH OCTOBER 31, 1995. FOR THE YEAR ENDED OCTOBER 31, 1995, THE FINANCIAL
HIGHLIGHTS' RATIOS OF EXPENSES, NET INVESTMENT INCOME, TOTAL RETURN, AND THE
PER SHARE INVESTMENT ACTIVITIES AND DISTRIBUTIONS REFLECT THIS ALLOCATION.
ADDITIONALLY, ON APRIL 22, 1996 THE CONESTOGA SHORT-TERM INCOME AND BOND
FUNDS WERE ACQUIRED BY COREFUNDS, INC. AT WHICH TIME THE INSTITUTIONAL CLASS
OF SHARES OF THESE FUNDS WERE REDESIGNATED CLASS Y AND THE RETAIL CLASS OF
SHARES OF THESE FUNDS WERE REDESIGNATED CLASS A.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SHORT TERM
INCOME AND BOND FUNDS, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF
EACH FUND, EXCLUDING THE SHORT TERM INCOME AND BOND FUNDS, WERE REDESIGNATED
CLASS A.
***FOR THE YEAR ENDED JUNE 30, 1996, TRANSACTIONS RELATING TO THE MERGER WERE
EXCLUDED FROM THE CALCULATION OF THE PORTFOLIO TURNOVER RATE.
+ THIS FIGURE HAS NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS MAY 15, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
2 COMMENCED OPERATIONS MAY 17, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS APRIL 1, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS DECEMBER 15, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 COMMENCED OPERATIONS MAY 3, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
9 COMMENCED OPERATIONS MAY 16, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
10 TOTAL RETURN DOES NOT REFLECT THE SALES LOAD CHARGED ON THE CLASS A SHARES. ADDITIONALLY, TOTAL RETURN FOR CLASS Y &
CLASS A FOR THE SHORT TERM INCOME AND BOND FUNDS FOR 1996 ARE FOR THE EIGHT
MONTH PERIOD ENDED DECEMBER 31, 1996.
11 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR ENDED JUNE 30, 1996
REPRESENTS THE PERIOD FROM NOVEMBER 1, 1995 TO JUNE 30, 1996. ALL PRIOR YEARS
ARE FOR THE PERIODS NOVEMBER 1 TO OCTOBER 31.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
107
<PAGE>
FINANCIAL
HIGHLIGHTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
RATIO RATIO OF NET
NET RATIO OF EXPENSES INCOME
NET ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- --------------- ------------ -------- --------- ----------- ---------- ----------- ------------
- ----------------
TREASURY RESERVE
- ----------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $1.00 $0.03 $(0.03) $1.00 2.57%+ $806,855 0.51% 5.05% 0.70% 4.86%
1997 1.00 0.05 (0.05) 1.00 4.97 835,384 0.51 4.86 0.71 4.66
1996 1.00 0.05 (0.05) 1.00 5.20 892,562 0.50 5.02 0.77 4.75
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91 0.85 4.54
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87 0.86 2.49
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89 0.85 2.50
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58 0.82 4.14
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80 0.82 6.35
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03 0.84 7.56
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26 0.84 8.62
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.44%+ $ 24,414 0.76% 4.80% 0.95% 4.61%
1997 1.00 0.05 (0.05) 1.00 4.71 12,146 0.76 4.61 0.96 4.41
1996 1.00 0.05 (0.05) 1.00 4.94 19,386 0.75 4.81 1.03 4.53
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81 1.10 4.44
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62 1.11 2.24
19931 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46 1.14 2.07
- -------------
CASH RESERVE
- -------------
CLASS Y*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.65%+ $956,368 0.52% 5.20% 0.72% 5.00%
1997 1.00 0.05 (0.05) 1.00 5.09 886,251 0.50 4.99 0.70 4.79
1996 1.00 0.05 (0.05) 1.00 5.26 790,211 0.50 5.09 0.78 4.81
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04 0.85 4.67
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95 0.85 2.57
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97 0.85 2.58
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68 0.82 4.24
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94 0.82 6.49
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28 0.80 7.82
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62 0.90 8.05
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54 1.14 5.96
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.52%+ $ 79,712 0.77% 4.95% 0.97% 4.75%
1997 1.00 0.05 (0.05) 1.00 4.83 27,693 0.75 4.74 0.95 4.54
1996 1.00 0.05 (0.05) 1.00 5.00 19,736 0.75 4.86 1.03 4.58
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86 1.10 4.49
1994 1.00 0.03 (0.03) 1.00 2.74 11,451 0.72 2.70 1.10 2.32
19931 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52 1.15 2.13
CLASS B
1997(A)(4) $1.00 $ -- $ -- $1.00 0.50%+ $ 80 1.52% 4.20% 1.72% 4.00%
- ----------------
TAX-FREE RESERVE
- ----------------
CLASS Y*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.63%+ $ 152,822 0.52% 3.17% 0.71% 2.98%
1997 1.00 0.03 (0.03) 1.00 3.08 119,579 0.50 3.07 0.70 2.87
1996 1.00 0.03 (0.03) 1.00 3.20 104,196 0.48 3.14 0.76 2.86
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09 0.85 2.72
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00 0.87 1.62
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20 0.89 1.82
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39 0.88 2.88
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20 0.81 3.45
CLASS C*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.49%+ $ 12,396 0.77% 2.92% 0.96% 2.73%
1997 1.00 0.03 (0.03) 1.00 2.83 3,202 0.75 2.82 0.95 2.62
1996 1.00 0.03 (0.03) 1.00 2.95 2,850 0.73 2.94 1.02 2.65
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80 1.10 2.43
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75 1.12 1.37
19931 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71 1.14 1.33
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON APRIL 22, 1996, SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B
SHARES WERE REDESIGNATED CLASS C. + RETURNS ARE FOR THE PERIOD INDICATED AND
HAVE NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JANUARY 4, 1993. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS NOVEMBER 21, 1988. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS APRIL 16, 1991. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS NOVEMBER 18, 1997. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
108
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
1. ORGANIZATION
The CoreFund Equity Index Fund, Core Equity Fund, Growth Equity Fund, Special
Equity Fund, International Growth Fund, Balanced Fund (the Equity Funds), Short
Term Income Fund, Short-Intermediate Bond Fund, Government Income Fund, Bond
Fund, Global Bond Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal
Bond Fund, New Jersey Municipal Bond Fund (the Fixed Income Funds), Treasury
Reserve, Cash Reserve, and Tax-Free Reserve (the Money Market Funds) are
portfolios offered by CoreFunds, Inc. (The Company), an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Company is presently authorized to offers 20 separate portfolios (the Funds):
EQUITY PORTFOLIOS: MONEY MARKET PORTFOLIOS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Cash Reserve
International Growth Fund Elite Treasury Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME PORTFOLIOS:
Short Term Income Fund
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements of the Elite Cash Reserve, Elite Treasury Reserve
and Elite Tax-Free Reserve are not presented herein.
The assets of each Portfolio are segregated, and a Shareholder's interest
is limited to the Portfolio in which shares are held. The Funds' prospectus
provides a description of the Funds' investment objectives, policies and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investment securities of the Equity and Fixed Income
Funds that are listed on a securities exchange for which market quotations are
available are valued by an independent pricing service at the last quoted sales
price for such securities on each business day. If there is no such reported
sale, these securities and unlisted securities for which market quotations are
readily available are valued at the most recent quoted bid price using
procedures determined in good faith by the Board of Trustees. Debt obligations
with sixty days or less remaining until maturity may be valued at their
amortized cost. Under this valuation method, purchase discounts and premiums are
accreted and amortized ratably to maturity and are included in interest income.
Investment securities of the Money Market Funds are stated at amortized
cost, which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income.
The books and records of the International Growth Fund and Global Bond
Fund are maintained in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars on the following bases:
[BULLET] market value of investment securities, assets and liabilities at
the current rate of exchange; and
[BULLET] purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The International Growth Fund does not isolate the portion of gains or
losses on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Global Bond Fund does isolate the effect of fluctuations in foreign
currency rates when determining the gain or loss upon sale or maturity of
foreign currency denominated debt obligations for Federal income tax purposes.
109
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
The International Growth Fund and Global Bond Fund report certain foreign
currency related transactions as components of unrealized and realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for Federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--The International Growth Fund and
Global Bond Fund enter into forward foreign currency contracts as hedges against
either specific transactions or portfolio positions. The aggregate principal
amounts of the contracts are not recorded since the funds intend to settle the
contracts prior to delivery. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The funds realize gains or losses at the time forward
contracts are settled. Financial future contracts are valued at the settlement
price established each day by the board of trade on an exchange on which they
are traded.
SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period, which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on ex-dividend
date.
REPURCHASE AGREEMENTS--Securities pledged as collateral for repurchase
agreements are held by each Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements and procedures adopted by
the adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of collateral by
the Portfolio may be delayed or limited.
EXPENSES--Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Company are
pro-rated to the Funds on the basis of relative net assets. Class specific
expenses, such as the 12b-1 fees, are borne by that class. Income, other
expenses and accumulated realized and unrealized gains and losses of a Fund are
allocated to the respective class on the basis of the relative net asset value
each day.
DISTRIBUTION TO SHAREHOLDERS--The Equity Index Fund, Core Equity Fund,
Growth Equity Fund, Special Equity Fund, Balanced Fund and Global Bond Fund
declare and pay dividends on a quarterly basis. The International Growth Fund
declares and pays dividends periodically. Such dividends are reinvested in
additional shares unless otherwise requested. The Short Term Income Fund,
Short-Intermediate Bond Fund, Government Income Fund, Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Treasury Reserve, Cash Reserve and Tax-Free Reserve distributions from net
investment income are declared on a daily basis and are payable on the first
business day of the following month. Any net realized capital gains on sales of
securities for a Fund are distributed to its shareholders at least annually.
Distributions from net investment income and net realized capital gains are
determined in accordance with U.S. Federal income tax regulations, which may
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid in capital in the period that the difference arises.
Accordingly, for the International Growth Fund and Global Bond Fund as of
December 31, 1997, $(411,000) and $450,000 was reclassified from accumulated net
realized gain (loss)on investments to accumulated net investment income,
respectively.
FEDERAL INCOME TAXES--It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income tax is required.
OTHER--Organizational costs incurred with the start up of the Balanced
Fund, Government Income Fund, Short Term Income Fund, Intermediate Municipal
Bond Fund, Global Bond Fund, Pennsylvania Municipal Bond Fund and New Jersey
Municipal Bond Fund are being amortized on a straight line basis over a maximum
period of sixty months. If any or all of the shares representing initial capital
of each fund are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organizational cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
110
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
The Company has entered into an investment advisory agreement with
CoreStates Investment Advisers, Inc. ("CSIA") to provide investment advisory
services to each Fund. For its services CSIA receives a fee based on the annual
average daily net assets of each Fund as shown in the following table:
<TABLE>
<CAPTION>
ADVISER INVESTMENT ADVISORY ADVISER INVESTMENT ADVISORY
FUND FEE AGREEMENT DATE FUND FEE AGREEMENT DATE
- -------------------- ------- ------------------- -------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index 0.40% March 25, 1991 Short Term Income 0.74% April 12, 1996
Core Equity 0.74 April 12, 1996 Short-Intermediate Bond 0.50 March 25, 1991
Growth Equity 0.75 March 25, 1991 Government Income 0.50 March 25, 1991
Special Equity 1.50 April 12, 1996 Bond 0.74 April 12, 1996
International Growth 0.80 December 5, 1989 Global Bond 0.60 March 25, 1991
Balanced 0.70 March 25, 1991 Intermediate Municipal
Bond 0.50 March 25, 1991
Treasury Reserve 0.40 April 12, 1996 Pennsylvania Municipal
Cash Reserve 0.40 April 12, 1996 Bond 0.50 May 15, 1994
Tax-Free Reserve 0.40 April 12, 1996 New Jersey Municipal
Bond 0.50 May 15, 1994
</TABLE>
Advisory fees are computed daily and paid monthly for all Funds.
Additionally, for the period ended December 31, 1997, CSIA has voluntarily
waived a portion of their fees in order to assist the Funds in maintaining
competitive expense ratios.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, in
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
Sub-Advisory services are provided to the CoreStates Advisers for the
International Growth Fund by Martin Currie, Inc. and Aberdeen Managers (The
"Sub-Advisers"). Sub-Advisory services are provided for the Global Bond Fund by
Analytic TSA (formerly Alpha Global). CoreStates Advisers is responsible for the
supervision, and payment of fees to the Sub-Advisers in connection with their
services.
4. ADMINISTRATIVE, TRANSFER AGENT AND DISTRIBUTION SERVICES
Pursuant to an Administration agreement dated October 30, 1992, as amended
June 1, 1995, SEI Fund Resources ("SFR") acts as the Fund's Administrator. Under
the terms of such agreement, SFR is entitled to receive an annual fee of 0.25%
on the average net assets of the Funds. SFR voluntarily waives a portion of
their fees in order to assist the Funds in maintaining competitive expense
ratios.
Pursuant to a Transfer Agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS"), a wholly owned subsidiary of State Street Bank
and Trust Company acts as the Funds' Transfer Agent. As such, BFDS provides
transfer agency, dividend disbursing and shareholder servicing for the Funds.
On November 2, 1992, SEI Financial Services ("SFS"), a wholly owned
subsidiary of SEI, became the Funds' exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the "Plan") for those Funds
offering Class A, C and B shares. The Plan provides for the payment by the
Company to the Distributor of up to 0.25% of the daily net assets of each Class
A and C Portfolio and 1.00% of the daily net assets of each Class B Portfolio.
The Company has also adopted a Shareholder Servicing Plan for those Funds
offering Class B shares. The Shareholder Servicing Plan provides for the payment
by the Company to the Distributor of up to 25% of the daily net assets of each
Class B Portfolio to which the Plan is applicable. The Distributor is authorized
to use these fees as compensation for its distribution-related services and as
payment to certain securities broker/dealers and financial institutions that
enter into shareholder servicing agreements or broker agreements with the
Distributor. The Funds paid approximately $850,104 to affiliated brokers for
commissions earned on the sales of the shares of the Funds for the six month
period ended December 31, 1997.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Funds.
111
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
A contingent Deferred Sales Charge (CDSC) is imposed on redemptions made in
the Class B shares. The CDSC varies depending on the number of years from the
time of payment for the purchase of Class B shares until the redemption of such
shares.
Contingent Deferred Sales
Year Charges as a Percentage
Since of Dollar Amount
Purchase Subject to Charge
-------- ------------------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth None
Seventh Convert to Class A Shares
5. INVESTMENT TRANSACTIONS
During the six month period ended December 31, 1997, purchases of
securities and proceeds from sales of securities, other than temporary
investments in short-term securities, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
-------------------------------- -------------------------------
PURCHASES SALES
-------------------------------- -------------------------------
U.S. U.S.
PORTFOLIO INVESTMENT TRANSACTIONS (000) GOVERNMENT OTHER TOTAL GOVERNMENT OTHER TOTAL
---------- ----- ------- ---------- ------- --------
<S> <C> <C> <C> <C>
Equity Index Fund -- 26,703 26,703 -- 22,386 22,386
Core Equity Fund -- 132 132 -- 151,787 151,787
Growth Equity Fund -- 66,463 66,463 -- 71,272 71,272
Special Equity Fund -- 24,748 24,748 -- 30,293 30,293
International Growth Fund -- 38,930 38,930 -- 39,848 39,848
Balanced Fund -- 36,206 36,206 -- 34,822 34,822
Short Term Income Fund 2,753 5,191 7,944 4,333 5,139 9,472
Short-Intermediate Bond Fund 65,819 39,422 105,241 69,963 33,236 103,199
Government Income Fund 5,451 -- 5,451 3,814 -- 3,814
Bond Fund 81,637 39,056 120,693 105,566 65,138 170,704
Global Bond Fund -- 41,416 41,416 -- 4,688 4,688
Intermediate Municipal Fund -- 139 139 -- 232 232
Pennsylvania Municipal Bond Fund -- 7,890 7,890 -- 2,405 2,405
New Jersey Municipal Bond Fund -- 353 353 -- 76 76
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Certain net capital losses incurred subsequent to October 31, 1996 have
been deferred for tax purposes and will be recognized during the fiscal year
ended June 30, 1998. The Funds had capital loss carryforwards at December 31,
1997, as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES
6/30/97 2002 2003 2004 2005
------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Short Term Income Fund $ 88,520 $ -- $ -- $ -- $ 88,520
Short-Intermediate Bond Fund 2,907,103 -- 1,483,436 217,497 1,206,170
Government Income Fund 319,174 -- 222,660 4,127 92,387
Bond Fund 1,702,115 -- -- -- 1,702,115
Global Bond Fund 1,573,551 -- 844,493 -- 729,058
Intermediate Term Municipal Bond Fund 79,158 -- 41,918 34,827 2,413
Pennsylvania Municipal Bond Fund 96,691 73,679 95 8,784 14,133
Treasury Reserve 9,082 -- -- -- 9,082
Cash Reserve 167,012 134,628 23,362 9,022 --
Tax-Free Reserve 54,381 5,273 44,981 4,127 --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
At December 31, 1997 the total cost of securities and the net realized
gains or losses on securities sold for Federal income tax purposes was not
materially different from amounts reported for financial purposes. The aggregate
gross unrealized gain or loss on securities at December 31, 1997 for each fund
within the CoreFunds is as follows:
112
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------
AGGREGATE AGGREGATE
GROSS GROSS
AGGREGATE GROSS UNREALIZED GAIN (LOSS) (000) APPRECIATION DEPRECIATION NET
------------ ------------ --------
<S> <C> <C> <C>
Equity Index Fund $119,666 $ (3,247) $116,419
Core Equity Fund 149,108 (16,936) 132,172
Growth Equity Fund 57,102 (1,766) 55,336
Special Equity Fund 15,922 (11,198) 4,724
International Growth Fund 29,294 (10,958) 18,336
Balanced Fund 23,572 (985) 22,587
Short Term Income Fund 89 (8) 81
Short-Intermediate Bond Fund 1,991 (24) 1,967
Government Income Fund 570 (15) 555
Bond Fund 4,190 (25) 4,165
Global Bond Fund 554 (881) (327)
Intermediate Municipal Bond Fund 56 -- 56
Pennsylvania Municipal Bond Fund 640 (4) 636
New Jersey Municipal Bond Fund 104 -- 104
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
6. FORWARD FOREIGN CURRENCY CONTRACTS
The International Growth Fund and Global Bond Fund enter into forward
foreign currency contracts as hedges against portfolio positions. Such
contracts, which protect the value of a Fund's investment securities against a
decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at a
future date. Also, although such contracts tend to minimize the risk of loss due
to a decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such foreign
currency increase. The following forward foreign currency contracts were
outstanding at December 31, 1997:
- -------------------------------------------------------------------------------
GLOBAL BOND FUND:
Foreign Currency Sales:
Contracts to In Exchange Unrealized
Deliver/Receive For Appreciation
--------------- ----------- ------------
3/23/98 DM 10,750,000 $6,101,645 $ 96,870
3/23/98 DK 19,000,000 2,829,149 44,204
3/12/98 FF 10,500,000 1,761,036 8,991
3/12/98 GP 1,950,000 3,197,318 34,913
3/23/98 SK 13,600,000 1,763,451 46,185
---------
Net Unrealized Appreciation $ 231,163
=========
- --------------------------------------------------------------------------------
CURRENCY LEGEND
- ---------------
DM German Marks
DK Danish Kroner
FF French Francs
GP British Pounds
SK Swedish Krona
113
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
7. CONCENTRATION OF CREDIT RISK
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in debt instruments of
municipal issuers. Although these Funds maintain a diversified portfolio, with
the exception of the Pennsylvania Municipal Bond Fund and the New Jersey
Municipal Bond Fund, the issuers ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in securities that
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At December 31, 1997, the percentage of
portfolio investments by each revenue source was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------- --------
INTERMEDIATE PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL MUNICIPAL
BOND BOND BOND TAX-FREE
FUND FUND FUND RESERVE
------------ ------------ ---------- --------
REVENUE BONDS:
<S> <C> <C> <C> <C>
Education Bonds 17% 18% 15% 7%
Health Care Bonds 3 13 5 10
Transportation Bonds 12 5 7 7
Utility Bonds 14 16 17 4
Housing Bonds -- 2 -- 10
Pollution Control Bonds -- -- -- 10
Industrial Development Bonds 6 16 -- 8
Public Facility Bonds -- 1 2 3
Other 12 2 7 10
GENERAL OBLIGATIONS 36 24 47 6
TAX EXEMPT COMMERCIAL PAPER -- -- -- 21
TAX AND REVENUE ANTICIPATION NOTES -- -- -- 3
TAX ANTICIPATION NOTES -- 3 -- 1
----- ----- ----- ----
100% 100% 100% 100%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount on an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by the issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions). At December 31, 1997, the percentage of securities with credit
enhancements are as follows:
- ----------------------------------------------------------------------------
------- ---------
LETTERS
OF BOND
CREDIT INSURANCE
------- ---------
Intermediate Municipal Bond Fund -- 64.9%
Pennsylvania Municipal Bond Fund -- 62.1
New Jersey Municipal Bond Fund -- 38.4
Tax-Free Reserve 53.3% 27.6
- ----------------------------------------------------------------------------
114
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
8. SHARE TRANSACTIONS (000):
The following are the share transactions for the six month period ended December
31, 1997.
<TABLE>
<CAPTION>
------ ------- ------ ------- ------------- -------- -------- ------- --------
EQUITY CORE GROWTH SPECIAL INTERNATIONAL
INDEX EQUITY EQUITY EQUITY GROWTH BALANCED TREASURY CASH TAX-FREE
FUND FUND(1) FUND FUND FUND FUND RESERVE RESERVE RESERVE
------ ------- ------ ------- ------------- -------- -------- ------- --------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 613 2,134 1,130 590 3,024 830 1,198,732 1,030,078 170,940
Shares issued in lieu
of cash distributions 223 3,181 639 816 543 449 1,462 1,865 96
Shares redeemed (664) (2,642) (1,381) (841) (2,727) (766) (1,228,616) (961,599) (137,772)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 172 2,673 388 565 840 513 (28,422) 70,344 33,264
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS A/C
Shares issued 117 123 43 42 18 108 34,333 107,066 24,342
Shares issued in lieu
of cash distributions 8 120 25 34 9 24 272 1,229 132
Shares redeemed 16 (78) (23) (15) (17) (35) (22,458) (56,508) (15,279)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 109 165 45 61 10 97 12,147 51,787 9,195
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS B
Shares issued 19 6 6 10 1 40 -- 88 --
Shares issued in lieu
of cash distributions -- 1 -- 2 -- 2 -- -- --
Shares redeemed -- -- -- -- -- -- -- (8) --
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 19 7 6 12 1 42 -- 80 --
==== ====== ====== ==== ====== ==== ========== ========= ========
TOTAL SHARE ACTIVITY
FOR PERIOD 300 2,845 439 638 851 652 (16,275) 122,211 42,459
==== ====== ====== ==== ====== ==== ========== ========= ========
<FN>
(1) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
<TABLE>
<CAPTION>
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
SHORT TERM SHORT- GOVERNMENT GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
INCOME INTERMEDIATE INCOME BOND BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND FUND FUND FUND BOND FUND BOND FUND BOND FUND
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 616 2,018 309 1,147 95 3 270 17
Shares issued in lieu
of cash distributions 88 454 35 479 137 -- 12 1
Shares repurchased (692) (1,998) (195) (2,950) (42) (14) (55) (10)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 12 474 149 (1,324) 190 (11) 227 8
==== ====== ==== ====== === === === ===
CLASS A
Shares issued 7 29 31 42 7 6 241 16
Shares issued in lieu
of cash distributions 1 6 4 4 1 2 6 1
Shares repurchased -- (31) (23) (12) (1) (9) (12) (7)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 8 4 12 34 7 (1) 235 10
==== ====== ==== ====== === === === ===
TOTAL SHARE ACTIVITY
FOR PERIOD 20 478 161 (1,290) 197 (12) 462 18
==== ====== ==== ====== === === === ===
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
115
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONCLUDED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
9. SHAREHOLDER VOTING RIGHTS
There was a special meeting scheduled for December 15, 1997 at which the
shareholders of the International Growth Fund voted on to approve the selection
of Aberdeen Managers as a sub-adviser for a portion of the assets of the
International Growth Fund. The results are as follows:
Shares Voted % of Voted % of Total
----------- ---------- ----------
FOR 8,203,048.00 98.77% 70.55%
AGAINST 11,795.00 0.14% 0.10%
ABSTAIN 89,958.00 1.08% 0.77%
10. PROPOSED REORGANIZATION
On November 18, 1997, CoreStates Financial Corp. and First Union
Corporation jointly announced that they had signed a definitive agreement for
the merger of CoreStates Bank, N.A. and First Union Bank. The Advisor is
currently a wholly-owned subsidiary of CoreStates Bank, N.A. Subject to certain
conditions, it is anticipated that the transaction will close at the end of
April, 1998. Thereafter, the Advisor will be an indirect wholly-owned subsidiary
of First Union Bank. A special meeting of shareholders will be called to
consider certain proposed fund reorganizations.
116
<PAGE>
CoreFunds,Inc.
--------------
ELITE TREASURY RESERVE
ELITE CASH RESERVE
ELITE TAX-FREE RESERVE
SEMI-ANNUAL REPORT
December 31, 1997
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 33.7%
U.S. Treasury Bills+
5.180%, 01/22/98 .......................................................... $ 6,000 $ 5,982
5.650%, 03/05/98 .......................................................... 500 495
5.797%, 04/02/98 .......................................................... 500 493
5.793%, 04/30/98 .......................................................... 500 491
5.580%, 05/28/98 .......................................................... 500 489
5.530%, 06/25/98 .......................................................... 500 487
5.540%, 08/20/98 .......................................................... 2,000 1,932
U.S. Treasury Notes
5.600%, 01/31/98 .......................................................... 900 900
5.690%, 07/31/98 .......................................................... 500 499
5.780%, 08/15/98 .......................................................... 500 500
5.610%, 08/31/98 .......................................................... 500 502
5.640%, 09/30/98 .......................................................... 500 501
5.650%, 10/31/98 .......................................................... 500 501
5.730%, 11/15/98 .......................................................... 2,000 1,996
5.740%, 11/30/98 .......................................................... 3,000 2,997
U.S. Treasury STRIPS
5.730%, 05/15/98 .......................................................... 400 392
5.740%, 08/15/98 .......................................................... 500 483
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $19,640) ............................................................... 19,640
- ---------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 66.6%
Aubrey Lanston 5.25%, dated 12/31/97, matures 01/02/98, repurchase price
$2,778,810 (collateralized by U.S. Treasury Note, par value $2,850,000,
5.625%, 12/31/02; market value $2,849,145) ................................... 2,778 2,778
Goldman Sachs 6.35%, dated 12/31/97, matures 01/02/98,
repurchase price $2,000,706 (collateralized by U.S. Treasury
Note, par value $1,960,000, 6.875%, 03/31/00;
market value $2,044,672) ..................................................... 2,000 2,000
Hong Kong Shanghai Bank 6.40%, dated 12/31/97, matures 01/02/98, repurchase
price $13,304,729 (collateralized by U.S. Treasury Note, par value
$13,155,000, 6.75%, 04/30/00; market value $13,619,372) ...................... 13,300 13,300
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch 6.40%, dated 12/31/97, matures 01/02/98, repurchase price
$2,500,889 (collateralized by U.S. Treasury Note, par value $2,365,000,
8.00%, 05/15/01; market value $2,556,092) .................................... $ 2,500 $ 2,500
Morgan Stanley 6.20%, dated 12/31/97, matures 01/02/98,
repurchase price $2,500,861 (collateralized by various U.S.
Treasury Notes, ranging in par value $295,000-$2,275,000,
5.50%, 12/31/00; total market value $2,560,491) .............................. 2,500 2,500
State Street Bank 5.50%, dated 12/31/97, matures 01/02/98,
repurchase price $13,204,033 (collateralized by U.S. Treasury
Note, par value $13,250,000, 6.125%, 03/31/98;
market value $13,475,250) .................................................... 13,200 13,200
Swiss Bank 6.40%, dated 12/31/97, matures 01/02/98,
repurchase price $2,500,889 (collateralized by U.S. Treasury
Note, par value $2,370,000, 7.50%, 05/15/02;
market value $2,559,126) ..................................................... 2,500 2,500
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $38,778) ............................................................... 38,778
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.3%
(Cost $58,418) .................................................................. 58,418
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.3%) ......................................... (151)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Shares ($0.001 par value -- 250 million authorized shares)
based on 53,853,436 outstanding shares .......................................... 53,854
Portfolio Shares ($0.001 par value -- 250 million authorized shares)
based on 4,413,400 outstanding shares ........................................... 4,413
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% .......................................................... $58,267
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS Y .......................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS C .......................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ YIELD TO MATURITY
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 58.1%
BANKING - 3.3%
NationsBank
5.858%, 01/30/98 ........................................................... $5,000 $ 4,977
5.813%, 03/17/98 ........................................................... 5,000 4,940
----------
Total Banking 9,917
----------
FINANCIAL SERVICES - 40.3%
Abbey National Treasury Services
5.712%, 04/27/98 ........................................................... 3,000 2,946
American Express
6.653%, 01/02/98 ........................................................... 5,000 4,999
5.581%, 01/09/98 ........................................................... 2,000 1,998
Asset Securitization Coop
5.770%, 02/26/98 ........................................................... 5,000 4,956
Cafco
6.653%, 01/02/98 ........................................................... 5,000 4,999
5.689%, 01/27/98 ........................................................... 5,000 4,980
Caisse de Depots En Consignations
5.678%, 03/17/98 ........................................................... 5,000 4,943
Cit Group Holdings
5.841%, 01/28/98 ........................................................... 5,000 4,978
Credit Suisse Commercial Paper
5.710%, 03/12/98 ........................................................... 5,000 4,945
Eureka Securitization
5.666%, 01/23/98 ........................................................... 3,000 2,990
5.695%, 02/02/98 ........................................................... 5,000 4,975
Ford Motor Credit
5.639%, 01/05/98 ........................................................... 3,000 2,998
5.788%, 02/05/98 ........................................................... 3,000 2,983
5.688%, 02/06/98 ........................................................... 2,000 1,989
5.774%, 03/06/98 ........................................................... 3,000 2,970
Goldman Sachs
5.560%, 05/07/98 ........................................................... 5,000 4,901
Merrill Lynch
5.679%, 01/16/98 ........................................................... 3,000 2,993
5.696%, 02/20/98 ........................................................... 3,900 3,870
5.700%, 03/30/98 ........................................................... 150 148
5.825%, 04/30/98 ........................................................... 3,000 2,944
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Morgan Stanley
5.673%, 01/21/98 ........................................................... $3,000 $ 2,991
5.680%, 02/04/98 ........................................................... 3,000 2,984
Morgan Stanley (A)
5.910%, 01/13/98 ........................................................... 5,000 5,000
National Australia Bank
5.764%, 02/13/98 ........................................................... 5,000 4,966
New Center Asset Trust
5.674%, 01/30/98 ........................................................... 3,000 2,987
5.490%, 04/03/98 ........................................................... 6,900 6,803
Prudential Funding
5.856%, 01/08/98 ........................................................... 5,000 4,994
5.839%, 01/12/98 ........................................................... 5,000 4,991
Swedish Export Credit
5.810%, 04/09/98 ........................................................... 5,000 4,922
---------
Total Financial Services 114,143
---------
INDUSTRIAL - 13.7%
Bell Atlantic Network
5.835%, 01/07/98 ........................................................... 5,000 4,995
BP America
6.402%, 01/02/98 ........................................................... 5,000 4,999
Campbell Soup
5.684%, 03/04/98 ........................................................... 3,600 3,566
Coca Cola
5.603%, 01/22/98 ........................................................... 5,000 4,984
Dupont
5.599%, 01/29/98 ........................................................... 5,000 4,978
General Electric
5.685%, 02/25/98 ........................................................... 3,000 2,974
5.736%, 04/23/98 ........................................................... 3,000 2,948
5.881%, 07/09/98 ........................................................... 5,000 4,851
Mitsubishi International
5.681%, 02/04/98 ........................................................... 3,000 2,984
---------
Total Industrial 39,278
---------
UTILITIES - 0.8%
National Rural Utilities
5.644%, 01/20/98 ........................................................... 3,000 2,991
TOTAL COMMERCIAL PAPER
(Cost $164,330) ............................................................... 164,330
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.7%
FHLB
5.810%, 01/23/98 ........................................................... $5,000 $ 5,000
FNMA (A)
5.894%, 01/06/98 ........................................................... 5,000 4,998
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $9,998) ................................................................. 9,998
- ---------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 4.8%
Asset-Backed Securities Investment Trust,
Series 1997-C, Class N (A)
5.961%, 01/15/98 ........................................................... 5,000 5,000
Case Equipment Loan Trust, Series 1997-B, Class A1
5.612%, 10/13/98 ........................................................... 3,181 3,181
Key Auto Finance Trust, Series 1997-2, Class A1
5.835%, 01/05/99 ........................................................... 5,000 5,000
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $13,181) ................................................................ 13,181
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 7.7%
BANKING - 1.8%
J.P. Morgan (A)
5.875%, 01/02/98 ........................................................... 5,000 5,002
----------
FINANCIAL SERVICES - 4.8%
Abbey National Treasury Services (A)
5.650%, 01/02/98 ........................................................... 5,000 4,999
Credit Suisse First Boston (A)
5.670%, 01/02/98 ........................................................... 5,000 5,000
Paccar Financial
5.770%, 09/15/98 ........................................................... 3,500 3,497
----------
Total Financial Services 13,496
----------
INDUSTRIAL - 1.0%
Pitney Bowes Credit
6.305%, 09/23/98 ........................................................... 2,900 2,909
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $21,407) ................................................................ 21,407
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MASTER NOTE - 2.5%
Associates Corporation of North America
5.497%, 01/02/98 ........................................................... $6,816 $ 6,817
----------
TOTAL MASTER NOTE
(Cost $6,817) ................................................................. 6,817
- ---------------------------------------------------------------------------------------------------------------------------
TIME DEPOSITS - 12.6%
Banque Nationale de Paris
6.625%, 01/02/98 ........................................................... 7,000 7,000
Bayerische Vereinsbank
6.500%, 01/02/98 ........................................................... 7,000 7,000
Den Danske Bank
6.500%, 01/02/98 ........................................................... 7,000 7,000
Republic National Bank of New York
6.500%, 01/02/98 ........................................................... 7,000 7,000
State Street Bank
5.500%, 01/02/98 ........................................................... 7,000 7,000
----------
TOTAL TIME DEPOSITS
(Cost $35,000) ................................................................ 35,000
- ---------------------------------------------------------------------------------------------------------------------------
INSURANCE FUNDING AGREEMENT - 1.9%
Allstate (A)
5.696%, 01/01/98 ........................................................... 5,000 5,000
----------
TOTAL INSURANCE FUNDING AGREEMENT
(Cost $5,000) ................................................................. 5,000
- ---------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 8.6%
National Westminster Bank
5.940%, 06/26/98 ........................................................... 5,000 4,999
Societe Generale
6.080%, 06/09/98 ........................................................... 5,000 4,999
5.765%, 10/09/98 ........................................................... 3,000 2,998
Swiss Bank
6.020%, 06/12/98 ........................................................... 5,000 5,001
5.825%, 10/02/98 ........................................................... 3,000 2,999
5.852%, 11/20/98 ........................................................... 3,000 2,999
----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $23,995) ................................................................ 23,995
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS - 100.0%
(Cost $279,728) .................................................................. $279,728 $281,727
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.0% ............................................ (35)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 750 million authorized)
based on 279,350,241 outstanding shares .......................................... 279,351
Portfolio Shares ($0.001 par value -- 750 million authorized)
based on 345,347 outstanding shares .............................................. 345
Accumulated net realized loss on investments ........................................ (3)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ........................................................... $279,693
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS Y ............................ $1.00
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS C ............................ $1.00
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
+ EFFECTIVE YIELD
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SLMA -- STUDENT LOAN MARKETING ASSOCIATION
</FN>
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS - 99.7%
ALABAMA - 2.8%
Alabama State Public School and College Revenue Bond (C)
5.500%, 10/01/98 ........................................................... $1,000 $ 1,012
Montgomery, Alabama TECP
3.700%, 02/26/98 ........................................................... 2,000 2,000
North Alabama Environmental Improvement Authority Revenue
Bond for Reynold Metals Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... 2,500 2,500
---------
Total Alabama 5,512
---------
ALASKA - 0.4%
Valdez, Alaska TECP
3.800%, 03/10/98 ........................................................... 800 800
---------
ARIZONA - 2.5%
Arizona Agriculture Improvement and Power District Electric
Revenue Bond for Salt River Project, Series E
Pre-Refunded @ 100 (C) (D)
8.250%, 01/02/98 ........................................................... 2,710 2,710
Arizona State, Maricopa County Regional Area
Road Funding TRAN (B)
7.400%, 07/01/98 ........................................................... 2,100 2,136
---------
Total Arizona 4,846
---------
CALIFORNIA - 3.7%
Los Angeles County, California TRAN
4.500%, 06/30/98 ........................................................... 2,000 2,006
Los Angeles County, California TRAN, Series A
4.500%, 06/30/98 ........................................................... 3,000 3,009
Sonoma County, California TRAN
4.500%, 01/29/98 ........................................................... 2,200 2,202
---------
Total California 7,217
---------
COLORADO - 0.7%
Moffat County, Colorado Pollution Control
Revenue Bond (A) (B) (C)
4.150%, 07/01/98 ........................................................... 1,400 1,400
---------
DELAWARE - 0.5%
Wilmington, Delaware Hospital for Franciscan Health System
Hospital Project, Series A Pre-Refunded @ 100 (A) (B) (C) (D)
5.000%, 02/02/98 ........................................................... 1,000 1,000
---------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA - 3.3%
Broward County, Florida Housing Finance Authority Multi-Family
Housing Revenue Landings Inverray Apartments
Project (A) (B) (C)
4.250%, 01/02/98 ........................................................... $ 600 $ 600
Broward County, Florida Housing Financial Authority
Multi-Family Housing Revenue Bond Sanctuary
Apartments Project (A) (C)
4.250%, 01/02/98 ........................................................... 1,500 1,500
Florida Municipal Power TECP
3.650%, 02/11/98 ........................................................... 2,510 2,510
Sunshine State, Florida TECP
3.750%, 03/27/98 ........................................................... 2,000 2,000
----------
Total Florida 6,610
----------
GEORGIA - 1.4%
Georgia Municipal Electric Authority Revenue Bond,
Series B Pre-Refunded @ 102 (A) (B) (D)
8.000%, 01/02/98 ........................................................... 1,000 1,020
Hapeville, Georgia Industrial Development Authority
Revenue Bond for Hapeville Hotel Project (A) (B) (C)
5.100%, 01/02/98 ........................................................... 300 300
Georgia State, Municipal Electric Authority
Revenue Bond (A) (B) (C)
3.850%, 01/02/98 ........................................................... 1,405 1,405
----------
Total Georgia 2,725
----------
ILLINOIS - 1.2%
Chicago, Illinois O'Hare Airport Revenue Bond (A) (B) (C)
3.700%, 01/02/98 ........................................................... 300 300
Illinois Development Financial Authority Pollution Control
Revenue Bond for Amoco Oil Company Project (A) (B)
4.950%, 01/02/98 ........................................................... 600 600
Illinois State Toll Highway Authority Revenue Bond,
Series B (A) (B)
3.650%, 01/02/98 ........................................................... 1,400 1,400
----------
Total Illinois 2,300
----------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDIANA - 4.8%
Gary, Indiana Environmental Improvement Revenue Bond for
U.S. Steel Project (A) (B) (C)
4.050%, 01/15/98 ........................................................... $ 700 $ 700
Hammond, Indiana Pollution Control Revenue Bond for Amoco
Oil Company Project (A) (B) (C)
4.950%, 01/02/98 ........................................................... 1,835 1,835
Sullivan Hoosiers, Indiana L1 TECP
3.750%, 02/25/98 ........................................................... 1,000 1,000
Sullivan Hoosiers, Indiana L2 TECP
3.750%, 01/09/98 ........................................................... 1,450 1,450
3.750%, 03/27/98 ........................................................... 1,100 1,100
Sullivan Hoosiers, Indiana L3 TECP
3.700%, 04/09/98 ........................................................... 2,000 2,000
Sullivan Hoosiers, Indiana L5 TECP
3.700%, 02/27/98 ........................................................... 1,000 1,000
3.750%, 03/27/98 ........................................................... 1,000 1,000
3.700%, 04/09/98 ........................................................... 1,700 1,700
Sullivan Hoosiers, Indiana L6 TECP
3.700%, 02/27/98 ........................................................... 1,100 1,100
3.750%, 07/07/98 ........................................................... 2,000 2,000
---------
Total Indiana 14,885
---------
KANSAS - 2.0%
Burlington, Kansas TECP
3.700%, 01/13/98 ........................................................... 1,800 1,800
Johnson County, Kansas School District No. 512
Shawnee Mission GO
5.850%, 10/01/98 ........................................................... 2,000 2,029
Kansas City, Kansas Industrial Development Revenue Bond for
PQ Corporation Project (A) (B) (C)
5.200%, 01/02/98 ........................................................... 100 100
---------
Total Kansas 3,929
---------
KENTUCKY - 4.0%
Mason County, Kentucky Pollution Control Revenue Bond (B) (C)
3.950%, 01/07/98 ........................................................... 6,000 6,000
Pendleton, Kentucky TECP
3.850%, 03/09/98 ........................................................... 2,000 2,000
---------
Total Kentucky 8,000
---------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LOUISIANA - 3.0%
Jefferson Parish, Louisiana Industrial Revenue Bond for
George J. Ackel, Sr. Project (A) (B) (C)
3.850%, 01/07/98 ........................................................... $1,900 $ 1,900
Lake Charles, Louisiana District Port Facility Revenue Bond
for Conoco Project (A) (B)
5.000%, 01/02/98 ........................................................... 2,100 2,100
Louisiana State Public Facilities Authority Revenue Bond
for Kenner Hotel Project (A) (B) (C)
5.100%, 01/07/98 ........................................................... 600 600
Parish of Saint Charles, Louisiana Pollution Control Revenue
Bond for Shell Oil Company Project, Ser B (A) (B)
4.900%, 01/02/98 ........................................................... 1,400 1,400
---------
Total Louisiana 6,000
---------
MASSACHUSETTS - 0.5%
Massachussetts State Health and Educational Facilities Lahey
Clinic Project, Series A1 Pre-Refunded @ 102 (C) (D)
7.625%, 07/01/98 ........................................................... 950 986
---------
MICHIGAN - 4.6%
Cornell Township, Michigan Economic Development
Corporation Revenue Bond for Environmental
Improvement (A) (B) (C)
5.000%, 11/01/16 ........................................................... 200 200
Delta County, Michigan Environmental Improvement Revenue
Bond for Mead Escambia Paper Project, Series C (A) (B) (C)
5.100%, 12/01/23 ........................................................... 600 600
Michigan State GO
4.500%, 09/30/98 ........................................................... 3,000 3,016
Michigan State Strategic Fund Pollution Control Revenue
Bond for Consumer Power Project (A) (B) (C)
4.950%, 01/02/98 ........................................................... 300 300
Michigan Storage TECP
3.750%, 02/05/98 ........................................................... 5,000 5,000
---------
Total Michigan 9,116
---------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MINNESOTA - 1.0%
Minnesota State, GO Pre-Refunded @ 100
6.600%, 08/01/98 ........................................................... $2,000 $ 2,031
---------
MISSISSIPPI - 3.7%
Claiborne County, Mississippi TECP
3.750%, 02/13/98 ........................................................... 2,350 2,350
Claiborne County, Mississippi G2 TECP
3.750%, 03/06/98 ........................................................... 1,400 1,400
Claiborne County, Mississippi TECP
3.750%, 02/13/98 ........................................................... 3,500 3,500
---------
Total Mississippi 7,250
---------
MISSOURI - 3.5%
Independence, Missouri TECP
3.800%, 01/09/98 ........................................................... 2,900 2,900
University of Missouri Capital Project Notes, Series FY
4.250%, 06/30/98 ........................................................... 4,000 4,008
---------
Total Missouri 6,908
---------
MONTANA - 1.9%
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project (A) (B) (C)
3.700%, 01/02/98 ........................................................... 1,000 1,000
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project, Series A (A) (B) (C)
3.650%, 01/02/98 ........................................................... 2,000 2,000
Forsyth, Montana Polution Control Revenue Bond Pacificorp
Project, Series 1988 (A) (B) (C)
4.500%, 01/02/98 ........................................................... 800 800
---------
Total Montana 3,800
---------
NEVADA - 1.0%
Clark County, Nevada Industrial Development Revenue
Bond, Series C (A) (B)
3.850%, 01/07/98 ........................................................... 2,000 2,000
---------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW HAMPSHIRE - 0.3%
New Hampshire State Industrial Development Revenue Bond
for Oerlikon-Burlhe Project (A) (B) (C)
3.800%, 01/02/98 ........................................................... $ 600 $ 600
----------
NEW MEXICO - 1.1%
Albuquerque, New Mexico GO, Ser A & B
4.600%, 07/01/98 ........................................................... 2,150 2,159
----------
NEW YORK - 3.6%
New York City, New York GO (A) (B) (C)
4.150%, 01/02/98 ........................................................... 300 300
New York Muni Waters TECP
3.800%, 02/05/98 ........................................................... 5,000 5,000
New York State Energy Research and Development Authority
Pollution Control Revenue for Niagara Mohawk Power
Project, Series A (A) (B) (C)
4.500%, 01/02/98 ........................................................... 600 600
New York State Urban Development Corporate Revenue Bond
for Correctional Facilities Project, Series C
Pre-Refunded @102 (C) (D)
7.625%, 01/01/98 ........................................................... 1,175 1,199
----------
Total New York 7,099
----------
NORTH CAROLINA - 4.3%
Lexington, North Carolina Medical Care Community
Hospital Revenue Bond for Memorial Hospital
Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... 1,000 1,000
North Carolina Medcare Givens Revenue Bond (A) (B) (C)
5.000%, 01/02/98 ........................................................... 3,000 3,000
North Carolina Medical Care Community Hospital Revenue
Pooled Finance Project, Series A (A) (B) (C)
5.000%, 01/02/98 ........................................................... 4,470 4,470
----------
Total North Carolina 8,470
----------
OHIO - 1.6%
Evandale, Ohio Industrial Development Authority Revenue
Bond (A) (B) (C)
3.700%, 01/02/98 ........................................................... 1,600 1,600
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ohio State Air Quality Revenue Bond (A) (B) (C)
5.000%, 01/07/98 ........................................................... $ 600 $ 600
Ohio State Air Quality Revenue Bond, Series B (A) (B) (C)
4.500%, 01/02/98 ........................................................... 1,000 1,000
----------
Total Ohio 3,200
----------
OREGON - 2.6%
Port of Portland, Oregon Pollution Control Revenue Bond for
Reynold Metals Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... 2,700 2,700
Port of St. Helens, Oregon Pollution Control Revenue
Bond (A) (B) (C)
4.950%, 01/02/98 ........................................................... 1,400 1,400
Umatilla County, Oregon Franciscan Health System Revenue
Bond, Series A Pre-Refunded @ 100 (A) (B) (C) (D)
5.000%, 02/02/98 ........................................................... 1,100 1,100
----------
Total Oregon 5,200
----------
PENNSYLVANIA - 13.8%
Allegheny County, Pennsylvania Hospital Development Revenue
Bond for Presbyterian University Hospital Project,
Ser B3 (A) (B) (C)
4.250%, 01/02/98 ........................................................... 900 900
Allegheny County, Pennsylvania Revenue Bond for Presbyterian
University Hospital (A) (B) (C)
4.250%, 01/02/98 ........................................................... 805 805
4.250%, 01/07/98 ........................................................... 1,700 1,700
Beaver County, Pennsylvania TECP
3.750%, 03/05/98 ........................................................... 1,700 1,700
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series A (A) (B) (C)
3.650%, 01/02/98 ........................................................... 1,000 1,000
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series B (A) (B) (C)
3.650%, 01/02/98 ........................................................... 1,100 1,100
Curwensville, Pennsylvania School District TRAN
4.160%, 06/30/98 ........................................................... 840 841
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Valley Regional Finance Authority Local Government
Revenue Bond, Series B (A) (B) (C)
3.650%, 01/02/98 ........................................................... $3,000 $ 3,000
Langhorne, Pennsylvania Saint Mary Hospital Authority
Revenue Bond for Franciscan Health Systems Project,
Series C Pre-Refunded @ 100 (A) (B) (C) (D)
5.000%, 02/02/98 ........................................................... 1,000 1,000
Lehigh County, Pennsylvania Industrial Development Authority
Revenue Bond for Allegheny Electric Project,
Series A (A) (B) (C)
3.800%, 12/01/15 ........................................................... 500 500
Montgomery County, Pennsylvania TECP
3.750%, 02/10/98 ........................................................... 2,500 2,500
Pennsylvania State Higher Education Facilities Authority
Revenue Bond for Carnegie Mellon University
Project, Series B (A) (B)
4.850%, 01/02/98 ........................................................... 800 800
Temple University, Pennsylvania Commonwealth
System of Higher Education
4.750%, 05/18/98 ........................................................... 1,000 1,003
Upper Darby, Pennsylvania School District GO
4.170%, 06/30/98 ........................................................... 500 501
Upper Darby, Pennsylvania School District TRAN
4.170%, 06/30/98 ........................................................... 1,756 1,757
Washington County, Pennsylvania Industrial Development
Authority Revenue Bond for Wetterau Finance
Company Project (A) (B) (C)
4.250%, 01/02/98 ........................................................... 2,500 2,500
Washington County, Pennsylvania Lease Revenue
Bond (A) (B) (C)
3.850%, 11/01/05 ........................................................... 3,415 3,415
York, Pennsylvania General Authority Pooled Revenue
Bond (A) (B) (C)
4.200%, 01/02/98 ........................................................... 2,350 2,350
---------
Total Pennsylvania 27,372
---------
SOUTH CAROLINA - 1.0%
Berkeley County, South Carolina Pollution Control Revenue
Bond for Amoco Chemical Project (A) (B)
4.950%, 01/02/98 ........................................................... 1,900 1,900
---------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TENNESSEE - 0.0%
Sullivan County, Tennessee Industrial Development Authority
Pollution Control Revenue Bond for Mead
Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... $ 100 $ 100
----------
TEXAS - 5.6%
Grapevine, Texas Industrial Development Authority Revenue
Bond for American Airlines Project, Series B3 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 1,600 1,600
Grapevine, Texas Industrial Development Authority Revenue
Bond for American Airlines Project, Series B4 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 800 800
Grapevine, Texas Industrial Development Authority
Revenue Bond for American Airlines Project,
Series A3 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 700 700
Grapevine, Texas Industrial Development Corporation
American Airlines, Series A1 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 400 400
North Central, Texas Health Facility Development Corporation
Revenue Bond (A) (B) (C)
5.000%, 01/02/98 ........................................................... 195 195
Nueces County, Texas Health Facilities Authority Revenue
Bond for Driscoll Children's Foundation Project (A) (B) (C)
3.850%, 01/02/98 ........................................................... 600 600
Port Corpus Christi, Texas Industrial Development Corporation
Revenue Bond, Series A (A) (B) (C)
3.850%, 01/02/98 ........................................................... 2,000 2,000
Tarrant County, Texas Housing Finance Authority Revenue
Bond for Windcastle Project (A) (B) (C)
3.850%, 01/02/98 ........................................................... 1,034 1,034
Texas Small Business Industrial Development Revenue Bond
3.700%, 01/07/98 ........................................................... 1,300 1,300
Texas State, Series A TRAN (A) (B) (C)
4.750%, 08/31/98 ........................................................... 2,500 2,514
----------
Total Texas 11,143
----------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTAH - 3.6%
Intermountain Power Agency Utah Power Supply Revenue
Bond, Series F (A) (B) (C)
3.750%, 07/01/15 ........................................................... $3,000 $ 3,000
Intermountain Power Agency Utah TECP
3.750%, 01/12/98 ........................................................... 3,000 3,000
Utah State Brd Regents Revenue Bond (A) (B) (C)
4.750%, 08/01/98 ........................................................... 1,155 1,161
---------
Total Utah 7,161
---------
VERMONT - 0.6%
Vermont State Student Loan Revenue Bond, Student Loan
Assistance Corporation Project (A) (B) (C)
3.800%, 01/02/98 ........................................................... 1,240 1,240
---------
VIRGINIA - 7.1%
Alexandria, Redevelopment & Housing Authority Goodwin
Project Revenue Bond, Ser B (A) (B) (C)
5.000%, 10/01/06 ........................................................... 2,100 2,100
Petersburg, Virginia Hospital Authority Southside
Revenue Project (A)
5.000%, 01/02/98 ........................................................... 1,800 1,800
Portsmouth, Virginia Housing Development Revenue
Bond (A) (B) (C)
4.000%, 11/01/27 ........................................................... 2,000 2,000
Virginia State Peninsula Port Authority Revenue Bond for
Dominion Terminal Project, Series 1987C (A) (B) (C)
5.000%, 01/02/98 ........................................................... 725 725
Virigina State Housing Revenue Bond
3.800%, 06/10/98 ........................................................... 3,000 3,000
Waynesboro, Viriginia Residential Care Facilities
Revenue Bond (A) (B) (C)
5.000%, 01/02/98 ........................................................... 4,330 4,330
---------
Total Virginia 13,955
---------
WEST VIRGINIA - 0.7%
Putnam County, West Virginia Industrial Development
Authority Revenue Bond for FMC Corporation
Project (A) (B) (C)
3.800%, 01/02/98 ........................................................... 1,300 1,300
---------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
WISCONSIN - 0.5%
Wisconsin Health and Educational Facilities Wheaton
Franciscan Services Revenue Bond
Pre-Refunded @ 102 (C) (D)
8.200%, 08/15/98 ........................................................... $1,000 $ 1,046
---------
WYOMING - 6.8%
Converse County, Wyoming TECP
3.750%, 02/02/98 ........................................................... 2,800 2,800
Gillette County, Wyoming TECP
3.700%, 01/07/98 ........................................................... 1,200 1,200
3.800%, 01/14/98 ........................................................... 3,000 3,000
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project, Series D (A) (B)
5.100%, 01/07/98 ........................................................... 1,200 1,200
Lincoln County, Wyoming Pollution Control Revenue Bond,
Series 1984 B (A)
5.100%, 01/02/98 ........................................................... 600 600
Lincoln County, Wyoming Resource Recovery Revenue Bond
for Exxon Project, Series C (A) (B)
5.100%, 01/02/98 ........................................................... 600 600
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project (A) (B)
4.950%, 01/02/98 ........................................................... 1,900 1,900
Platte County, Wyoming Pollution Control Revenue Bond,
Series A (A) (B) (C)
4.500%, 01/02/98 ........................................................... 600 600
Platte County, Wyoming Pollution Control Revenue Bond,
Series B (A) (B) (C)
4.500%, 01/02/98 ........................................................... 1,600 1,600
---------
Total Wyoming 13,500
---------
TOTAL MUNICIPAL BONDS
(Cost $202,760) ............................................................... 202,760
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.7%
(Cost $202,760) .................................................................. 202,760
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.3% ............................................ 499
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
MARKET
VALUE
ELITE TAX-FREE RESERVE (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSETS:
Portfolio Shares ($0.001 par value -- 250 million authorized)
based on 202,261,424 outstanding shares .......................................... $202,261
Portfolio Shares ($0.001 par value -- 250 million authorized)
based on 1,028,846 outstanding shares ............................................ 1,029
Accumulated Net Realized Loss on Investments ........................................ (31)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ........................................................... $203,259
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS Y ........................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS C ........................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
GO -- GENERAL OBLIGATION
RAN -- REVENUE ANTICIPATION NOTE
TECP -- TAX-EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTES
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSER OF THE
PUT DEMAND DATE OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
This page left intentionally blank.
20
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (000) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
For the six month period ended December 31, 1997 (Unaudited)
ELITE ELITE ELITE
TREASURY CASH TAX
RESERVE RESERVE FREE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ................................................ $831 $7,064 $3,408
---- ------ ------
EXPENSES:
Investment advisory fees ................................... 30 248 184
Less investment advisory fees waived ....................... (18) (149) (111)
Administrative fees ........................................ 37 310 230
Less administrative fees waived ............................ (27) (224) (166)
Transfer agent fees & expenses ............................. 3 6 11
Professional fees .......................................... (1) (1) 4
Registration & filing fees ................................. -- 21 4
Printing ................................................... -- 15 10
Miscellaneous .............................................. -- 16 --
---- ------ ------
Total expenses ................................................... 24 242 166
---- ------ ------
NET INVESTMENT INCOME ............................................ 807 6,822 3,242
NET REALIZED LOSS ON INVESTMENTS:
Net realized loss from securities sold ..................... -- -- (1)
---- ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $807 $6,822 $3,241
==== ====== ======
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
For the six month period ended December 31, 1997 (Unaudited) and the year ended June 30, 1996
ELITE
TREASURY
RESERVE*
- ---------------------------------------------------------------------------------------------------------------------
07/01/97 07/01/96
TO 12/31/97 TO 06/30/97
----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net investment income ................................................. $ 807 $ 1,347
Net realized loss on securities ....................................... -- --
-------- --------
Net increase in net assets resulting from operations ........................ 807 1,347
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class Y ........................................................... (799) (13,478)
Class C ........................................................... (8) --
-------- --------
Total dividends distributed ........................................... (807) (13,478)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued ....................................... 97,965 40,896
Cost of shares redeemed ........................................... (65,778) (43,727)
-------- --------
Increase (Decrease) in net assets
from Class C transactions .............................. 32,187 (2,831)
-------- --------
Class C
Proceeds from shares issued ....................................... 4,498 --
Cost of shares redeemed ........................................... (85) --
-------- --------
Increase in net assets from Class C transactions ............. 4,413 --
-------- --------
Increase (Decrease) in net assets from capital transactions ................. 36,600 (2,831)
======== ========
NET ASSETS:
Beginning of period ................................................... 21,667 24,498
-------- --------
End of period ......................................................... $ 58,267 $ 21,667
======== ========
SHARES ISSUED AND REDEEMED:
Class Y
Shares issued ..................................................... 97,965 40,896
Shares redeemed ................................................... (65,778) (43,727)
-------- --------
Net increase (decrease) ...................................... 32,187 (2,831)
-------- --------
Class C
Shares issued ..................................................... 4,498 --
Shares redeemed ................................................... (85) --
-------- --------
Net increase (decrease) ...................................... 4,413 --
-------- --------
Total share activity for period ............................................. 36,600 (2,831)
-------- --------
OUTSTANDING SHARES:
Beginning of period ................................................... 21,667 24,498
-------- --------
End of period ......................................................... 58,267 21,667
======== ========
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
ELITE
CASH
RESERVE**
- -----------------------------------------------------------------------------------------------------------------------
07/01/97 07/01/96
TO 12/31/97 TO 06/30/97
----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net investment income ................................................. $ 6,822 $ 18,767
Net realized loss on securities ....................................... -- (3)
---------- ------------
Net increase in net assets resulting from operations ........................ 6,822 18,764
---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class Y ........................................................... (6,821) (18,767)
Class C ........................................................... (1) --
---------- ------------
Total dividends distributed ........................................... (6,822) (18,767)
---------- ------------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued ....................................... 457,011 825,899
Cost of shares redeemed ........................................... (384,653) (1,003,355)
---------- ------------
Increase (Decrease) in net assets
from Class C transactions .............................. 72,358 (177,456)
---------- ------------
Class C
Proceeds from shares issued ....................................... 345 --
Cost of shares redeemed ........................................... -- --
---------- ------------
Increase in net assets from Class C transactions ............. 345 --
---------- ------------
Increase (Decrease) in net assets from capital transactions ................. 72,703 (177,456)
========== ============
NET ASSETS:
Beginning of period ................................................... 206,990 384,446
---------- ------------
End of period ......................................................... $ 279,693 $ 206,990
========== ============
SHARES ISSUED AND REDEEMED:
Class Y
Shares issued ..................................................... 457,014 825,899
Shares redeemed ................................................... (384,653) (1,003,355)
---------- ------------
Net increase (decrease) ...................................... 72,361 (177,456)
---------- ------------
Class C
Shares issued ..................................................... 345 --
Shares redeemed ................................................... -- --
---------- ------------
Net increase (decrease) ...................................... 345 --
---------- ------------
Total share activity for period ............................................. 72,706 (177,456)
---------- ------------
OUTSTANDING SHARES:
Beginning of period ................................................... 206,990 384,446
---------- ------------
End of period ......................................................... 279,696 206,990
========== ============
</TABLE>
<TABLE>
<CAPTION>
ELITE
TAX-FREE
RESERVE***
- -------------------------------------------------------------------------------------------------------------------
07/01/96 07/01/96
TO 06/30/97 TO 06/30/97
----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net investment income ................................................. $ 3,242 $ 3,774
Net realized loss on securities ....................................... (1) --
----------- ----------
Net increase in net assets resulting from operations ........................ 3,241 3,774
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class Y ........................................................... (3,241) (3,774)
Class C ........................................................... (1) --
----------- ----------
Total dividends distributed ........................................... (3,242) (3,774)
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued ....................................... 248,501 226,783
Cost of shares redeemed ........................................... (193,581) (165,949)
----------- ----------
Increase (Decrease) in net assets
from Class C transactions .............................. 54,920 60,834
----------- ----------
Class C
Proceeds from shares issued ....................................... 1,029 --
Cost of shares redeemed ........................................... -- --
----------- ----------
Increase in net assets from Class C transactions ............. 1,029 --
----------- ----------
Increase (Decrease) in net assets from capital transactions ................. 55,948 60,834
=========== ==========
NET ASSETS:
Beginning of period ................................................... 147,311 86,477
----------- ----------
End of period ......................................................... $ 203,259 $147,311
=========== ==========
SHARES ISSUED AND REDEEMED:
Class Y
Shares issued ..................................................... 248,501 226,783
Shares redeemed ................................................... (193,581) (165,949)
----------- ----------
Net increase (decrease) ...................................... 54,920 60,834
----------- ----------
Class C
Shares issued ..................................................... 1,029 --
Shares redeemed ................................................... -- --
----------- ----------
Net increase (decrease) ...................................... 1,029 --
----------- ----------
Total share activity for period ............................................. 55,949 60,834
----------- ----------
OUTSTANDING SHARES:
Beginning of period ................................................... 147,341 86,507
----------- ----------
End of period ......................................................... 203,290 147,341
=========== ==========
<FN>
* THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
** THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY CASH RESERVE.
*** THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
</FN>
</TABLE>
See accompanying notes to financial statements.
22 & 23
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
ELITE TREASURY RESERVE+
- ---------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO
NET NET RATIO OF EXPENSES
ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ------------- ------------ ------ --------- ----------- ---------- -----------
CLASS Y
For the six month
period ended
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997** $1.00 0.05 (0.05) $1.00 2.76%* $53,854 0.16% 5.46% 0.46%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.54% $24,498 0.19% 5.39% 0.80%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.24% $18,396 0.23% 5.09% 0.87%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.10% $20,363 0.28% 3.03% 0.91%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.17% $27,614 0.18% 3.19% 0.85%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 2.00%* $49,328 0.05% 3.95% 0.80%
CLASS C
For the six month
period ended
December 31, 1997**(2) $1.00 0.01 (0.01) $1.00 0.20%* $4,413 0.41% 5.21% 0.71%
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS
(EXCLUDING
WAIVERS)
----------
CLASS Y
For the six month
period ended
<S> <C>
December 31, 1997** 5.16%
For the year ended
June 30, 1996 4.78%
For the year ended
June 30, 1995 4.45%
For the year ended
June 30, 1994 2.40%
For the year ended
June 30, 1993 2.52%
For the period ended
June 30, 1992 (1) 3.20%
CLASS C
For the six month
period ended
December 31, 1997**(2) 4.91%
<FN>
- ----------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1997 HAVE BEEN ANNUALIZED.
(1) THE ELITE TREASURY RESERVE CLASS Y COMMENCED OPERATIONS ON DECEMBER 10, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) THE ELITE TREASURY RESERVE CLASS C COMMENCED OPERATIONS ON DECEMBER 18, 1997.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
</FN>
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
ELITE CASH RESERVE+
- ---------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO
NET NET RATIO OF EXPENSES
ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ------------- ------------ ------ --------- ----------- ---------- -----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the six month
period ended
December 31, 1997** $1.00 0.05 (0.05) $1.00 2.81%* $279,348 0.20% 5.50% 0.50%
For the year ended
June 30, 1997 $1.00 0.05 (0.05) $1.00 5.43% $206,987 0.17% 5.28% 0.50%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.62% $384,446 0.15% 5.46% 0.76%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.46% $406,597 0.17% 5.35% 0.81%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.31% $382,814 0.16% 3.24% 0.84%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.29% $424,363 0.17% 3.25% 0.81%
For the year ended
June 30, 1992 $1.00 0.05 (0.05) $1.00 5.04% $416,945 0.18% 4.96% 0.83%
For the year ended
June 30, 1991 $1.00 0.07 (0.07) $1.00 7.49% $453,947 0.15% 7.05% 0.80%
For the period ended
June 30, 1990 (1) $1.00 0.08 (0.08) $1.00 8.03%* $232,091 0.13% 8.42% 0.83%
CLASS C
For the six month
period ended
December 31, 1997**(2) $1.00 0.01 (0.01) $1.00 0.21%* $345 0.45% 5.35% 0.75%
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS
(EXCLUDING
WAIVERS)
----------
CLASS Y
For the six month
period ended
<S> <C>
December 31, 1997** 5.20%
For the year ended
June 30, 1997 4.94%
For the year ended
June 30, 1996 4.85%
For the year ended
June 30, 1995 4.71%
For the year ended
June 30, 1994 2.56%
For the year ended
June 30, 1993 2.61%
For the year ended
June 30, 1992 4.31%
For the year ended
June 30, 1991 6.40%
For the period ended
June 30, 1990 (1) 7.72%
CLASS C
For the six month
period ended
December 31, 1997**(2) 5.05%
<FN>
- ------------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1997 HAVE BEEN ANNUALIZED.
(1) THE ELITE CASH RESERVE CLASS Y COMMENCED OPERATIONS ON DECEMBER 10, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) THE ELITE CASH RESERVE CLASS C COMMENCED OPERATIONS ON DECEMBER 18, 1997.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY CASH RESERVE
</FN>
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
ELITE TAX-FREE RESERVE+
- ---------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO
NET NET RATIO OF EXPENSES
ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ------------- ------------ ------ --------- ----------- ---------- -----------
CLASS Y
For the six month
period ended
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997** $1.00 0.03 (0.03) $1.00 1.78%* $202,230 0.18% 3.52% 0.48%
For the year ended
June 30, 1997 $1.00 0.03 (0.03) $1.00 3.42%$ 147,311 0.17% 3.39% 0.50%
For the year ended
June 30, 1996 $1.00 0.03 (0.03) $1.00 3.51%$ 86,477 0.16% 3.44% 0.76%
For the year ended
June 30, 1995 $1.00 0.03 (0.03) $1.00 3.41%$ 72,593 0.19% 3.37% 0.83%
For the year ended
June 30, 1994 $1.00 0.02 (0.02) $1.00 2.32%$ 78,219 0.17% 2.29% 0.82%
For the year ended
June 30, 1993 $1.00 0.02 (0.02) $1.00 2.48%$ 48,424 0.19% 2.45% 0.83%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 1.50%* $ 66,158 0.17% 3.00% 0.89%
For the six month
period ended
December 31, 1997** $1.00 0.03 (0.03) $1.00 1.78%* $202,230 0.18% 3.52% 0.48%
CLASS C
For the six month
period ended
December 31, 1997**(2) $1.00 0.01 (0.01) $1.00 0.13%* $1,029 0.43% 3.27% 0.73%
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS
(EXCLUDING
WAIVERS)
----------
CLASS Y
For the six month
period ended
<S> <C>
December 31, 1997** 3.22%
For the year ended
June 30, 1997 3.06%
For the year ended
June 30, 1996 2.84%
For the year ended
June 30, 1995 2.73%
For the year ended
June 30, 1994 1.64%
For the year ended
June 30, 1993 1.81%
For the period ended
June 30, 1992 (1) 2.28%
For the six month
period ended
December 31, 1997** 3.22%
CLASS C
For the six month
period ended
December 31, 1997**(2) 2.97%
<FN>
- --------------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1997 HAVE BEEN ANNUALIZED.
(1) THE ELITE TAX-FREE RESERVE CLASS Y COMMENCED OPERATIONS ON NOVEMBER 19, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) THE ELITE TAX-FREE RESERVE CLASS C COMMENCED OPERATIONS ON DECEMBER 18, 1997.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
</FN>
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
1. ORGANIZATION
The CoreFund Elite Treasury Reserve is a Fund offered by CoreFunds, Inc.
(the "Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Cash Reserve
International Growth Fund Elite Treasury Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME FUNDS:
Short Term Income Fund
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements included herein present only those of the Elite
Treasury Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Treasury Reserve.
SECURITY VALUATION -- Investment securities of the Elite Treasury Reserve are
stated at amortized cost which approximates market value. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by each Fund's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of the collateral
by the Fund may be delayed or limited.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Treasury
Reserve, Elite Cash Reserve and Elite Tax-Free Reserve. Advisory fees are
computed daily and paid monthly for all Funds. Additionally, for the six month
period ended December 31, 1997, CSIA has voluntarily waived a portion of their
fees in order to assist the Funds in maintaining competitive expense ratios.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, at
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resource ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Funds's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Treasury Reserve, Elite Cash Reserve and Elite
Tax-Free Reserve. Such a fee is computed daily and paid monthly for all Funds.
Additionally, for the six month period ended December 31, 1997, SFR has
voluntarily waived a portion of their fees in order to assist the Fund in
maintaining a competitive expense ratio.
Effective for the period July 1, 1995 to November 16, 1995, SEI Investments
Management Corporation acted as the Transfer Agent of the Fund. Pursuant to a
transfer agency agreement dated November 16, 1995, Boston Financial Data
Services ("BFDS") a subsidiary of State Street Bank and Trust Company acts as
the Fund's Transfer Agent. As such, BFDS provides transfer agency, dividend
disbursing, and shareholder servicing for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
5. INVESTMENT COMPOSITION
The Fund invests in securities which include revenue and general obligation
instruments.
At December 31, 1997, the revenue sources by purpose were as follows:
% OF PORTFOLIO
INVESTMENTS
--------------
REVENUE INSTRUMENTS
Education Bonds ..................................... 5%
Hospital & Health Care Bonds ........................ 12
Housing Bonds ....................................... 5
Industrial Development Bonds ........................ 8
Other Bonds ......................................... 5
Pollution Control Bonds ............................. 16
Transportation Bonds ................................ 4
Utility Bonds ....................................... 3
TAX EXEMPT COMMERCIAL PAPER .................................. 29
GENERAL OBLIGATIONS .......................................... 7
TAX & REVENUE ANTICIPATION NOTES ............................. 6
-----
100%
=====
In addition, certain investments are covered by insurance issued by several
private issuers who guarantee the payment of interest and principal at final
maturity in the event of default. Such insurance, however, does not guarantee
the market value of the securities or the value of the Fund's shares.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
6. PROPOSED REORGANIZATION
On November 18, 1997, CoreStates Financial Corp. and First Union
Corporation jointly announced that they had signed a definitive agreement for
the merger of CoreStates Bank, N.A. and First Union Bank. The Advisor is
currently a wholly-owned subsidiary of CoreStates Bank, N.A. Subject to certain
conditions, it is anticipated that the transaction will close at the end of
April, 1998. Thereafter, the Advisor will be an indirect wholly-owned subsidiary
of First Union Bank. A special meeting of shareholders will be called to
consider certain proposed fund reorganizations.
31
<PAGE>
NOTES
- --------------------------------------------------------------------------------
32
<PAGE>
This report and the financial statements contained herein are submitted for
the general information of the shareholders of the Corporation. The report is
not authorized for distribution to prospective investors in the Corporation
unless preceded or accompanied by an effective prospectus. Shares in the Fund
are not deposits or obligations of, or guaranteed or endorsed by, CoreStates
Bank, N.A., the parent corporation of the Fund's investment adviser. Such shares
are also not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency.
<PAGE>
-77-
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
November 17, 1997
EVERGREEN SELECT STRATEGIC VALUE FUND
EVERGREEN SELECT DIVERSIFIED VALUE FUND
EVERGREEN SELECT LARGE CAP BLEND FUND
EVERGREEN SELECT COMMON STOCK FUND
EVERGREEN SELECT STRATEGIC GROWTH FUND
EVERGREEN SELECT EQUITY INCOME FUND
EVERGREEN SELECT SMALL COMPANY VALUE FUND
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
EVERGREEN SELECT BALANCED FUND
(EACH A "FUND" TOGETHER THE "FUNDS")
Each Fund is a series of an open-end
management investment company,
known as "Evergreen Select Equity
Trust" (the "Trust").
This statement of additional information ("SAI") provides additional
information about all classes of shares of the Funds listed above. It is not a
prospectus and you should read it in conjunction with the prospectus of the
Funds dated November 17, 1997, as supplemented from time to time. You may obtain
a copy of the prospectus from, Evergreen Distributor, Inc.
TABLE OF CONTENTS
INVESTMENT POLICIES..........................................................3
Additional Information on Securities and Investment Practices.......3
Investment Restrictions And Guidelines.............................13
MANAGEMENT OF THE TRUST.....................................................16
INVESTMENT ADVISORY AND OTHER SERVICES......................................18
Investment Advisers................................................18
Distributor . . . . . . . . . . . . . . . . . . . .. . . . . . . .20
Distribution Plan..................................................20
Additional Service Providers.......................................20
BROKERAGE ALLOCATION AND OTHER PRACTICES....................................21
Selection of Brokers...............................................21
Brokerage Commissions..............................................21
General Brokerage Policies.........................................21
TRUST ORGANIZATION..........................................................22
Form of Organization...............................................22
Description of Shares..............................................22
Voting Rights......................................................22
Limitation of Trustees' Liability..................................23
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES.............................23
Exchanges..........................................................23
How The Funds Value Their Shares...................................23
Shareholder Services...............................................24
PRINCIPAL UNDERWRITER.......................................................24
CALCULATION OF PERFORMANCE DATA.............................................25
ADDITIONAL INFORMATION......................................................25
FINANCIAL STATEMENTS........................................................25
INVESTMENT POLICIES
The investment objectives of each Fund and a description of the securities
in which each Fund may invest is set forth in the Funds' prospectus. The
following expands upon the discussion in the prospectus regarding certain
investments of the Funds.
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES
Equity Securities
Equity securities consist primarily of common stocks and securities
convertible into common stocks. Investing in common stocks, particularly those
having growth characteristics, frequently involves greater risks (and possibly
greater rewards) than investing in other types of securities. Common stock
prices tend to be more volatile and companies having growth characteristics may
sometimes be unproven.
Investing in companies with medium market capitalizations involves greater
risk than investing in larger companies. The stock prices of mid-cap companies
can rise quickly and drop substantially in a short period of time. This
volatility results from a number of factors, including reliance by these
companies on relatively limited product lines, markets, and financial resources.
These and other factors may make mid-cap companies more susceptible to setbacks
or downturns.
Investing in companies with small market capitalizations involves greater
risk than investing in larger companies. Their stock prices can rise very
quickly and drop dramatically in a short period of time. This volatility results
from a number of factors, including reliance by these companies on limited
product lines, markets, and financial and management resources. These and other
factors may make small cap companies more susceptible to setbacks or downturns.
These companies may experience higher rates of bankruptcy or other failures than
larger companies. They may be more likely to be negatively affected by changes
in management. In addition, the stock of small cap companies may be thinly
traded.
Derivatives
Derivatives are financial contracts whose value depends on, or is derived
from, the value of an underlying asset, reference rate or index. These assets,
rates, and indices may include bonds, stocks, mortgages, commodities, interest
rates, currency exchange rates, bond indices, and stock indices. Derivatives may
be standardized, exchange-traded contracts or customized, privately negotiated
contracts. Exchange-traded derivatives tend to be more liquid and subject to
less credit risk than those that are privately negotiated.
There are four principal types of derivative instruments -- options,
futures, forwards, and swaps -- from which virtually any type of derivative
transaction can be created. Debt instruments that incorporate one or more of
these building blocks for the purpose of determining the principal amount of
and/or rate of interest payable on the debt instruments are often referred to as
"structured securities." An example of this type of structured security is
indexed commercial paper. The term is also used to describe certain securities
issued in connection with the restructuring of certain foreign obligations. See
"Indexed Commercial Paper" and "Structured Securities" below. The term
"derivative" is also sometimes used to describe securities involving rights to a
portion of the cash flows from an underlying pool of mortgages or other assets
from which payments are passed through to the owner of, or that collateralize,
the securities. See "Mortgage Related Securities," "Collateralized Mortgage
Obligations," "Adjustable Rate Mortgage Securities," "Stripped Mortgage
Securities," "Mortgage Securities - Special Considerations," and "Other
Asset-Backed Securities."
The Funds can use derivatives to earn income, to enhance returns, to hedge
or adjust the risk profile of the portfolio, in place of more traditional direct
investments or to obtain exposure to otherwise inaccessible markets. A Fund's
use derivatives for non-hedging purposes entails greater risks than if a Fund
were to derivatives solely for hedging purposes.
Derivatives are a valuable tool which, when used properly, can provide
significant benefit to a Fund's shareholders. The Funds' investment adviser is
not an aggressive user of derivatives with respect to the Funds. However, a Fund
may take positions in those derivatives that are within its investment policies
if, in the Adviser's judgment, this represents an effective response to current
or anticipated market conditions. the Adviser's use of derivatives is subject to
continuous risk assessment and control from the standpoint of a Fund's
investment objective and policies. While the judicious use of derivatives by
experienced investment managers, such as the Adviser, can be beneficial,
derivatives also involve risks different from, and, in certain cases, greater
than, the risks presented by more traditional investments. Following is a
general discussion of important risk factors and issues concerning the use of
derivatives that investors should understand before investing in a Fund.
Market Risk -- This is the general risk attendant to all investments
that the value of a particular investment will decline or otherwise
change in a way detrimental to a Fund's interest.
Management Risk -- Derivative products are highly specialized
instruments that require investment techniques and risk analyses
different from those associated with stocks and bonds. The use of a
derivative requires an understanding not only of the underlying
instrument, but also of the derivative itself, without the benefit of
observing the performance of the derivative under all possible market
conditions. Because derivatives are complex, the Funds and the Adviser
must (1) maintain controls to monitor the transactions entered into,
(2) assess the risk that a derivative adds to a Fund's portfolio and
(3) forecast price, interest rate or currency exchange rate movements
correctly.
Credit Risk -- This is the risk that a Fund may lose money because the
other party to a derivative (usually called a "counter party") failed
to comply with the terms of the derivative contract. The credit risk
for exchange-traded derivatives is generally less than for privately
negotiated derivatives, since the clearing house, which is the issuer
or counter party to each exchange-traded derivative, guarantees
performance. This guarantee is supported by a daily payment system
(i.e., margin requirements) operated by the clearing house to reduce
overall credit risk. For privately negotiated derivatives, there is no
similar clearing agency guarantee. Therefore, a Fund considers the
creditworthiness of each counter party to a privately negotiated
derivative in evaluating potential credit risk.
Liquidity Risk -- Liquidity risk exists is the possibility that a Fund
will have difficulty buying or selling a particular instrument. If a
derivative transaction is particularly large or if the relevant market
is illiquid (as is the case with many privately negotiated
derivatives), a Fund may not be able to initiate a transaction or
liquidate a position at an advantageous price.
Leverage Risk -- Since many derivatives have a leverage component,
adverse changes in the value or level of the underlying asset, rate or
index can result in a loss substantially greater than the amount
invested in the derivative itself. In the case of swaps, the risk of
loss generally is related to a notional principal amount, even if the
parties have not made any initial investment. Certain derivatives have
the potential for unlimited loss, regardless of the size of the initial
investment.
Other Risks -- Other risks in using derivatives include the risk of
mispricing or improper valuation and the inability of derivatives to
correlate perfectly with underlying assets, rates, and indices. Many
derivatives, in particular privately negotiated derivatives, are
complex and often valued subjectively. Improper valuations can result
in increased cash payment requirements to counter parties or a loss of
value to a Fund. Derivatives do not always perfectly or even highly
correlate or track the value of the assets, rates or indices they are
designed to closely track. Consequently, a Fund's use of derivatives
may not always be an effective means of, and sometimes could be
counterproductive to, furthering a Fund's investment objective.
Options Transactions
Writing Covered Options. The Funds may write (i.e., sell) covered call and
put options. By writing a call option, a Fund becomes obligated during the term
of the option to deliver the securities underlying the option upon payment of
the exercise price. Writing a put option obligates the Fund during the term of
the option to purchase the securities underlying the option at the exercise
price if the option buyer exercises the option. A Fund also may write straddles
(combinations of covered puts and calls on the same underlying security).
The Funds may only write "covered" options. This means that while a Fund is
obligated as the writer of a call option it will own the underlying securities
subject to the option or, with call options on U.S. Treasury bills, it might own
similar U.S. Treasury bills. If a Fund has written options against all of its
securities that are available for writing options, the Fund may be unable to
write additional options unless it sells some of its portfolio holdings to
obtain new securities against which it can write options. If this were to occur,
higher portfolio turnover and correspondingly greater brokerage commissions and
other transaction costs may result. The Funds do not expect, however, that this
will occur. A Fund will be considered "covered" with respect to a put option it
writes if, while it is obligated as the writer of the put option, it deposits
and maintains with its custodian in a segregated account liquid assets having a
value equal to or greater than the exercise price of the option.
The principal reason for writing call or put options is to obtain, through
a receipt of premiums, a greater current return than would be realized on the
underlying securities alone. A Fund receives a premium from writing a call or
put option, which it retains whether or not the option is exercised. By writing
a call option, a Fund might lose the potential for gain on the underlying
security while the option is open, and, by writing a put option, a Fund might
become obligated to purchase the underlying security for more than its current
market price upon exercise.
Purchasing Options. The Funds may purchase put or call options, including
put or call options for offsetting previously written put or call options of the
same series. Once a Fund has written a covered option, it will continue to hold
the segregated securities or assets until it effects a closing purchase
transaction. If the Fund is unable to close the option position, it must hold
the segregated securities or assets until the option expires or is exercised. An
option position may be closed out only in a secondary market for an option of
the same series. Although a Fund generally writes only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market will exist for any particular option at any particular
time, and, for some options, no secondary market may exist. In such event,
effecting a closing transaction for a particular option might not be possible.
Options on some securities are relatively new, and predicting how much
trading interest there will be for such options is impossible. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair a Fund's ability to
use such options to achieve its investment objective.
Options Trading Markets. The Funds trade in options that are generally
listed on national securities exchanges, currently including the Chicago Board
Options Exchange and the New York, American, Pacific and Philadelphia Stock
Exchanges. Options on some securities are traded in the over-the-counter market,
and may not be listed on any exchange. Options traded in the over-the-counter
market involve a greater risk that the securities dealers participating in the
transactions could fail to meet their obligations to a Fund. Certain state
authorities may limit the use of options traded in the over-the-counter market.
A Fund will include the premiums it has paid for the purchase of unlisted
options and the value of securities used to cover options it has written for
purposes of calculating whether the Fund has complied with its policies on
illiquid securities.
Futures Transactions and Related Options Transactions
The Funds intend to enter into financial futures contracts as a hedge
against changes in prevailing levels of interest rates to seek relative
stability of principal and to establish more definitely the effective return on
securities held or intended to be acquired by the Funds or as a hedge against
changes in the prices of securities held by a Fund or to be acquired by a Fund.
A Fund's hedging may include sales of futures as an offset against the effect of
expected increases in interest rates or securities prices and purchases of
futures as an offset against the effect of expected declines in interest rates.
For example, when a Fund anticipates a significant market or market sector
advance, it will purchase a stock index futures contract as a hedge against not
participating in such advance at a time when a Fund is not fully invested. The
purchase of a futures contract serves as a temporary substitute for the purchase
of individual securities which may then be purchased in an orderly fashion. As
such purchases are made, an equivalent amount of index based futures contracts
would be terminated by offsetting sales. In contrast, a Fund would sell stock
index futures contracts in anticipation of or in a general market or market
sector decline that may adversely affect the market value of the Fund's
portfolio. To the extent that the Fund's portfolio changes in value in
correlation with a given index, the sale of futures contracts on that index
would substantially reduce the risk to the portfolio of a market decline or
change in interest rates, and, by doing so, provide an alternative to the
liquidation of the Fund's securities positions and the resulting transaction
costs.
The Funds intend to engage in options transactions which are related to
financial futures contracts for hedging purposes and in connection with the
hedging strategies described above.
Although techniques other than sales and purchases of futures contracts and
related options transactions could be used to reduce the Funds' exposure to
interest rate and/or market fluctuations, the Funds may be able to hedge their
exposure more effectively and perhaps at a lower cost through using futures
contracts and related options transactions. While the Funds do not intend to
take delivery of the instruments underlying futures contracts they hold, the
Funds do not intend to engage in such futures contracts for speculation.
Futures Contracts
Futures contracts are transactions in the commodities markets rather than
in the securities markets. A futures contract creates an obligation by the
seller to deliver to the buyer the commodity specified in the contract at a
specified future time for a specified price. The futures contract creates an
obligation by the buyer to accept delivery from the seller of the commodity
specified at the specified future time for the specified price. In contrast, a
spot transaction creates an immediate obligation for the seller to deliver and
the buyer to accept delivery of and pay for an identified commodity. In general,
futures contracts involve transactions in fungible goods such as wheat, coffee
and soybeans. However, in the last decade an increasing number of futures
contracts have been developed which specify financial instruments or financially
based indexes as the underlying commodity.
U.S. futures contracts are traded only on national futures exchanges and
are standardized as to maturity date and underlying financial instrument. The
principal financial futures exchanges in the United States are The Board of
Trade of the City of Chicago, the Chicago Mercantile Exchange, the International
Monetary Market (a division of the Chicago Mercantile Exchange), the New York
Futures Exchange and the Kansas City Board of Trade. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership, which is also
responsible for handling daily accounting of deposits or withdrawals of margin.
A futures commission merchant ("Broker") effects each transaction in connection
with futures contracts for a commission. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC") and National Futures Association ("NFA").
Interest Rate Futures Contracts. The sale of an interest rate futures
contract creates an obligation by a Fund, as seller, to deliver the type of
financial instrument specified in the contract at a specified future time for a
specified price. The purchase of an interest rate futures contract creates an
obligation by a Fund, as purchaser, to accept delivery of the type of financial
instrument specified at a specified future time for a specified price. The
specific securities delivered or accepted, respectively, at settlement date, are
not determined until at or near that date. The determination is in accordance
with the rules of the exchange on which the futures contract sale or purchase
was made.
Currently, interest rate futures contracts can be purchased or sold on
90-day U.S. Treasury bills, U.S. Treasury bonds, U.S. Treasury notes with
maturities between 6 1/2 and 10 years, Government National Mortgage Association
(GNMA) certificates, 90-day domestic bank certificates of deposit, 90-day
commercial paper, and 90-day Eurodollar certificates of deposit. It is expected
that futures contracts trading in additional financial instruments will be
authorized. The standard contract size is $100,000 for futures contracts in U.S.
Treasury bonds, U.S. Treasury notes and GNMA certificates, and $1,000,000 for
the other designated contracts. While U.S. Treasury bonds, U.S. Treasury bills
and U.S. Treasury notes are backed by the full faith and credit of the U.S.
government and GNMA certificates are guaranteed by a U.S. government agency, the
futures contracts in U.S. government securities are not obligations of the U.S.
Treasury.
Index Based Futures Contracts, Other Than Stock Index Based. It is expected
that bond index and other financially based index futures contracts will be
developed in the future. It is anticipated that such index based futures
contracts will be structured in the same way as stock index futures contracts
but will be measured by changes in interest rates, related indexes or other
measures, such as the consumer price index. In the event that such futures
contracts are developed, the Funds will sell interest rate index and other index
based futures contracts to hedge against changes which are expected to affect
the Funds' portfolios.
The purchase or sale of a futures contract differs from the purchase or
sale of a security, in that no price or premium is paid or received. Instead, to
initiate trading an amount of cash, cash equivalents, money market instruments,
or U.S. Treasury bills equal to approximately 1 1/2% (up to 5%) of the contract
amount must be deposited by a Fund with the Broker. This amount is known as
initial margin. The nature of initial margin in futures transactions is
different from that of margin in security transactions. Futures contract margin
does not involve the borrowing of funds by the customer to finance the
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to a Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. The margin required for a particular futures contract is set by
the exchange on which the contract is traded and may be significantly modified
from time to time by the exchange during the term of the contract.
Subsequent payments, called variation margin, to the Broker and from the
Broker, are made on a daily basis as the value of the underlying instrument or
index fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as mark-to-market. For example, when a
Fund has purchased a futures contract and the price of the underlying financial
instrument or index has risen, that position will have increased in value, and
the Fund will receive from the Broker a variation margin payment equal to that
increase in value. Conversely, where a Fund has purchased a futures contract and
the price of the underlying financial instrument or index has declined, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the Broker. At any time prior to expiration of the
futures contract, a Fund may elect to close the position. A final determination
of variation margin is then made, additional cash is required to be paid to or
released by the Broker, and the Fund realizes a loss or gain.
The Trust intends to enter into arrangements with its custodian and with
Brokers to enable the initial margin of a Fund and any variation margin to be
held in a segregated account by its custodian on behalf of the Broker.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of financial instruments, and index based futures
contracts call for the delivery of cash equal to the difference between the
closing value of the index on the expiration date of the contract and the price
at which the futures contract is originally made, in most cases such futures
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out a futures contract sale is effected by an offsetting
transaction in which a Fund enters into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument or index and same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund is paid the difference and thus realizes a gain. If the
offsetting purchase price exceeds the sale price, the Fund pays the difference
and realizes a loss. Similarly, the closing out of a futures contract purchase
is effected by an offsetting transaction in which a Fund enters into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the Fund
realizes a gain. If the purchase price exceeds the offsetting sale price the
Fund realizes a loss. The amount of the Fund's gain or loss on any transaction
is reduced or increased, respectively, by the amount of any transaction costs
incurred by the Fund.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one contract of September U.S. Treasury bills on an
exchange may be fulfilled at any time before delivery of the contract is
required (i.e. on a specified date in September, the "delivery month") by the
purchase of one contract of September U.S. Treasury bills on the same exchange.
In such instance the difference between the price at which the futures contract
was sold and the price paid for the offsetting purchase, after allowance for
transaction costs, represents the profit or loss to a Fund.
There can be no assurance, however, that a Fund will be able to enter into
an offsetting transaction with respect to a particular contract at a particular
time. If a Fund is not able to enter into an offsetting transaction, the Fund
will continue to be required to maintain the margin deposits on the contract and
to complete the contract according to its terms.
Options on Financial Futures. The Funds intend to purchase call and put
options on financial futures contracts and sell such options to terminate an
existing position. Options on futures are similar to options on stocks except
that an option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
rather than to purchase or sell stock at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures margin account. This amount represents the amount by which the market
price of the futures contract at exercise exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the futures
contract. If an option is exercised the last trading day prior to the expiration
date of the option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and value of the futures
contract.
The Funds intend to use options on financial futures contracts in
connection with hedging strategies. In the future the Funds may use such options
for other purposes.
Purchase of Put Options on Futures Contracts. The purchase of protective
put options on financial futures contracts is analogous to the purchase of
protective puts on individual stocks, where an absolute level of protection is
sought below which no additional economic loss would be incurred by a Fund. Put
options may be purchased to hedge a portfolio of stocks or debt instruments or a
position in the futures contract upon which the put option is based.
Purchase of Call Options on Futures Contracts. The purchase of call options
on financial futures contracts represents a means of obtaining temporary
exposure to market appreciation at limited risk. It is analogous to the purchase
of a call option on an individual stock, which can be used as a substitute for a
position in the stock itself. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying financial instrument or index itself, purchase of a call option may
be less risky than the ownership of the interest rate or index based futures
contract or the underlying securities. Call options on commodity futures
contracts may be purchased to hedge against an interest rate increase or a
market advance when a Fund is not fully invested.
Use of New Investment Techniques Involving Financial Futures Contracts or
Related Options. The Funds may employ new investment techniques involving
financial futures contracts and related options. The Funds intend to take
advantage of new techniques in these areas which may be developed from time to
time and which are consistent with the Fund's investment objective. The Trust
believes that no additional techniques have been identified for employment by
the Funds in the foreseeable future other than those described above.
Limitations on Purchase and Sale of Futures Contracts and Related Options
on Such Futures Contracts. A Fund will not enter into a futures contract if, as
a result thereof, more than 5% of the Fund's total assets (taken at market value
at the time of entering into the contract) would be committed to margin deposits
on such futures contracts, including any premiums paid for options on futures.
The Funds intend that its futures contracts and related options
transactions will be entered into for traditional hedging purposes. That is,
futures contracts will be sold to protect against a decline in the price of
securities that a Fund owns, or futures contracts will be purchased to protect a
Fund against an increase in the price of securities it intends to purchase. The
Funds do not intend to enter into futures contracts for speculation.
In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts will be deposited in a segregated account with the Trust's custodian
and/or in a margin account with a Broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
Risks of Futures Contracts. Financial futures contracts prices are volatile
and are influenced, among other things, by changes in stock prices, market
conditions, prevailing interest rates and anticipation of future stock prices,
market movements or interest rate changes, all of which in turn are affected by
economic conditions, such as government fiscal and monetary policies and
actions, and national and international political and economic events.
At best, the correlation between changes in prices of futures contracts and
of the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances, such as variations in
speculative market demand for futures contracts and for securities, including
technical influences in futures contracts trading; differences between the
securities being hedged and the financial instruments and indexes underlying the
standard futures contracts available for trading, in such respects as interest
rate levels, maturities and creditworthiness of issuers, or identities of
securities comprising the index and those in a Fund's portfolio. In addition,
futures contract transactions involve the remote risk that a party be unable to
fulfill its obligations and that the amount of the obligation will be beyond the
ability of the clearing broker to satisfy. A decision of whether, when and how
to hedge involves the exercise of skill and judgment, and even a well conceived
hedge may be unsuccessful to some degree because of market behavior or
unexpected interest rate trends.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a 10% decrease in the
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out, and a 15% decrease would result in a loss equal to 150% of the
original margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, a Fund would presumably have sustained comparable losses if, instead of
entering into the futures contract, it had invested in the underlying financial
instrument. Furthermore, in order to be certain that a Fund has sufficient
assets to satisfy its obligations under a futures contract, the Fund will
establish a segregated account in connection with its futures contracts which
will hold cash or cash equivalents equal in value to the current value of the
underlying instruments or indices less the margins on deposit.
Most U.S. futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
Risks of Options on Futures Contracts. In addition to the risks described
above for financial futures contracts, there are several special risks relating
to options on futures contracts. The ability to establish and close out
positions on such options will be subject to the development and maintenance of
a liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. A Fund will
not purchase options on any futures contract unless and until it believes that
the market for such options has developed sufficiently that the risks in
connection with such options are not greater than the risks in connection with
the futures contracts. Compared to the use of futures contracts, the purchase of
options on such futures involves less potential risk to a Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the use of an option on a
futures contract would result in a loss to a Fund, even though the use of a
futures contract would not, such as when there is no movement in the level of
the futures contract.
Corporate Bond Ratings (Evergreen Select Balanced Fund)
Higher yields are usually available on securities that are lower rated or
that are unrated. Bonds rated Baa by Moody's Investor Service ("Moody's") are
considered as medium grade obligations, which are neither highly protected nor
poorly secured. Debt rated BBB by Standard & Poor's Ratings Group ("S&P") is
regarded as having an adequate capacity to pay interest and repay principal,
although adverse economic conditions are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories. Lower rated securities, commonly known as "junk bonds,"
are usually defined as Baa or lower by Moody's or BBB or lower by S&P. The Fund
may purchase unrated securities, which are not necessarily of lower quality than
rated securities but may not be attractive to as many buyers. Debt rated BB, B,
CCC, CC and C by S&P is regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. Debt rated CI by S&P is debt (income
bonds) on which no interest is being paid. Debt rated D by S&P is in default and
payment of interest and/or repayment of principal is in arrears. The Fund
intends to invest in D-rated debt only in cases where, in the judgment of a
Fund's investment adviser, there is a distinct prospect of improvement in the
issuer's financial position as a result of the completion of reorganization or
otherwise. Bonds that are rated Ca by Moody's are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest. Bonds that are rated Ca by Moody's represent obligations
which are speculative in a high degree. Such issues are often in default or have
other market shortcomings. Bonds that are rated C by Moody's are the lowest
rated class of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Convertible Securities
Convertible securities include bonds, debentures, corporate notes,
preferred stocks and other securities. Convertible securities are securities
that the holder can convert into common stock. Convertible securities rank
senior to common stock in a corporation's capital structure and, therefore,
entail less risk than a corporation's common stock. The value of a convertible
security is a function of its investment value (Its market worth without a
conversion privilege) and its conversion value (its market worth if exchanged).
If a convertible security's investment value is greater than its conversion
value, its price primarily will reflect its investment value and will tend to
vary inversely with interest rates (the issuer's creditworthiness and other
factors may also affect its value). If a convertible security's conversion value
is greater than its investment value, its price will tend to be higher than its
conversion value and it will tend to fluctuate directly with the price of the
underlying equity security.
Investment Company Securities
Securities of other investment companies may be acquired by each of the
Funds to the extent permitted under the Investment Company Act of 1940, as
amended (the "1940 Act"). These limits require that, as determined immediately
after a purchase is made, (i) not more than 5% of the Fund's total assets will
be invested in the securities of any one investment company, (ii) not more than
10% of the value of its total assets will be invested in the aggregate in
securities of investment companies as a group, and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Fund's. As a shareholder of another investment company, a Portfolio would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that the Portfolio bears directly in
connection with its own operations.
Loans of Securities
To generate income and offset expenses, the Funds may lend portfolio
securities to broker-dealers and other financial institutions. Loans of
securities by a Fund may not exceed 30% of the value f the Fund's total assets.
While securities are on loan, the borrower will pay the Fund any income accruing
on the security. The Fund may invest any collateral it receives in additional
portfolio securities, such as U.S. Treasury notes, certificates of deposit,
other high-grade, short-term obligations or interest bearing cash equivalents.
Gains or losses in the market value of a security lent will affect the Fund and
its shareholders.
When a Fund lends its securities, it will require the borrower to give the
Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Funds have the right to
call a loan and obtain the securities lent any time on notice of not more than
five business days. The Fund may pay reasonable fees in connection with such
loans.
Although voting rights attendant to securities lent pass to the borrower,
the Funds may call such loans at any time and may vote the securities if it
believes a material event affecting the investment is to occur. The Funds may
experience a delay in receiving additional collateral or in recovering the
securities lent or may even suffer a loss of rights in the collateral should the
borrower of the securities fail financially. The Funds may only make loans to
borrowers deemed to be of good standing, under standards approved by the Board
of Trustees, when the income to be earned from the loan justifies the attendant
risks.
Master Demand Notes
Master demand notes are unsecured obligations that permit the investment of
fluctuating amounts by the Funds at varying rates of interest pursuant to direct
arrangements between a Fund, as lender, and the issuer, as borrower. Master
demand notes may permit daily fluctuations in the interest rate and daily
changes in the amounts borrowed. A Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note agreement,
or to decrease the amount. The borrower may repay up to the full amount of the
note without penalty. Notes purchased by a Fund permit the Fund to demand
payment of principal and accrued interest at any time (on not more than seven
days' notice). Notes acquired by a Fund may have maturities of more than one
year, provided that (1) the Fund is entitled to payment of principal and accrued
interest upon not more than seven days' notice, and (2) the rate of interest on
such notes is adjusted automatically at periodic intervals, which normally will
not exceed 31 days, but may extend up to one year. The notes are deemed to have
a maturity equal to the longer of the period remaining to the next interest rate
adjustment or the demand notice period. Because these types of notes are direct
lending arrangements between the lender and borrower, such instruments are not
normally traded and there is no secondary market for these notes, although they
are redeemable and thus repayable by the borrower at face value plus accrued
interest at any time. Accordingly, a Fund's right to redeem is dependent on the
ability of the borrower to pay principal and interest on demand. In connection
with master demand note arrangements, a Fund's investment adviser considers,
under standards established by the Board of Trustees, earning power, cash flow
and other liquidity ratios of the borrower and will monitor the ability of the
borrower to pay principal and interest on demand. These notes are not typically
rated by credit rating agencies. Unless rated, a Fund may invest in them only if
at the time of an investment the issuer meets the criteria established for
commercial paper discussed in the statement of additional information (which
limits such investments to commercial paper rated A-1 by S&P, Prime-1 by Moody's
or F-1 by Fitch Investors Service, L.P.).
Obligations of Foreign Branches of United States Banks
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by government regulation.
Payment of interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as sovereign risk). In addition, evidences of ownership of such securities
may be held outside the U.S. and the Fund may be subject to the risks associated
with the holding of such property overseas. Examples of governmental actions
would be the imposition of currency controls, interest limitations, withholding
taxes, seizure of assets or the declaration of a moratorium. Various provisions
of federal law governing domestic branches do not apply to foreign branches of
domestic banks.
Obligations of United States Branches of Foreign Banks
Obligations of U.S. branches of foreign banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office. In addition, there may be less publicly available information about a
U.S. branch of a foreign bank than about a domestic bank.
Repurchase Agreements
The Funds may enter into repurchase agreements with entities that are
registered U.S. government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed a Fund's
Adviser to be creditworthy. A repurchase agreement is an agreement by which a
person (e.g., a Fund) obtains a security and simultaneously commits to return
the security to the seller (a member bank of the Federal Reserve System or
recognized securities dealer) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
A Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker-dealers, which are deemed by the Adviser to be
creditworthy pursuant to guidelines established by the Trustees.
Restricted and Illiquid Securities
Pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A"), the
Board of Trustees the Trusts determines the liquidity of certain restricted
securities Rule 144A is a non-exclusive, safe-harbor for certain secondary
market transactions involving securities subject to restrictions on resale under
federal securities laws. Rule 144A provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
Rule 144A was expected to further enhance the liquidity of the secondary market
for securities eligible for sale under Rule 144A. In determining the liquidity
of certain restricted securities the Trustees consider: (i) the frequency of
trades and quotes for the security; (ii) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (iii)
dealer undertakings to make a market in the security; and (iv) the nature of the
security and the nature of the marketplace trades.
Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund would sell securities and
agree to repurchase them at a mutually agreed upon date and price. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase may decline below the repurchase price.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis. These
transactions involve the purchase of debt obligations with delivery and payment
normally take place within a month or more after the date of commitment to
purchase. The Funds will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-issued securities are subject
to market fluctuation, and no interest accrues on the security to the purchaser
during this period. The payment obligation and the interest rate that will be
received on the securities are each fixed at the time the purchaser enters into
the commitment.
Segregated accounts will be established with the custodian, and the Funds
will maintain liquid assets in an amount at least equal in value to a Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, a Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Purchasing obligations on a when-issued basis is a form of leveraging and
can involve a risk that the yields available in the market when the delivery
takes place may actually be higher than those obtained in the transaction
itself. In that case there could be an unrealized loss at the time of delivery.
A Fund uses when-issued, delayed-delivery and forward commitment
transactions to secure what it considers to be an advantageous price and yield
at the time of purchase. When a Fund engages in when- issued, delayed-delivery
and forward commitment transactions, it relies on the buyer or seller, as the
case may be, to consummate the sale. If the buyer or seller fails to complete
the sale, then the Fund may miss the opportunity to obtain the security at a
favorable price or yield.
Typically, no income accrues on securities a Fund has committed to purchase
prior to the time delivery of the securities is made, although the Fund may earn
income on securities it has deposited in a segregated account. When purchasing a
security on a when-issued, delayed delivery, or forward commitment basis, the
Fund assumes the rights and risks of ownership of the security, including the
risk of price and yield fluctuations, and takes such fluctuations into account
when determining its net asset value. Because the Fund is not required to pay
for the security until the delivery date, these risks are in addition to the
risks associated with the Fund's other investments.
INVESTMENT RESTRICTIONS AND GUIDELINES
Fundamental Policies
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the "1940
Act"). Unless otherwise stated, all references to the assets of a Fund are in
terms of current market value.
Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the Investment Company
Act of 1940, as amended (the "1940 Act").
Concentration
Each Fund may not concentrate its investments in the securities of issuers
primarily engaged in any particular industry (other than securities that are
issued or guaranteed by the U.S. government or its agencies or
instrumentalities).
Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Underwriting Securities Issued by Other Persons
Each Fund may not underwrite securities of other issuers, except insofar as
each Fund may be deemed to be an underwriter in connection with the disposition
of its portfolio securities.
Real Estate
Each Fund may not purchase or sell real estate, except that, to the extent
permitted by law each Fund may invest in (a) securities that are directly or
indirectly secured by real estate, or (b) securities issued by companies that
invest in real estate.
Commodities
Each Fund may not purchase or sell commodities or contracts on commodities,
except to the extent that each Fund may engage in financial futures contacts and
related options and currency contracts and related options and may otherwise do
so in accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act.
Loans to Other Persons
Each Fund may not make loans to other persons, except that a Fund may lend
its portfolio securities in accordance with applicable law. The acquisition of
investment securities or other investment instruments shall not be deemed to be
the making of a loan.
GUIDELINES
Unlike the Fundamental Policies above, to the extent permitted by law, the
following guidelines may be changed by the Trust's Board of Trustees without
shareholder approval. Unless otherwise stated, all references to the assets of
a Fund are in terms of current market value.
Diversification
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to the 75% of its
total assets, a diversified investment company may not invest more than 5% of
its total assets, determined at market or other fair value at the time of
purchase, in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
Borrowings
Each Fund may borrow money from banks or enter into reverse repurchase
agreements in an amount up to one third of its total assets. Each Fund may also
borrow an additional 5% of its total assets from banks or others. Each Fund may
borrow only as a temporary measure for extraordinary or emergency purposes. Each
Fund will not purchase securities while borrowings are outstanding except to
exercise prior commitments and to exercise subscription rights. Each Fund may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities. Each Fund may purchase securities on margin
and engage in short sales to the extent permitted by applicable law.
Illiquid securities
Each Fund may not invest more than 15% of its net assets in securities that
are Illiquid. A security is Illiquid when a fund may not dispose of it in the
ordinary course of business within seven days at approximately the value at
which a Fund has the investment on its books.
Investment in other investment companies
Each Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, each Fund may not (1) own more
than 3% of the outstanding voting stock of another investment company, (2)
invest more than 5% of its assets in the securities of any single investment
company, and (3) invest more than 10% of its assets in investment companies.
However, each Fund may invest all of its investable assets in securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and limitations as each Fund.
MANAGEMENT OF THE TRUST
Set forth below are the Trustees and officers of the Trust and their
principal occupations and some of their affiliations over the last five years.
Unless otherwise indicated, the address for each Trustee and officer is 200
Berkeley Street, Boston, Massachusetts, 02116. Each Trustee is also a Trustee of
each of the other Trusts in the Evergreen Fund complex, other than Evergreen
Variable Trust, of which Messrs. Howell, Salton and Scofield are the only
Trustees.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
Laurence B. Ashkin Trustee Real estate developer and construction consultant;
(DOB: 2/2/28) and President of Centrum Equities and Centrum
Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.;
(DOB: 10/23/34) and former Managing Director, Seaward
Management Corporation (investment advice).
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance
(DOB: 10/12/38) Committee, Cambridge College; Chairman Emeritus
and Director, American Institute of Food and Wine;
Chairman and President, Oldways Preservation and
Exchange Trust (education); former Chairman of
the Board, Director, and Executive Vice President,
The London Harness Company; former Managing
Partner, Roscommon Capital Corp.; former Chief
Executive Officer, Gifford Gifts of Fine Foods;
former Chairman, Gifford, Drescher & Associates
(environmental consulting); and former Director,
Keystone Investments, Inc.
James S. Howell Chairman of the Former Chairman of the Distribution Foundation for
(DOB: 8/13/24) Board of Trustees the Carolinas; and former Vice President of Lance
Inc. (food manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer,
(DOB: 2/14/39) Carson Products Company; Director of Phoenix
Total Return Fund and Equifax, Inc.; Trustee of
Phoenix Series Fund, Phoenix Multi-Portfolio Fund,
and The Phoenix Big Edge Series Fund; and former
President, Morehouse College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham
(DOB: 8/2/39) Corporation; and former Director of Carolina
Cooperative Federal Credit Union.
*William Walt Pettit Trustee Partner in the law firm of Holcomb and Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee Vice Chair and former Executive Vice President,
(DOB: 9/14/41) DHR International, Inc. (executive recruitment);
former Senior Vice President, Boyden International
Inc. (executive recruitment); and Director,
Commerce and Industry Association of New
Jersey, 411 International, Inc., and J&M Cumming
Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health
(DOB: 6/2/47) Services; and former Managed Health Care
Consultant; former President, Primary Physician
Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)
Richard J. Shima Trustee Chairman, Environmental Warranty, Inc. (insurance
(DOB: 8/11/39) agency); Executive Consultant, Drake Beam Morin,
Inc. (executive outplacement); Director of
Connecticut Natural Gas Corporation, Hartford
Hospital, Old State House Association, Middlesex
Mutual Assurance Company, and Enhance
Financial Services, Inc.; Chairman, Board of
Trustees, Hartford Graduate Center; Trustee,
Greater Hartford YMCA; former Director, Vice
Chairman and Chief Investment Officer, The
Travelers Corporation; former Trustee, Kingswood-
Oxford School; and former Managing Director and
Consultant, Russell Miller, Inc.
John J. Pileggi President and Senior Managing Director, Furman Selz LLC since
Treasurer 1992; Managing Director from 1984 to 1992;
230 Park Avenue, Consultant to BISYS Fund Services since 1996;
Suite 910 New York, 230 Park Avenue, Suite 910, New York, NY.
New York
George O. Martinez Secretary Senior Vice President and Director of
Administration and Regulatory Services, BISYS
3435 Stezer Road Fund Services; Vice President/Assistant General
Columbus, Ohio Counsel, Alliance Capital Management from 1988
to 1995; 3435 Stelzer Road, Columbus, Ohio.
</TABLE>
*This Trustee may be considered an interested trustee within the meaning of
the 1940 Act.
The officers of the Trust are all officers and/or employees of The BISYS
Group, Inc. ("BISYS"), except for Mr. Pileggi, who is a consultant to BISYS.
Listed below is the estimated Trustee compensation for the twelve-month
period ended June 30, 1998.
COMPENSATION TABLE
Total
Compensation
Aggregate From Registrant
Compensation And Fund Complex
Trustee From Registrant Paid To Directors
Laurence B. Ashkin $4,987 $68,252
Charles A.Austin $4,993 $55,639
K. Dun Gifford $4,658 $51,160
James S. Howell $6,308 $97,924
Leroy Keith Jr. $4,662 $52,641
Gerald M. McDonnell $4,662 $79,369
Thomas L. McVerry $5,714 $87,132
William Walt Petit $4,659 $78,184
David M. Richardson $4,993 $55,639
Russell A. Salton, III $4,658 $78,592
Michael S. Scofield $4,660 $79,776
Richard J. Shima $4,660 $65,188
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISERS
The First Capital Group of FUNB is the investment adviser (the "Adviser")
to each Fund other than the Evergreen Select Small Company Fund. FUNB is a
subsidiary of First Union Corporation, a bank holding company headquartered in
Charlotte, North Carolina. First Union Corporation and its subsidiaries provide
a broad range of financial services to individuals and businesses throughout the
United States. First Union Corporation and FUNB are located at 201 South College
Street, Charlotte North Carolina 28288.
Evergreen Asset Management Corp. ("Evergreen Asset") is the investment
adviser to Evergreen Select Small Company Value Fund. Evergreen Asset is located
at 2500 Westchester Avenue, Purchase, New York 10577 and is also a subsidiary of
First Union.
Pursuant to the advisory agreement (the "Advisory Agreement" or,
collectively, the "Advisory Agreements") between the Trust and each Adviser, and
subject to the supervision of the Trust's Board of Trustees, each Adviser
furnishes to each Fund investment advisory, management and administrative
services, office facilities, and equipment in connection with its services for
managing the investment and reinvestment of each Fund's assets. Each Adviser
pays for all of the expenses incurred in connection with the provision of its
services.
Each Fund pays for all charges and expenses, other than those specifically
referred to as being borne by the Adviser, including, but not limited to, (1)
custodian charges and expenses; (2) bookkeeping and auditors' charges and
expenses; (3) transfer agent charges and expenses; (4) fees and expenses of
Independent Trustees; (5) brokerage commissions, brokers' fees and expenses; (6)
issue and transfer taxes; (7) costs and expenses under the Distribution Plan;
(8) taxes and trust fees payable to governmental agencies; (9) the cost of share
certificates; (10) fees and expenses of the registration and qualification of
such Fund and its shares with the Securities and Exchange Commission or under
state or other securities laws; (11) expenses of preparing, printing and mailing
prospectuses, statements of additional information, notices, reports and proxy
materials to shareholders of such Fund; (12) expenses of shareholders' and
Trustees' meetings; (13) charges and expenses of legal counsel for such Fund and
for the Independent Trustees of the Trust on matters relating to such Fund; and
(14) charges and expenses of filing annual and other reports with the Securities
and Exchange Commission and other authorities; and all extraordinary charges and
expenses of such Fund.
Each Fund pays its respective Adviser a fee for its services, expressed as
a percentage of average net assets, as set forth below. In addition, each
Adviser has voluntarily agreed to reduce its advisory fee by 0.10%, resulting in
the net advisory fees that are also indicated in the table below.
Fund Advisory Fee Net Advisory Fee
Evergreen Select Strategic Value Fund 0.70% 0.60%
Evergreen Select Diversified Value Fund 0.60% 0.50%
Evergreen Select Large Cap Fund 0.70% 0.60%
Evergreen Select Common Stock Fund 0.70% 0.60%
Evergreen Select Strategic Growth Fund 0.70% 0.60%
Evergreen Select Equity Income Fund 0.70% 0.60%
Evergreen Select Social Principles Fund 0.80% 0.70%
Evergreen Small Company Value Fund 0.90% 0.80%
Evergreen Select Balanced Fund 0.60% 0.50%
Under the Advisory Agreement, any liability of the Adviser in connection
with rendering services thereunder is limited to situations involving its
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties.
The Advisory Agreement continues in effect for two years from its effective
date and, thereafter, from year to year only if approved at least annually by
the Board of Trustees of the Trust or by a vote of a majority of a Fund's
outstanding shares (as defined in the 1940 Act). In either case, the terms of
the Advisory Agreement and continuance thereof must be approved by the vote of a
majority of the Independent Trustees (Trustees who are not interested persons of
the Fund, as defined in the 1940 Act, and who have no direct or indirect
financial interest in the Fund's Distribution Plan or any agreement related
thereto) cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement may be terminated, without penalty, on 60 days'
written notice by the Trust's Board of Trustees or by a vote of a majority of
outstanding shares. The Advisory Agreement will terminate automatically upon its
"assignment" as that term is defined in the 1940 Act.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the Funds through
broker-dealers and other financial representatives. Its address is, 25 55th
Street, New York, N.Y. 10019.
DISTRIBUTION PLAN
Rule 12b-1 under the 1940 Act permits investment mutual funds to use their
assets to pay for distributing their shares. However, to take advantage of Rule
12b-1, the 1940 Act requires that mutual funds comply with various conditions,
including adopting a distribution plan. The Funds have adopted a distribution
plan for their Institutional Service Shares (the "Plan") that permits a Fund to
deduct up to 0.25% of the Institutional Service class' average net assets to pay
for shareholder services. The Board of Trustees, including a majority of the
Independent Trustees has approved the plan.
The National Association of Securities Dealers, Inc. ("NASD") limits the
amount that a mutual fund may pay annually in distribution costs for sale of its
shares and shareholder service fees. The NASD limits annual expenditures to
1.00% of the aggregate average daily net asset value of its shares, of which
0.75% may be used to pay such distribution costs and 0.25% may be used to pay
shareholder service fees. The NASD also limits the aggregate amount that a Fund
may pay for such distribution costs to 6.25% of gross share sales since the
inception of the distribution plan, plus interest at the prime rate plus 1.00%
on such amounts remaining unpaid from time to time.
The Independent Trustees or a majority of the outstanding voting shares of
a Fund's Institutional Service Class may terminate the Plan.
A Fund cannot change the Plan in a way that materially increases the
distribution expenses of the Institutional Service Class without obtaining
shareholder approval. Otherwise, the Trustees may amend the Plan.
Management must report the amounts and purposes of expenditures under the
Plan to the Independent Trustees quarterly.
While the Institutional Service Distribution Plan is in effect, a Fund will
be required to commit the selection and nomination of candidates for Independent
Trustees to the discretion of the Independent Trustees.
The Independent Trustees of the Funds have determined that the Funds will
benefit from the Institutional Service shares distribution plan.
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to each
Fund, subject to the supervision and control of the Trust's Board of Trustees.
EIS provides the Funds with facilities, equipment and personnel and is entitled
to receive a fee based on the aggregate average daily net assets of the Funds
based on the total assets of all mutual funds advised by First Union
subsidiaries. EIS' fee is calculated in accordance with the following schedule:
0.60% on the first $7 billion; 0.0425% on the next $3 billion; 0.035% on the
next $5 billion; 0.025% on the next $10 billion; 0.019% on the next $5 billion
and 0.014% on assets in excess of $30 billion.
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union Corporation,
is the Funds' transfer agent. The transfer agent issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is 200 Berkeley Street,
Boston, Massachusetts 02116.
Independent auditors
KPMG Peat Marwick audits each Fund's financial statement. The auditor's
address is 99 High Street, Boston, Massachusetts 02110.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank keeps
custody of the Fund's securities and cash and performs other related duties. The
custodian's address is Box 9021, Boston, Massachusetts 02205-9827.
BROKERAGE ALLOCATION AND OTHER PRACTICES
SELECTION OF BROKERS
In effecting transactions in portfolio securities for the Funds, the
Adviser seeks the best execution of orders at the most favorable prices. The
Adviser determines whether a broker has provided a Fund with best execution and
price in the execution of a securities transaction by evaluating, among other
things, the broker's ability to execute large or potentially difficult
transactions, and the financial strength and stability of the broker.
BROKERAGE COMMISSIONS
Generally, each Fund expects to purchase and sell its securities through
brokerage transactions for which commissions are payable. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealers' markdown. Where transactions are made in the
over-the-counter market, each Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
The Funds expect to buy and sell their fixed-income securities through
principal transactions that is directly from the issuer or from an underwriter
or market maker for the securities. Generally, the Funds will not pay brokerage
commissions for such purchases. Usually, when a Fund buys a security from an
underwriter, the purchase price will include underwriting commission or
concession. The purchase price for securities bought from dealers serving as
market makers will similarly include the dealer's mark up or reflect a dealer's
mark down. When the Funds execute transactions in the over-the-counter market,
they will deal with primary market makers unless more favorable prices are
otherwise obtainable.
GENERAL BROKERAGE POLICIES
Generally, the Fund expects to purchase and sell its securities through
brokerage transactions for which commissions are payable. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's markdown. Where transactions are made in the
over-the-counter market, the Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
The Adviser makes investment decisions for the Fund independently from
those of its other clients. It may frequently develop, however, that the Adviser
will make the same investment decision for more than one client. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more of its clients
are engaged in the purchase or sale of the same security, the Adviser will
allocate the transactions according to a formula that is equitable to each of
its clients. Although, in some cases, this system could have a detrimental
effect on the price or volume of the Fund's securities, the Fund believes that
in other cases its ability to participate in volume transactions will produce
better executions. In order to take advantage of the availability of lower
purchase prices, the Fund may occasionally participate in group bidding for the
direct purchase from an issuer of certain securities.
The Board of Trustees periodically reviews the Fund's brokerage policy.
Because of the possibility of further regulatory developments affecting the
securities exchanges and brokerage practices generally, the Board of Trustees
may change, modify or eliminate any of the foregoing practices.
TRUST ORGANIZATION
FORM OF ORGANIZATION
The Trust was formed as a Delaware business trust on September 17, 1997
(the "Declaration of Trust"). A copy of the Declaration of Trust is on file as
an exhibit to the Trust's Registration Statement, of which this statement of
additional information is a part. This summary is qualified in its entirety by
reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest of series and classes of shares. Each share of a
Fund represents an equal proportionate interest with each other share of that
series and/or class. Upon liquidation, shares are entitled to a pro rata share
of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required to
hold annual meetings. However, the Trust intends to hold meetings at least
annually. At meetings called for the initial election of Trustees or to consider
other matters, shares are entitled to one vote per share. Shares generally vote
together as one class on all matters. Classes of shares of a Fund have equal
voting rights. No amendment may be made to the Declaration of Trust that
adversely affects any class of shares without the approval of a majority of the
shares of that class. Shares have non-cumulative voting rights, which means that
the holders of more than 50% of the shares voting for the election of Trustees
can elect 100% of the Trustees to be elected at a meeting and, in such event,
the holders of the remaining 50% or less of the shares voting will not be able
to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time, the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
EXCHANGES
Investors may exchange shares of any Fund for shares of the same class of
any other Evergreen "Select" fund, as described under "Exchanges" in each Fund's
prospectus. Before you make an exchange, you should read the prospectus of the
"Select" fund into which you wish to exchange. The Trust reserves the right to
discontinue, alter or limit the exchange privilege at any time.
HOW THE FUNDS VALUE THEIR SHARES
How and When the Funds Calculate Their Net Asset Value Per Share ("NAV")
Each Fund computes its net asset value once daily on Monday through Friday,
as described in the Prospectus. A Fund will not compute its NAV on the day the
following legal holidays are observed: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
A Fund calculates its net asset value per share by adding up its
investments and other assets, subtracting its liabilities and then dividing the
result by the number of shares outstanding.
How the Funds Value The Securities They Own
Current values for a Fund's portfolio securities are determined in the
following manner:
(1) securities that are traded on a national securities exchange or the
over-the-counter National Market System ("NMS") are valued on the basis
of the last sales price on the exchange where primarily traded or NMS
prior to the time of the valuation, provided that a sale has occurred;
(2) securities traded in the over-the-counter market, other than on NMS
are valued at the mean of the bid and asked prices at the time of
valuation;
(3) short-term investments maturing in more than sixty days for which
market quotations are readily available, are valued at current market
value;
(4) short-term investments maturing in sixty days or less (including
all master demand notes) are valued at amortized cost (original
purchase cost as adjusted for amortization of premium or accretion of
discount), which, when combined with accrued interest, approximates
market;
(5) short-term investments maturing in more than sixty days when
purchased that are held on the sixtieth day prior to maturity are
valued at amortized cost (market value on the sixtieth day adjusted for
amortization of premium or accretion of discount), which, when combined
with accrued interest, approximates market; and
(6) securities, including restricted securities, for which complete
quotations are not readily available; listed securities or those on NMS
if, in the Fund's opinion, the last sales price does not reflect a
current market value or if no sale occurred; and other assets are
valued at prices deemed in good faith to be fair under procedures
established by the Board of Trustees.
SHAREHOLDER SERICES
As described in the prospectus, a shareholder may elect to receive their
dividends and capital gains distributions in cash instead of shares. However,
ESC will automatically convert a shareholder's distribution option so that the
shareholder reinvests all dividends and distributions in additional shares when
it learns that the postal or other delivery service is unable to deliver checks
or transaction confirmations to the shareholder's address of record. The Fund
will hold the returned distribution or redemption proceeds in a non
interest-bearing account in the shareholder's name until the shareholder updates
their address. Therefore, no interest will accrue on amounts represented by
uncashed distribution or redemption checks
PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with respect
to each class of each Fund. The Trust has entered into a Principal Underwriting
Agreement ( "Underwriting Agreement") with the Distributor with respect to each
class of each Fund. The Distributor is a subsidiary of The BISYS Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the public
offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and statement of additional information. All orders are subject to acceptance by
the respective Trust and each Trust reserves the right, in its sole discretion,
to reject any order received. Under the Underwriting Agreement, the Trust is not
liable to anyone for failure to accept any order.
The Trust has agreed under the Underwriting Agreement to pay all expenses
in connection with the registration of its shares with the Securities and
Exchange Commission and auditing.
The Distributor has agreed that it will, in all respects, duly conform with
all state and federal laws applicable to the sale of the shares. The Distributor
has also agreed that it will indemnify and hold harmless the Trust and each
person who has been, is, or may be a Trustee or officer of the Trust against
expenses reasonably incurred by any of them in connection with any claim,
action, suit, or proceeding to which any of them may be a party that arises out
of or is alleged to arise out of any misrepresentation or omission to state a
material fact on the part of the Distributor or any other person for whose acts
the Distributor is responsible or is alleged to be responsible, unless such
misrepresentation or omission was made in reliance upon written information
furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as long
as its terms and continuance are approved annually (i) by a vote of a majority
of the Trust's Independent Trustees, and (ii) by vote of a majority of the
Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.
The Underwriting Agreement may be terminated, without penalty, on 60 days'
written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could benefit the
sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
CALCULATION OF PERFORMANCE DATA
Total return quotations for a class of shares of a Fund as they may appear
from time to time in advertisements are calculated by finding the average annual
compounded rates of return over one, five and ten year periods, or the time
periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.
Current yield quotations as they may appear, from time to time, in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of a Fund, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the base period.
Any given yield or total return quotation should not be considered
representative of a Fund's yield or total return for any future period.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, a Fund
reserves the right to change the terms of the offer stated in its prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in a Fund's prospectus, statement of
additional information or in supplemental sales literature issued by such Fund
or the Distributor, and no person is entitled to rely on any information or
representation not contained therein.
Each Fund's prospectus and SAI omit certain information contained in its
registration statement, which may be obtained for a fee from the SEC in
Washington, D.C.
FINANCIAL STATEMENTS
The audited statement of assets and liabilities and the reports thereon of
KPMG Peat Marwick for each Fund will be filed by amendment.
<PAGE>
Table of Contents
<TABLE>
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Letter to Shareholders ......................... 1
Evergreen Select Common Stock Fund
Fund at a Glance ............................ 3
Portfolio Manager Commentary ................ 4
Evergreen Select Equity Income Fund
Fund at a Glance ............................ 6
Portfolio Manager Commentary ................ 7
Evergreen Select Large Cap Blend Fund
Fund at a Glance ............................ 9
Portfolio Manager Commentary ................ 10
Evergreen Select Small Company Value
Fund
Portfolio Manager Commentary ................ 12
Evergreen Select Social Principles Fund
Fund at a Glance ............................ 14
Portfolio Manager Commentary ................ 15
Evergreen Select Strategic Growth
Fund
Fund at a Glance ............................ 17
Portfolio Manager Commentary ................ 18
Evergreen Select Strategic Value Fund
Fund at a Glance ............................ 20
Portfolio Manager Commentary ................ 21
Financial Highlights
Evergreen Select Common Stock Fund .......... 23
Evergreen Select Equity Income Fund ......... 24
Evergreen Select Large Cap Blend Fund ....... 25
Evergreen Select Small Company Value
Fund ..................................... 26
Evergreen Select Social Principles Fund ..... 27
Evergreen Select Strategic Growth Fund ...... 28
Evergreen Select Strategic Value Fund ....... 29
Schedule of Investments
Evergreen Select Common Stock Fund .......... 30
Evergreen Select Equity Income Fund ......... 32
Evergreen Select Large Cap Blend Fund ....... 34
Evergreen Select Small Company Value
Fund ..................................... 36
Evergreen Select Social Principles Fund ..... 38
Evergreen Select Strategic Growth Fund ...... 40
Evergreen Select Strategic Value Fund ....... 42
Statements of Assets and Liabilities ........... 44
Statements of Operations ....................... 45
Statements of Changes in Net Assets -
Period ended December 31, 1997 .............. 46
Combined Notes to Financial
Statements ..................................... 47
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Evergreen Funds
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Evergreen Funds is one of the nation's fastest growing investment companies
with more than $40 billion in assets under management.
With 85 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broader range of quality investment products
and services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
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Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
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Evergreen Funds Distributor, Inc.
<PAGE>
Letter to Shareholders
February 1998
Dear Investors:
This marks the first investment report of the Evergreen Select Equity Trust.
The Evergreen Select Funds are designed to meet the unique needs of
institutional investors and high net worth individuals. These funds
offer the following:
o As an extension of First Capital
[Photgraph of Group's institutional offering, each Fund is
William M. Ennis] managed by a team of seasoned investment
professionals.
o Each Fund has a specific style and well
defined investment process which makes it
particularly suitable for implementing an asset
William M. Ennis allocation for an overall portfolio.
o Communication and servicing designed for
institutional and high net worth clients.
[Photograph of
David C. Francis] o The combination of Evergreen Select Equity
Trust, Fixed Income Trust, and Money Market
Funds represent a comprehensive line of 19
David C. Francis funds.
The Select Equity Trust's first report marks a generally rewarding period in
the capital markets. The returns of the benchmarks for most types of domestic
equity investment strategies were truly impressive, although the year was
punctuated by periods of volatility. In 1997, Standard & Poor's 500 Index rose
33.4%. In fact, it had reached a year-to-date performance figure of 35% in
early August before investors, perhaps fearing the lofty heights, started
re-evaluating. For the year, the Dow Jones Industrial Average climbed by 24.9%,
reaching a peak of 8,259 points before settling back just below 8,000 at year's
end. Small cap stocks also did well, although not quite as well as large cap
stocks. The NASDAQ Composite had a return of 21.64%, while the Russell 2000
Index had a return of a 22.4%.
The bond market was encouraged by a very strong dollar, growing evidence of
moderating economic growth, and remarkably constrained inflation considering
that the American economy was in the eighth year of an economic expansion. It
also provided impressive rewards. The 30-year Treasury, after peaking at a
7.17% interest rate in mid-April, finished the year at 5.92%. The total return
for the 30-year Treasury, as measured by the Lehman Brothers Long T-Bond Index,
was 14.8%.
Outside the U.S., the picture was less consistent, particularly in the emerging
markets and especially in Asia. Twin currency and financial crises in late
summer and the fall roiled the Asian markets, unleashing domino effects
throughout the world. In fact, Asian financial problems had a cooling effect on
the U.S. markets in late 1997, causing downward revisions in earnings'
forecasts, particularly in the technology industry, and encouraging a return to
large cap stocks. Evidence of a slowing economy and extraordinarily low
inflation (the Consumer Price Index rose by just 1.7% for the year) was cause
for confidence in the bond market during the final six months of 1997.
Capital market participants in early 1998 looked at generally favorable
domestic conditions. The environment was particularly encouraging to bond
market investors. The three successive, exceptionally strong years in the
equity market had left stock valuations at relatively high and, to at least
some observers, controversial levels.
We will not attempt to predict 1998's returns in this report. We assure you,
however, that the portfolios in the Evergreen Select Equity Trust will be
expertly managed, with an eye toward finding distinctive opportunities and
long-term value in today's complex and interdependent markets.
1
<PAGE>
In the following pages, the investment managers for each of the funds of the
Evergreen Select Equity Trust will report on their portfolios. We believe you
will find them informative. Thank you for your continued investment in
Evergreen Select Funds.
Sincerely,
/s/William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
/s/David C. Francis
David C. Francis, C.F.A.
Chief Investment Officer,
Managing Director
First Capital Group
2
<PAGE>
EVERGREEN
Select Common Stock Fund
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Common Stock Fund utilizes a diversified style of equity
management which capitalizes on opportunities in both value- and
growth-oriented stocks. In serving the investment needs of individual
investors, the Fund remains sensitive to tax implications.
Process
The Fund uses a bottom-up stock selection process, focusing on security
fundamentals rather than broad economic forecasts. The Fund is managed using a
team approach; investment managers locate attractive holdings using a unique
blend of quantitative and traditional fundamental analysis skills.
Benchmark
S & P 500 Index
PERFORMANCE AND RETURNS
</TABLE>
<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/81
Average Annual Returns
6 mos. 10.93%
1 year 27.31%
3 years 29.86%
5 years 16.86%
10 years 15.40%
Since Inception 15.87%
Cumulative Since Inception 955.61%
Distribution per share for the period* $ 0.09
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/87 12/89 12/91 12/93 12/95 12/97
Class I Shares 10,000 14,533 18,183 20,630 26,095 41,883
Standard & Poor's
500 Index 10,000 14,452 18,261 21,623 30,130 49,349
Comparison of change in value of a $10,000 investment in Evergreen Select
Common Stock Fund, Class I and the Standard & Poor's 500 Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
3
<PAGE>
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EVERGREEN
Select Common Stock Fund
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Portfolio Manager Commentary
Portfolio Management Team
The Fund is managed by Mark C. Sipe and Hanspeter Giger who have over 31 years
of combined investment experience. Their disciplined approach assures
consistency of results and superior service.
[Photograph appears [Photograph appears
of Mark C. Sipe] of Hanspeter Giger]
Mark C. Sipe Hanspeter Giger
Performance
The Evergreen Select Common Stock Fund's total return exceeded that of the S&P
500 Index during the six-month period ending December 31, 1997: 10.90% versus
10.6%. Much of the stock market's performance continued to be driven by large
capitalization stocks, as had been the case in the year's earlier quarters,
although during the quarter ending September 30th small-cap stocks (as measured
by the S&P 600 Index) nearly doubled the gains of the large cap S&P 500 Index.
Large-caps took the lead again after the sharp October 27th market sell-off,
when investors appeared to strongly favor predictable earnings and the larger,
more liquid stocks. The Fund's broad diversification across the market
capitalization spectrum benefited it significantly during the first three months
of the period, but contributed to a lag in performance versus the index during
the final three.
Sector Activity
Basic Materials, Capital Goods, Energy, and Technology were among the
worst-performing sectors of the market during the six months ended December 31,
1997. The first two sectors experienced downward pressure late in the period due
to perceived links with Southeast Asia. For the Basic Materials, perceived
demand and pricing issues related to slowing economies and currency devaluation
sharply diminished interest in the group. For the Capital Goods stocks, concerns
about the possible infrastructure project delays or cancellations appeared to
contribute to that sector's underperformance. During the period, we reduced the
portfolio's weighting in both of these sectors.
Top 5 Sectors
-------------
(as a percentage of net assets)
Finance and Banks 15.0%
Information Services & Technology 12.3%
Healthcare Products & Services 12.2%
Food & Beverage Products 8.6%
Oil/Energy 8.0%
Investment Strategy
Technology was the single worst-performing sector in the final three months,
accounting for 11 of the 15 worst-performing stocks in the Fund during the
quarter ending December 31. This sector was also the most active in terms of
changes in the portfolio during the fiscal period, with many names added in the
first three months. Because we anticipate further turbulence in this area, we
have shifted away from less well-positioned names in favor of those whose
long-term outlooks, especially the Year 2000 issue, should greatly overshadow
potential volatility. Consistent with this strategy, stocks such as Cabletron
Systems, Cognos, Inc., and BMC Industries were sold.
The Energy sector was affected by a number of unrelated events and announcements
which led to a sharp fall in crude oil prices late in the period. Because we
expect this drop in prices to be relatively short-lived, no changes were made in
the Fund other than adding some
4
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EVERGREEN
Select Common Stock Fund
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Portfolio Manager Commentary
money to existing positions during the final months. For the entire period, the
Fund saw a net increase in the number of Energy stocks held. We expect strong
demand for energy products going forward and have focused on the consolidation
in refining capacity and expansion of exploration and development as areas of
concentration with the Fund's holdings in names such as Tosco, Diamond Offshore,
and Reading & Bates.
Not surprisingly, defensive sectors such as Utilities and Finance were the stars
of the increasingly volatile six- month period. Although underweighted in the
portfolio, Utility shares comprised 6 of the top 15 performing stocks in the
final three months. Highlighting this performance in the Fund were names such as
Utilicorp United (+28.8%), CMS Energy (+19.1%), and GPU, Inc. (17.2%). The
Financial sector, which continued to benefit from the low interest-rate
environment, saw net additions in the Fund's holdings, including NationsBank,
Fleet Financial Group, and KeyCorp. Consumer Cyclicals, another of the few
strong-performing market sectors during the period, was aided in the Fund by the
notable additions of Sunbeam and Federated Department Stores, as well as by
outstanding performances from Family Dollar Stores (+60%), Ford Motor Co.
(+28%), and Dayton Hudson Corp. (+27%).
Top 10 Holdings
----------------
(as a percentage of net assets)
General Electric Co. 3.1%
Computer Associates International, Inc. 2.2%
Ford Motor Co. 2.2%
International Business Machines Corp. 1.9%
GTE Corp. 1.9%
Philip Morris Companies, Inc. 1.8%
Cisco Systems, Inc. 1.8%
Sara Lee Corp. 1.8%
Coca Cola Co. (The) 1.6%
Texaco, Inc. 1.5%
Outlook
Overall market uncertainty, and therefore heightened volatility, is likely to
carry over into 1998, barring quick resolution of the Asian crisis. Current
expectations are for a moderation of economic growth, which would likely
contribute to a slowing rate of growth in corporate earnings. However, with low
interest rates and low inflation, the environment remains favorable for
continued strong profitability from corporate America. The Fund will continue to
emphasize stocks of companies where earnings growth is likely to exceed that of
the average company, or where unusual values appear to have been created as a
result of market volatility. A research-intensive process is applied in the
selection of stocks for the Fund, and we remain confident that this strategy
will continue to bear fruit over the long term.
5
<PAGE>
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EVERGREEN
Select Equity Income Fund
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Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Equity Income Fund utilizes both value- and growth-oriented
stocks in pursuit of its objective: high current income and long-term capital
appreciation. The Fund provides investors a relative degree of safety by
emphasizing companies with below-average price-to-earnings ratios and higher
dividend yields relative to their industry groups.
Process
The Fund uses a bottom-up stock selection process, focusing on security
fundamentals rather than broad economic forecasts. The portfolio construction
process consists of a unique blend of quantitative and traditional fundamental
analysis skills.
Benchmark
S & P 500 Index
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PERFORMANCE AND RETURNS
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<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/78
Average Annual Returns
6 mos. 14.82%
1 year 28.56%
3 years 25.82%
5 years 15.69%
10 years 14.94%
Since Inception 15.12%
Cumulative Since Inception 1352.46%
Distribution per share for the period* $ 0.21
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/87 12/89 12/91 12/93 12/95 12/97
Class I Shares 10,000 15,385 18,940 20,781 26,731 40,252
Standard & Poor's
500 Index 10,000 14,452 18,261 21,623 30,130 49,249
Comparison of change in value of a $10,000 investment in Evergreen Select
Equity Income Fund, Class I and the Standard & Poor's 500 Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
6
<PAGE>
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EVERGREEN
Select Equity Income Fund
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Portfolio Manager Commentary
Portfolio Management
The Evergreen Select Equity Income Fund is managed by Paul A. DiLella who has 17
years of investment experience. In addition to managing First Union's Equity
Income Fund, Mr. DiLella is also responsible for the co-management of the
Evergreen Utility Fund. He also has research responsibility for the electric
utility, natural gas distribution, and REIT areas.
[Photograph of Pual A. DiLella appears here]
Paul A. DiLella
Performance
The Evergreen Select Equity Income Fund posted a total return of 14.8% for the
six-month period ended December 31, 1997. This return significantly outpaced the
10.6% total return of the S&P 500 Index. Strong performance relative to the S&P
500 can be attributed to favorable security selection, as well as to strong
sector weightings.
Top 5 Sectors
(as a percentage of net assets)
Utilities - Electric 18.9%
Oil/Energy 14.9%
Banks 13.9%
Treasury Notes & Bonds 7.4%
Healthcare Products & Services 6.2%
Favorable Sector Weightings
Stemming from the well-publicized crisis in Southeast Asia, equity investors
experienced a volatile six-month period. Consequently, defensive sectors such as
utilities and financials led the market during this uncertain environment. The
Fund's six-month returns benefited from the fact that the portfolio's top six
holdings are in these two sectors. Conversely, historically volatile sectors
such as technology tended to underperform, especially those companies with high
valuations and exposure to Asian markets.
The portfolio's overweighting in utilities aided returns as this sector
significantly outpaced the broad market, especially during the final three
months of 1997. During the fourth quarter, the S&P Utilities Index outperformed
the S&P 500 Index, 16.3% versus 2.9%. Within this sector, the purchase of
high-yielding UtiliCorp United proved timely, when its price increased over 22%
following its purchase in October 1997.
The Fund's underweighted position in technology and information services stocks
also contributed to strong relative performance because the technology sector
was extremely hard hit by the market's volatility. This weighting was reduced
from 5.6% to 2.0% over the six- month period.
7
<PAGE>
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EVERGREEN
Select Equity Income Fund
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Portfolio Manager Commentary
Investment Strategy
The strategy of the Evergreen Select Equity Income Fund is simple: provide
investors with high current income and long-term capital appreciation.
Consistent with this strategy, the portfolio manager strives to provide a
current yield higher than that of the S&P 500 Index. As of December 31, the
Fund's current yield was 3.3% versus the S&P 500 Index's yield of 1.6%. The
Fund's 30-day SEC yield was 2.44% as of December 31, 1997.
The Fund's high yield portfolio structure is intended to provide a defensive
posture. A stable, high yield portfolio helps returns especially in periods of
volatility in which the market pays a premium for stable, high-dividend-paying
companies. It should be noted that for the 12 months ended December 31, 1997,
the Fund's total return of 28.6% exceeded the Lipper average of 16.4% for the 62
funds in the Income category.1
The recent shift among technology and utility weightings also exemplifies the
Fund's strategy. These sector changes are an effort to improve the Fund's
defensive posture as well as improve the Fund's yield. More utility companies
and fewer technology holdings generally translate into less volatile performance
and higher yield, fueling returns in a turbulent market environment.
1Lipper Analytical Services is an independent mutual fund rating company.
Top 10 Equity Holdings
-----------------------
(as a percentage of net assets)
Union Planters Corp. 3.3%
PacifiCorp 3.2%
First Tennessee National Corp. 2.9%
UtiliCorp United, Inc. 2.8%
CMS Energy Corp. 2.8%
CINergy Corp. 2.6%
Houston Industries, Inc. 2.5%
GPU, Inc. 2.5%
GTE Corp. 2.5%
Allegheny Energy, Inc. 2.5%
Outlook
Historically high valuation levels and the recent problems in Southeast Asia
increase the likelihood of volatility in the stock market. We believe that the
portfolio's current structure is well-suited for this particular market
environment. Despite the recent focus on financial crises in Asian markets, it
is important to remember that the greatest gains and losses will come from
individual stock selection. The Evergreen Select Equity Income Fund maintains a
portfolio of strongly managed companies whose defensive, income-oriented
characteristics seek to offer a relative degree of stability as well as
above-average current yield. We remain confident that our strategy will help
provide investors with solid, consistent returns over the long term.
8
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
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Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Large Cap Blend Fund invests in large and mid-sized U.S.
companies, blending those that display both value and growth-oriented
characteristics. This philosophy holds that value and growth stocks tend to be
countercyclical, outperforming the broad market at different times.
Diversification between the two approaches tends to provide less volatile
investment results over time.
Process
Research and stock selection focus on companies of sound financial quality that
have strong management teams and maintain competitive leadership positions
within their respective industries. These companies are identified using a
fundamental, bottom-up stock selection process which is research-intensive.
Benchmark
S & P 500 Index
Performance And Returns
<TABLE>
<CAPTION>
Class I Class IC
<S> <C> <C>
Performance Inception Date 12/31/93 12/31/93
Average Annual Returns
6 mos. 15.18% 15.18%
1 year 30.50% 30.50%
3 years 34.05% 34.05%
Since Inception 22.95% 22.95%
Cumulative Since Inception 128.52% 128.52%
Distribution per share for the period* $ 0.01 $ 0.03
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/93 12/94 12/95 12/96 12/97
Class IC Shares 10,000 9,486 13,250 17,510 22,850
Standard & Poor's 500 Index 10,000 10,131 13,934 17,131 22,776
Comparison of change in value of a $10,000 investment in Evergreen Select Large
Cap Blend Fund, Class IC and the Standard & Poor's 500 Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
9
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
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Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Large Cap Blend Fund is managed by a team of 4 portfolio
managers with over 90 years of combined investment experience. The team-oriented
approach incorporates multiple perspectives to identify the most attractive
opportunities in the market and ensures adherence to the style-specific
objectives.
[Photograph of Eric M. Wiegand appears here] [Photograph of Dean Hawes appears
here]
Eric M. Wiegand Dean Hawes
[Photograph of Eric M. Wiegand appears here] [Photograph of Dean Hawes appears
here]
Darryl Brown Steven Hoeft
Performance
The Evergreen Select Large Cap Blend Fund posted a total return of 15.2% for the
six-month period ended December 31, 1997. Generated in a rather turbulent market
environment, the Fund's strong returns compare very favorably to the 10.6% total
return of the S&P 500 Index. The Fund also outpaced the average return of 9.15%
for the general equity fund as measured by Lipper Analytical Services, an
independent mutual fund rating company. Performance was positively impacted by
favorable security selection and sector weightings in the health-care and
utility sectors, as well as an underweighted posture toward basic material
companies.
Investment Strategy
We have responded to the volatile market environment and turmoil in Asian
markets by scaling back the portfolio's risk profile, primarily during the final
months of the fiscal period. A more defensively oriented portfolio structure was
achieved by reducing two particular types of holdings: companies with high
price-to-earnings ratios and those with a heavy reliance on foreign markets for
earnings growth. Our decision to reduce Colgate Palmolive exemplifies our
strategy to mitigate the portfolio's risk profile. This multi-national company's
high price-to-earnings ratio and dependence on developing markets for earnings
growth, in our opinion, made this stock a risky investment. This prompted us to
reduce it during the latter part of the fiscal period.
Although the extent of the impact remains unclear, the financial turmoil in
Southeast Asia will likely hurt companies who depend on that region for their
earnings growth. We feel that the Fund will be best served by steering clear of
such companies; therefore, we have fashioned a portfolio which endeavors to
focus on more domestic-oriented companies and holdings with more attractive
valuations.
Top 5 Sectors
---------------
(as a percentage of net assets)
Healthcare Products & Services 18.8%
Banks 11.1%
Information Services & Technology 10.9%
Oil/Energy 7.5%
Utilities 7.4%
10
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
- -----------------------------------------------------------------------
Portfolio Manager Commentary
Sector Allocation Adjustments
Consistent with our lower risk strategy of diversifying between growth and value
stocks, we have also made some notable sector adjustments. During the reporting
period, the Fund has favored growth stocks over value stocks. Repositioned
sector weightings, however, have increased the value orientation within the
portfolio.
The Fund's utility weighting increased from 2.3% to 7.4% during the fiscal
period. We feel the utility sector's attractive valuation and domestic-oriented
earnings growth should insulate it from foreign crises and continue to fuel its
strong performance which began in the final months of 1997. In an effort to
bolster our utility weighting, CMS Energy and Pacificorp are two companies we
added during the period. Conversely, we decreased our exposure to information
services and technology companies. The slowdown in foreign markets could have a
very negative impact on high P/E technology companies which rely on Asian
markets to justify their lofty valuations; therefore, companies such as Ascend
Communications, Intel and Quantum Corporation were eliminated during the period.
Top 10 Equity Holdings
(as a percentage of net assets)
HBO & Co. 3.0%
Cendant Corp. 3.0%
American International Group, Inc. 3.0%
Tyco International Ltd. 2.8%
BankBoston Corp. 2.7%
General Electric Co. 2.7%
SmithKline Beecham Plc, ADR 2.7%
Tosco Corp. 2.7%
CINergy Corp. 2.7%
Masco Corp 2.6%
Outlook
Going forward, we expect our sector adjustments and the portfolio's lower risk
profile to benefit performance, especially if the stock market experiences
increased "Asia-induced" volatility. Specifically, the portfolio's repositioning
away from "foreign-dependent" companies should reduce the impact of the slowdown
in Asian markets. It is important to note, however, with the recent focus on
global economic forces we believe the greatest gains and losses will come from
choosing individual stocks. Consequently, we remain focused on maintaining a
portfolio of quality, strongly managed, industry-leading companies which
demonstrate the ability to meet and exceed earnings expectations.
11
<PAGE>
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EVERGREEN
Select Small Company Value Fund
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Portfolio Manager Commentary
Portfolio Management Team
Nola Maddox Falcone heads up the Small Company Value Fund team which includes
Stephen A. Lieber and Gary R. Buesser. Ms. Falcone is President and Co-Chief
Executive Officer of Lieber & Co. and Evergreen Asset Management Corp. Stephen
A. Lieber is Chairman and Co-Chief Executive Officer of Lieber & Co. and
Evergreen Asset Management Corp. Gary A. Buesser joined Lieber & Co. as an
analyst in 1996. Previously, he was a Portfolio Manager/Analyst with Cowen Asset
Management and Shearson Lehman Brothers.
[Photograph appears here of Nola M. Falcone,CFA]
Nola M. Falcone, CFA
[Photograph appears here of [Photograph appears here of
Stephen A. Lieber] Gary R. Buesser]
Stephen A. Lieber Gary R. Buesser
New Fund
The Evergreen Select Small Company Value Fund began operations on December 22,
1997, moving quickly to be fully invested to take advantage of unusual values in
the small company stock market. We believe that late 1997 was an unusually
opportune period to be investing in undervalued small companies. Market
over-reaction to the Asian financial and currency crisis had caused the stock
prices of many small companies to fall to attractive levels relative to their
earnings. This was especially true in technology-related industries, including
production and semiconductor equipment and medical technology companies, and in
oil and gas production and services. In addition, the continuation of the
consolidation trends in the banking and utility industries created opportunities
to buy attractive companies at prices below the values that we believe could be
recognized in acquisitions.
Investment Strategy
The Fund employs a disciplined research process in seeking undervalued
stocks of small companies. We search for opportunities created by:
temporary dislocations in the market, such as the Asian crisis; the
introduction of new products or management teams that change the
earnings expectations of companies; or industry consolidation trends.
Increased industry consolidation through mergers and acquisitions has
been a very significant factor helping value investors in the small cap
stock market. On January 19, 1998, the New York Times estimated merger
and acquisition activity reached the $1 trillion level in 1997 and is
expected to continue through 1998.
At the close of the fiscal period on December 31, 1997, the Fund's
largest industry weighting was in banks and thrifts, at 15.0% of net
assets. We believed consolidation among banks and thrift institutions
would continue, and that the current stock prices of many small cap
banks were below the levels that could reasonably be expected in
takeovers.
Consolidation among gas and electric utilities also played a role in our
decision to emphasize those industries, which together accounted for
almost 4% of net assets at the close of the period. Among the portfolio
holdings were South Jersey Industries, UGI Corp. and Madison Gas &
Electric.
In general, the Asian currency and financial crisis caused investors to
fear a slowdown in corporate earnings growth. In a time of uncertainty,
they seemed to prefer large-cap, blue chip companies. This caused a
correction in the small cap stock market and among technology
12
<PAGE>
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EVERGREEN
Select Small Company Value Fund
- ---------------------------------------------------------------------------
Portfolio Manager Commentary
companies in general. Evergreen's team of 16 analysts was able to find a
number of undervalued companies with relatively lower price/earnings
ratios based on projected 1998 earnings growth rates, even considering
an economic slowdown caused by the Asian crisis. In particular, we found
opportunities in the energy services and semiconductor equipment
industries and among medical technology companies.
Top 5 Sectors
---------------
(as a percentage of net assets)
Banks and Thrifts 15.0%
Oil Field Services 10.5%
Healthcare Products & Services 7.9%
Electrical Equipment & Services 7.9%
Oil/Energy 7.2%
Semiconductor equipment companies purchased by the Fund included
Photronics, Inc., and Dupont Photomasks, Inc., both of which produce
masks or templates used in the manufacture of computer chips. We believe
both these companies have very strong growth patterns in place that
justify higher stock prices. In the technology area, the Fund also
established a position in BGS Systems, a software company that we found
undervalued in the market.
We believe several factors have led to an anticipated drag on demand for
energy. These factors include the Asian financial crisis, concerns about
Iraq's possible increase in production of oil and gas, and the increase
in OPEC's allowed production levels. Together, these factors have
created buying opportunities in the oil and gas service and oil
industries, where we were able to find a number of attractive companies.
These included Atwood Oceanics, Inc., Barrett Resources Corp., Hvide
Marine, Inc., and SEACOR SMIT, Inc. We anticipate there will be
consolidation in this industry with the development of "super
independents" and the focus on domestic acquisitions by the major oil
companies.
In the general medical technology area, our research helped us find
several companies with interesting products that should prove a catalyst
for earnings growth currently not recognized in the market prices of
their stocks. Among the medical-related companies with distinctive
product advantages were: ADAC Laboratories, which manufactures a new
nuclear imaging device to help doctors detect the spread of lung cancer;
EMPI, Inc., which has developed a new electro-therapy device to aid in
the treatment of incontinence by strengthening internal muscles; and
VISX, Inc., which produces a laser technology used to correct
near-sightedness.
Top 10 Holdings
------------------
(as a percentage of net assets)
ADAC Laboratories 3.1%
Hvide Marine, Inc. 3.0%
Maryland Federal Bancorp, Inc. 2.7%
CPI Corp. 2.2%
Russ Berrie & Co. Inc. 2.0%
Cliffs Drilling Co. 1.9%
Civic Bancorp 1.9%
Hancock Holding Co. 1.9%
SEACOR SMIT, Inc. 1.9%
Andrew Corp. 1.9%
Outlook
Looking toward the future, we believe that while there may be a slowing
in economic growth in 1998, there should not be a recession. Within this
context, we believe many small capitalization stocks continue to have
market prices lower than either their growth outlook or their potential
acquisition value would indicate.
13
<PAGE>
- ------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- -------------------------------------------------------------------------
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Social Principles Fund invests in the stocks of
mid-sized U.S. companies with an average market capitalization of $3
billion. The Fund emphasizes companies that generally respect human
rights, play a role in local communities, and produce useful products in
an environmentally sound way. This philosophy holds that socially
conscious investing promotes responsible values without impairing
long-term performance.
Process
The Fund utilizes a fundamental, bottom-up stock selection process which
is research intensive. In addition, the Fund utilizes an external
Advisory Board whose role is to develop and continually review guiding
policies and principles of social investing. All holdings are
periodically reviewed to assure adherence to the Advisory Board
Standards.
Benchmark
S & P 400 Midcap Index
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class IC
<S> <C>
Performance Inception Date 5/31/88
Average Annual Returns
6 mos. 10.67 %
1 year 23.30 %
3 years 25.58 %
5 years 16.58 %
Since Inception 15.21 %
Cumulative Since Inception 288.24 %
Distribution per share for the period* $ 0.004
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
5/88 12/89 12/91 12/93 12/95 12/97
Class IC Shares 10,000 12,328 15,391 19,771 27,007 38,820
Standard &Poor's 400 Midcap
Index 10,000 14,728 14,603 17,868 21,701 34,583
Comparison of change in value of a $10,000 investment in Evergreen Select
Social Principles Fund, Class IC and the Standard & Poor's 400 Midcap Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Funds predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
14
<PAGE>
- -------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- -------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Social Principles Fund is managed by Eric M.
Wiegand and assistant manager, A. Jay Zelko, who have over 24 years of
combined investment experience. The team-oriented approach identifies
the most attractive opportunities in the market and ensures adherence to
the style-specific objectives.
[Photograph appears of Eric M.Wiegand] [Photograph appears of A. Jay Zelko]
Eric M. Wiegand A. Jay Zelko
Performance
The Evergreen Select Social Principles Fund posted a total return of 10.7%
for the six-month period ended December 31, 1997. Despite strong overall
equity returns, it was a difficult performance period for funds focusing
on mid- and small-capitalized stocks. This disparity was most pronounced
during the final three months of 1997, when the large cap S&P 500 Index
had a total return of 2.9% versus the midcap S&P 400 index return of 0.8%
and the small cap S&P 600 index return
of -3.1%.
Top 5 Sectors
--------------
(as a percentage of net assets)
Healthcare Products & Services 14.1%
Information Services & Technology 13.2%
Banks 7.5%
Finance & Insurance 6.8%
Utilities - Electric 5.3%
Investment Strategy
In response to market volatility stemming from problems in Southeast
Asia, we have shifted the portfolio toward a more defensive posture.
Consistent with this strategy, we emphasized companies which, generally,
had less debt as well as attractive valuations. For example, the "debt-
to-capitalization" ratio for the Fund is 25% versus 33% for our
benchmark, the S&P 400 Index. Despite a reduced risk profile, the Fund
maintains a solid growth orientation, as evidenced by the long-term
growth rate of 20.8% versus 16.0% for the S&P 400 Index.
Also, we favor companies which are in a position to exploit a particular niche
in the market. An example is General Nutrition Companies, one of the Fund's
current holdings. General Nutrition has experienced strong growth primarily
because it is the only nationwide specialty retailer of its kind, supplying
vitamin and mineral supplements, sports nutrition products and herbs. "Niche"
companies generally have more dependable earnings growth - due to less direct
competition - and are less likely to be negatively impacted from a slowdown in
economic growth.
Sector Allocation Shifts
Two notable sector adjustments were made during the fiscal period:
decreased exposure to technology and information services and an
increased utility weighting. We felt that the potential negative impact
from devalued currencies in Southeast Asia, as well as high relative
valuations, justified a reduction in technology-related companies.
Ascend Communications and Dell Computer are two technology holdings we
eliminated.
Conversely, we view the Fund's bulked-up utility weighting as a way to
insulate the portfolio from turmoil in Asian markets while
simultaneously strengthening our defensive posture. Attractive
valuations and non-foreign earnings growth should provide this sector a
degree of immunity from the "Asian flu," and allow utility companies to
continue their strong performance which began in the final months of
1997.
15
<PAGE>
- ---------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- ----------------------------------------------------------------------
Portfolio Manager Commentary
Top 10 Holdings
---------------
(as a percentage of net assets)
Newpark Resources, Inc. 2.8%
HEALTHSOUTH Corp. 2.7%
Comair Holdings, Inc. 2.7%
General Nutrition Companies, Inc. 2.6%
HBO & Co. 2.6%
Network Associates, Inc. 2.4%
Partnerre Ltd. 2.4%
SouthTrust Corp. 2.2%
EMC Corp. 2.1%
AGCO Corp. 2.0%
Future Opportunities
Going forward, one of our particular areas of interest is in the
environmental field. Well-managed companies involved in activities such
as waste management and recycling are poised to benefit as Americans
become increasingly aware of environmental issues. Well-publicized
reports of global warming and air pollution can serve to benefit
companies which unveil creative and effective solutions to deal with
these problems. Capitalizing on America's increasing environmental
focus, we purchased American Disposal Services as well as Allied Waste
Industries, two companies which provided solid gains during the quarter.
We will continue to explore this area for opportunities going forward.
Outlook
As a result of recent sector adjustments, individual stock selection and
a more defensive-oriented structure, we feel the Fund is well positioned
going into 1998. Investors' preference of large, dominant, liquid
companies has created a "valuation gap" which has produced very
attractive valuations for small- and mid-cap stocks. As this disparity
narrows, we expect the resurgence of mid-capitalization stocks to
positively impact performance, as investors return their focus to
earnings and business fundamentals rather than size and liquidity.
16
<PAGE>
- ------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -------------------------------------------------------------------------
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Strategic Growth Fund is a growth-style equity product
that emphasizes large and mid-sized U.S. companies. We believe that
superior long-term returns can be achieved through a disciplined
approach of investing in stocks with excellent historical and future
earnings growth.
Process
The Fund is managed by two investment professionals who utilize a unique
blend of quantitative and qualitative fundamental analysis. This
bottom-up stock selection process is research- intensive and identifies
companies which exhibit strong current fundamentals, histories of
superior earnings/dividend growth and rising earnings expectations.
Benchmark
Russell 1000 Growth Index
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/94
Average Annual Returns
6 mos. 16.96%
1 year 30.78%
3 years 30.94%
Since Inception 30.94%
Cumulative Since Inception 124.50%
Distribution per share for the period* $ 0.01
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/94 12/95 12/96 12/97
Class I Shares 10,000 13,850 17,191 22,482
Russell 1000 Growth Index 10,000 13,505 16,384 21,132
Comparison of change in value of a $10,000 investment in Evergreen Select
Strategic Growth Fund, Class I and the Russell 1000 Growth Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
17
<PAGE>
- --------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Strategic Growth Fund is managed by Timothy M.
Stevenson and W. Shannon Reid. They have over 31 years' combined
investment experience and boast a unique blend of quantitative and
traditional fundamental analysis skills. Their disciplined approach
assures consistency of results and superior service.
[Photograph of Timothy M. Stevenson] [Photograph of W. Shannon Reid]
Timothy M. Stevenson W. Shannon Reid
Performance
The Evergreen Select Strategic Growth Fund posted a total return of
17.0% for the six-month period ended December 31, 1997. The Fund
significantly outpaced the 9.2% total return for the benchmark Russell
1000 Growth Index during the same time period. Strong performance can be
attributed to individual stock selection and timely sell decisions
rather than a heavy concentration in any particular economic sector. The
Fund's position in cash and equivalents during the period averaged
approximately 5%.
Top 5 Sectors
(as a percentage of net assets)
Healthcare Products & Services 18.0%
Information Services & Technology 15.7%
Finance & Insurance 12.2%
Food & Beverage Products 9.8%
Consumer Products & Services 7.6%
Investment Strategy
The Fund strives to achieve superior investment returns by owning a
diversified portfolio of established companies which seek to produce
superior and sustainable earnings growth. Our quantitative and
qualitative fundamental analysis identifies companies which exhibit
histories of superior earnings and dividend growth, strong current
fundamentals and rising earnings expectations.
Equally important as the "buy decision" is deciding when to sell a
particular holding. Growth stocks are inherently high expectation
stocks. A deterioration in fundamentals typically leads to a negative
price response; therefore, we continuously monitor business
fundamentals, earnings trends and market expectations of positions held
in the Fund.
Outlook
Overall market uncertainty, and therefore heightened volatility, is
likely to carry over into 1998, barring quick resolution of the Asian
economic turmoil. Within the portfolio we have reduced or eliminated our
positions in some technology and other multinational companies which
either compete against companies in that region or depend on the region
for a significant portion of their earnings growth. Our analysis
indicates that the limited upside potential for these stocks is
outweighed by potential earnings disappointments. Examples include Texas
Instruments, Oracle, Intel and Dupont. Conversely, we have increased our
emphasis on companies with domestically oriented earnings growth such as
Home Depot, CompUSA, Patterson Dental and Lincare Holdings.
18
<PAGE>
- -----------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -----------------------------------------------------------------------
Portfolio Manager Commentary
The net effect of these changes has been to reduce the average market
capitalization for the Fund and lower its price-to-earnings ratio from
28.8 to 27.5 during the six- month period. From a sector standpoint, we
maintain a slight overweighting in consumer cyclicals, finance and
business services. Slightly underweighted sectors include consumer
staples and technology.
Going forward, we anticipate the portfolio's lower risk profile and
reduced exposure to multinational companies to benefit performance,
especially if the stock market experiences increased "Asia-induced"
volatility. Despite the recent focus on turmoil in foreign markets, we
believe it is important to remember that individual stock selection
remains the most important determinant of performance. With that in
mind, we continue to invest in U.S. companies which are judged to have
superior and sustainable earnings growth prospects.
Top 10 Holdings
----------------
(as a percentage of net assets)
Coca Cola Co. (The) 3.7%
Bristol-Myers Squibb Co. 2.8%
Microsoft Corp. 2.7%
Philip Morris Companies, Inc. 2.7%
Proctor & Gamble Co. (The) 2.6%
Tyco International Ltd. 2.3%
Computer Horizons Corp. 2.1%
Shering-Plough Corp. 2.1%
PMC-Sierra, Inc. 2.1%
Cendant Corp. 2.0%
19
<PAGE>
- ------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- ------------------------------------------------------------------
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Strategic Value Fund is a value-style equity product
which emphasizes large and mid-capitalization U.S. companies. This
philosophy holds that stocks, over time, can become mispriced relative
to their true value and that attractive opportunities can be identified
through a combination of quantitative analysis and rigorous fundamental
research.
Process
Following the initial screen by our proprietary model which determines
that a stock is selling at a reasonable valuation level, the Strategic
Value team employs a labor-intensive research effort in order to dig
deep for clues to uncover value. Qualitative factors which are analyzed
include industry leadership, quality of management, the company's
current competitive position and future earnings prospects.
Benchmark
Russell 1000 Value Index
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/81
Average Annual Returns
6 mos. 14.46%
1 year 32.29%
3 years 30.44%
5 years 20.64%
10 years 17.23%
Since Inception 18.07%
Cumulative Since Inception 1327.29%
Distribution per share for the period* $ 0.10
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here of the follow plot points]
<TABLE>
<CAPTION>
12/87 12/89 12/91 12/93 12/95 12/97
<S> <C> <C> <C> <C> <C> <C>
Class I Shares 10,000 15,072 16,021 21,708 29,464 49,038
Russell 1000 Value Index 10,000 14,237 16,967 20,413 25,793 40,154
</TABLE>
Comparison of change in value of a $10,000 investment in Evergreen Select
Strategic Value Fund, Class I and the Russell 1000 Value Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
20
<PAGE>
- ------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- -------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Strategic Value Fund is managed by a team of 4
portfolio managers with over 82 years of combined investment experience
and expertise in value equity analysis and management. The team-oriented
approach incorporates multiple perspectives to identify the most
attractive opportunities in the market and ensures adherence to the
style-specific objectives.
[Photograph of Don Rains] [Photograph of Jack Gray]
Don Rains Jack Gray
[Photograph of Elizabeth Smith] [Photograph of Tim O'Grady]
Elizabeth Smith Tim O'Grady
Performance
The Evergreen Select Strategic Value Fund posted a total return of 14.5%
for the six-month period ended December 31, 1997. This performance was
achieved in a rather volatile market environment and compares very
favorably to the 14.9% total return of the Russell 1000 Value Index as
well as the S&P 500 Index's 10.6% return. The fiscal period was divided
into two distinct and very different intervals. The portfolio
capitalization structure and sector weightings which benefited
performance during the first three months hampered returns during the
final quarter. Overall, it was a positive period with the Fund
outperforming its benchmark, the Russell 1000 Value Index.
Top 5 Sectors
--------------
(as a percentage of net assets)
Banks 23.0%
Oil/Energy 13.3%
Finance & Insurance 12.8%
Information Services & Technology 6.3%
Utilities - Electric 5.8%
Utility Sector
Over the past three-to-five years, the utility sector has essentially
become a non-performing asset class, that is, up until the final months
of 1997. Historically, we have carried a sixty percent relative
weighting in the utility group. During the final and volatile months of
1997, investors sought out calmer waters by moving into the utility
sector in the face of Southeast Asia's economic turmoil, awaiting a
better tide in the form of a clearer perspective on the crisis. Whereas
our utility underweighting enhanced returns in the third quarter, this
major rotation into utilities contributed to the performance edge of the
Russell 1000 Value Index during the fourth quarter, with its stronger
utility representation versus the Evergreen Select Strategic Value Fund.
Although we still maintain an underweighted position, we have made a
prudent decision to move a little closer to our benchmark weighting by
purchasing Pinnacle West and UtiliCorp United during the fiscal period.
Technology Sector
The Fund's weighting in technology and in particular in the individual
companies that constitute our sector weighting, enhanced performance
early in the period but had a negative impact during the fourth quarter.
The market's negative reaction to technology stocks was swift and
decisive. From our perspective it is important to look through the
near-term environment and focus the Fund on core technology companies
with good
21
<PAGE>
- ----------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- ----------------------------------------------------------------------------
Portfolio Manager Commentary
long-term growth prospects. Our sense is that the technology sector is
one of the few pure growth sectors in today's economy. While short-term
performance results may be interrupted or delayed over narrow time
periods, longer term we feel the Fund is properly structured to
participate in the future growth prospects facing the industry.
The Market's Rotation
The trend that developed in the first part of the period when market
leadership was led by small-to-mid-capitalization companies, reversed
itself during the final three months. The rebound in the market was
largely centered around large capitalization shares, because investors
were willing to pay a premium for both security and liquidity. The
Fund's average market capitalization during the quarter stood at
approximately $26 billion compared to $33.5 billion for the Russell 1000
Value Index. Much like the previously mentioned sector weightings, this
capitalization disparity fueled the Fund's strong 13.2% third quarter
total return while hampering the fourth quarter return of 1.1%.
Top 10 Holdings
(as a percentage of net assets)
Philip Morris Companies, Inc. 3.0%
Century Telephone Enterprises, Inc. 2.9%
Union Planters Corp. 2.8%
Chase Manhattan Corp. 2.7%
Williams Companies, Inc. (The) 2.7%
Citicorp 2.7%
Bristol-Myers Squibb Co. 2.7%
First Chicago NBD Corp. 2.6%
PNC Bank Corp. 2.6%
Summit Bancorp 2.5%
Outlook
In viewing the background for equities, we continue to carry forward our
1997 operating assumptions of moderate economic growth without pricing
pressure into 1998. Our sense is that the Standard and Poor's 500 Index
will do well to match its long-term return of 10.4% per year in 1998.
Corporate earnings hold the key. Given current equity valuations, and
without further declines in interest rates, investors must see
conclusive evidence of an acceptable earnings pattern throughout 1998.
With it, a case can be made for higher equity prices, without it,
equities look vulnerable and could go through a corrective phase. This
places us squarely in the cautious bull camp.
22
<PAGE>
- --------------------------------------------------------------------------
EVERGREEN
Select Common Stock Fund
- --------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- -------------------------------------------------------------------------------
CLASS I*
- -------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 82.97
=========
Income from investment operations:
Net investment income 0.11
Net realized and unrealized gain on investments 0.05
---------
Total from investment operations 0.16
---------
Distributions to shareholders from:
Net investment income (0.09)
----------
Total distributions (0.09)
----------
Net asset value end of period $ 83.04
==========
Total Return 0.20%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.70%+
Total expenses, excluding fee waiver and expense reimbursement 0.83%+
Net investment income 1.31%+
Portfolio turnover rate 4%
Average commission rate per share $ 0.0492
Net assets end of period (millions) $ 1,887
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
23
<PAGE>
- ---------------------------------------------------------------------------
EVERGREEN
Select Equity Income Fund
- ---------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- ------------------------------------------------------------------------------------------
CLASS I*
- -------------------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 87.31
=========
Income from investment operations:
Net investment income 0.26
Net realized and unrealized gain on investments and written call options 3.25
---------
Total from investment operations 3.51
---------
Distributions to shareholders from:
Net investment income (0.21)
----------
Total distributions (0.21)
----------
Net asset value end of period $ 90.61
==========
Total Return 4.03%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.77%+
Total expenses, excluding fee waiver and expense reimbursement 0.88%+
Net investment income 2.88%+
Portfolio turnover rate 5%
Average commission rate per share $ 0.0573
Net assets end of period (thousands) $ 207,354
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
24
<PAGE>
- ------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- ------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended December 31, 1997
- ---------------------------------------------------------------------------------------------
CLASS I** CLASS IC*
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value beginning of period $ 44.59 $ 45.05
============ ============
Income from investment operations:
Net investment income 0.02 0.04
Net realized and unrealized gain on investments 1.45 0.99
------------ ------------
Total from investment operations 1.47 1.03
------------ ------------
Distributions to shareholders from:
Net investment income (0.01) (0.03)
------------ ------------
Total distributions (0.01) (0.03)
------------ ------------
Net asset value end of period $ 46.05 $ 46.05
============ ============
Total Return 3.30% 2.28%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.71%+ 0.71%+
Total expenses, excluding fee waiver and expense reimbursement 0.85%+ 0.85%+
Net investment income 0.77%+ 0.78%+
Portfolio turnover rate 5% 5%
Average commission rate per share $ 0.0564 $ 0.0564
Net assets end of period (thousands) $ 267 $ 467,014
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of Class operations) to
December 31, 1997.
** For the period from December 19, 1997 (commencement of Class operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
25
<PAGE>
- ---------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- ---------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- -----------------------------------------------------------------------------
CLASS IS*
- -----------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 10.00
=========
Income from investment operations:
Net investment income 0.01
Net realized and unrealized gain on investments 0.23
---------
Total from investment operations 0.24
---------
Distributions to shareholders from:
Net investment income 0
---------
Total distributions 0
---------
Net asset value end of period $ 10.24
=========
Total Return 2.40%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 1.00%+
Total expenses, excluding fee waiver and expense reimbursement 1.46%+
Net investment income 3.05%+
Portfolio turnover rate 3%
Average commission rate per share $ 0.0604
Net assets end of period (thousands) $ 25,894
</TABLE>
+ Annualized.
* For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended December 31, 1997
- -------------------------------------------------------------------------------------------------
CLASS I* CLASS IC*
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value beginning of period $ 36.65 $ 36.65
============= =============
Income loss from investment operations:
Net investment loss (0.01) (0.01)
Net realized and unrealized loss on investments (0.85) (0.84)
Total from investment operations (0.86) (0.85)
------------- -------------
Distributions to shareholders:
In excess of net investment income 0# 0#
------------- -------------
Total distributions 0 0
------------- -------------
Net asset value end of period $ 35.79 $ 35.80
============= =============
Total Return (2.34%) (2.34%)
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.86%+ 0.86%+
Total expenses, excluding fee waiver and expense reimbursement 1.00%+ 1.00%+
Net investment loss (0.13%)+ (0.13%)+
Portfolio turnover rate 5% 5%
Average commission rate per share $ 0.0526 $ 0.0526
Net assets end of period (thousands) $ 117 $ 156,921
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
# Amount is less than one cent per share.
See Combined Notes to Financial Statements.
27
<PAGE>
- -------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- --------------------------------------------------------------------------------
CLASS I*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 32.45
=========
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gain on investments 0.43
---------
Total from investment operations 0.45
---------
Distributions to shareholders from:
Net investment income (0.01)
----------
Total distributions (0.01)
----------
Net asset value end of period $ 32.89
==========
Total Return 1.39%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.72%+
Total expenses, excluding fee waiver and expense reimbursement 0.87%+
Net investment income 0.54%+
Portfolio turnover rate 43%
Average commission rate per share $ 0.0581
Net assets end of period (thousands) $ 275,399
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
28
<PAGE>
- -----------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- -----------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- ---------------------------------------------------------------------------------
CLASS I*
- ----------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 203.35
==========
Income from investment operations:
Net investment income 0.18
Net realized and unrealized gain on investments 6.19
----------
Total from investment operations 6.37
----------
Distributions to shareholders from:
Net investment income (0.10)
-----------
Total distributions (0.10)
-----------
Net asset value end of period $ 209.62
===========
Total Return 3.13%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.75%+
Total expenses, excluding fee waiver and expense reimbursement 0.85%+
Net investment income 0.84%+
Portfolio turnover rate 1%
Average commission rate per share $ 0.0605
Net assets end of period (thousands) $ 183,368
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------
EVERGREEN
Select Common Stock Fund
- ---------------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 95.8%
Automotive
Equipment &
Manufacturin - 2.7%
275,000 Arvin Industries, Inc. ..... $ 9,160,938
850,000 Ford Motor Co. ............. 41,384,375
------------
50,545,313
-------------
Banks - 9.9%
435,000 Banc One Corp. ........... 23,625,937
210,000 BankBoston Corp. ......... 19,726,875
195,000 Bankers Trust Corp. ..... 21,925,313
230,000 Chase Manhattan Corp. ... 25,185,000
320,000 First Chicago NBD Corp. ... 26,720,000
225,000 Fleet Financial Group Corp. .. 16,860,938
200,000 KeyCorp................ 14,162,500
375,000 NationsBank Corp. ........... 22,804,687
250,000 SouthTrust Corp. ............ 15,859,375
-------------
186,870,625
--------------
Building,
Construction &
Furnishings - 1.8%
310,000 * American Standard Companies,
Inc. ...................... 11,876,875
435,000 Masco Corp. ............... 22,130,625
--------------
34,007,500
---------------
Capital
Goods - 1.6%
230,000 Case Corp. ............. 13,900,625
460,000 LucasVarity Plc - ADR.... 16,042,500
------------
29,943,125
--------------
Chemical &
Agricultural
Products - 3.6%
150,000 * Cytec
Industries, Inc. ..... 7,040,625
120,000 Dow Chemical Co. 12,180,000
430,000 Du Pont (E.I.)
De Nemours & Co. ...... 25,826,875
150,000 Pioneer
Hi-Bred
Internationa Inc. ........ 16,087,500
165,000 Union Carbide Corp. ...... 7,084,688
--------------
68,219,688
--------------
Communicatio
Systems &
Services - 1.8%
600,000 Cisco Systems, Inc. ....... 33,450,000
-----------
Consumer Products &
Services - 4.6%
300,000 Black & Decker Corp. ...... 11,718,750
425,000 * Fruit Of The
Loom, Inc. Cl. A ......... 10,890,625
120,000 Gillette Co. (The)....... 12,052,500
175,000 Nike, Inc. Cl. B ........ 6,868,750
355,000 Stanley Works........... 16,751,562
385,000
Sunbeam-Oste Co., Inc.... 16,218,125
220,000 Whirlpool Corp. ......... 12,100,000
-------------
86,600,312
-------------
Diversified Companies - 0.5%
210,000 Tyco
Internationa Ltd. ......... 9,463,125
-----------
Electrical
Equipment &
Services - 3.1%
790,000 General Electric Co. .... 57,966,250
-----------
Finance &
Insurance - 5.1%
275,000 Allmerica
Financial Corp. ..... 13,732,812
185,000 Allstate Corp. (The)...... 16,811,875
100,000 Loews Corp. .............. 10,612,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
320,000 Morgan
Stanley,
Dean Witter,
Discover & Co. ..... $18,920,000
135,000 PMI Group, Inc. (The).... 9,762,188
360,000 Providian
Financial Corp............ 16,267,500
171,000 UNUM Corp. ............... 9,298,125
------------
95,405,000
--------------
Food &
Beverage
Products - 8.6%
440,000 Coca Cola Co. (The)....... 29,315,000
560,000 Conagra, Inc. ............ 18,375,000
340,000 Fortune Brands, Inc....... 12,601,250
770,000 Philip
Morris
Companies, Inc. .......... 34,890,625
520,000 RJR Nabisco
Holdings Corp. ........... 19,500,000
240,000 * Safeway, Inc. ............ 15,180,000
590,000 Sara Lee Corp. ........... 33,224,375
-------------
163,086,250
-------------
Healthcare
Products &
Services - 12.2%
370,000 Abbott Laboratories....... 24,258,125
290,000 * Amgen, Inc. .............. 15,696,250
385,000 * Boston
Scientific
Corp. .................... 17,661,875
230,000 Bristol-Myer
Squibb Co. ............... 21,763,750
250,000 * FPA Medical
Management, Inc. ......... 4,656,250
270,000 HBO & Co. ................ 12,960,000
450,000 Health
Management
Associates,
Inc. ..................... 11,362,500
620,000 HEALTHSOUTH Corp. ........ 17,205,000
210,000 * Lincare
Holdings, Inc. ........... 11,970,000
720,000 * MedPartners, Inc. ........ 16,110,000
260,000 Pfizer, Inc. .............. 19,386,250
200,000 Schering-Plo Corp. ........ 12,425,000
300,000 SmithKline
Beecham Plc, ADR .......... 15,431,250
630,000 Tenet Healthcare Corp. ..... 20,868,750
190,000 Teva
Pharmaceutic
Industries
Ltd.,
ADR ......................... 8,989,375
--------------
230,744,375
--------------
Industrial
Specialty
Products &
Services - 0.5%
160,000 * Sealed Air Corp. ........... 9,880,000
-------------
Information
Services &
Technology 2.3%
365,000 * 3Com Corp. ................. 12,752,187
200,000 * Adaptec, Inc. .............. 7,425,000
180,000 Altera Corp. ................ 5,962,500
200,000 * Applied
Materials, Inc. ............. 6,025,000
400,000 * Cadence
Design
Systems, Inc. ............... 9,800,000
470,000 Compaq
Computer Corp. ............... 26,525,625
787,500 Computer
Associates
Internationa
Inc. ........................ 41,639,062
90,000 * Dell Computer Corp. ......... 7,560,000
270,000 Intel Corp. ................. 18,967,500
340,000 International
Business Machines Corp. ..... 35,551,250
150,000 * Microsoft Corp. ............. 19,387,500
140,000 * Networks
Associates, Inc. ............ 7,402,500
190,000 * Quantum Corp. ............... 3,811,875
80,000 * Sanmina Corp. ............... 5,420,000
200,000 * SCI Systems, Inc. .......... 8,712,500
200,000 * Synopsys, Inc. ............. 7,150,000
</TABLE>
30
<PAGE>
- ----------------------------------------------------------------------
EVERGREEN
Select Common Stock Fund
- ----------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C> <C>
COMMON STOCKS - continued
Information Services &
Technology - continued
175,000 Varian Associates, Inc. ............ $ 8,848,438
--------------
232,940,937
---------------
Metal Products & Services - 1.4%
110,000 Aluminum Co. of America ............ 7,741,250
285,000 Crown Cork & Seal Co., Inc. ........ 14,285,625
485,000 LTV Corp. .......................... 4,728,750
--------------
26,755,625
---------------
Oil/Energy - 8.0%
145,000 Ashland, Inc. ...................... 7,784,687
530,000 Enron Corp. ........................ 22,028,125
130,000 Mobil Corp. ........................ 9,384,375
350,000 Phillips Petroleum Co. ............. 17,018,750
300,000 Sonat, Inc. ........................ 13,725,000
520,000 Texaco, Inc. ....................... 28,275,000
460,000 Tosco Corp. ........................ 17,393,750
460,000 Ultramar Diamond Shamrock Corp. .... 14,662,500
580,000 YPF Sociedad Anonima, ADR .......... 19,828,750
--------------
150,100,937
--------------
Oil Field Services - 2.0%
500,000 Diamond Offshore Drilling, Inc. .... 24,062,500
350,000 * Reading & Bates Corp. .............. 14,656,250
--------------
38,718,750
--------------
Real Estate - 0.9%
460,000 FelCor Suite Hotels, Inc. REIT ..... 16,330,000
--------------
Retailing & Wholesale - 4.2%
375,000 Dayton Hudson Corp. ................ 25,312,500
545,000 Family Dollar Stores, Inc. ......... 15,975,313
380,000 * Federated Department Stores, Inc. .. 16,363,750
475,000 Sears, Roebuck & Co. ............... 21,493,750
--------------
79,145,313
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Telecommunication Services &
Equipment - 0.7%
190,000 * Nokia Corp., ADR ................... $ 13,300,000
---------------
Transportation - 1.7%
210,000 Burlington Northern Santa Fe ....... 19,516,875
435,000 Norfolk Southern Corp. ............. 13,403,438
--------------
32,920,313
--------------
Utilities - Electric - 4.7%
670,000 CINergy Corp. ..................... 25,669,375
555,000 CMS Energy Corp. ................... 24,454,687
555,000 GPU, Inc. .......................... 23,379,375
390,000 UtiliCorp United, Inc. ............. 15,136,875
---------------
88,640,312
---------------
Utilities - Telephone - 3.9%
440,000 Century Telephone Enterprises, Inc. 21,917,500
680,000 GTE Corp. .......................... 35,530,000
500,000 * LCI International, Inc. ............ 15,375,000
--------------
72,822,500
----------------
Total Common Stocks
(cost $1,238,668,263)............... 1,807,856,250
----------------
SHORT-TERM INVESTMENTS - 4.2%
Money Market Shares - 4.2%
78,662,448 Valiant General Fund ............... 78,662,448
----------------
Total Short-Term Investments
(cost $78,662,448)................. 78,662,448
---------------
Total Investments -
(cost $1,317,330,711)..... 100.0% 1,886,518,698
Other Assets and
Liabilities - Net ........ 0.0 341,192
------- --------------
Net Assets ............... 100.0% $1,886,859,890
====== ==============
</TABLE>
* Non-income producing securities.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
31
<PAGE>
- ----------------------------------------------------------------------
EVERGREEN
Select Equity Income Fund
- ----------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 80.4%
Aerospace &
Defense - 0.7%
20,000 United Technologies
Corp. ................ $ 1,456,250
-------------
Automotive Equipment &
Manufacturing - 2.4%
100,000 Ford Motor Co. ........ 4,868,750
---------------
Banks - 13.9%
50,000 BankBoston Corp. ..... 4,696,875
45,000 Bankers Trust Corp. .... 5,059,687
90,000 First Tennessee
National Corp. ......... 6,007,500
80,000 PNC Bank Corp. ......... 4,565,000
30,000 Summit Bancorp (b) ..... 1,597,500
100,000 Union Planters Corp..... 6,793,750
-------------
28,720,312
-------------
Building, Construction
& Furnishings - 2.5%
100,000 * American Standard
Companies, Inc. ........ 3,831,250
21,607 Southdown, Inc. ........ 1,274,813
------------
5,106,063
-------------
Chemical & Agricultural
Products - 0.9%
19,000 Dow Chemical Co. .... 1,928,500
--------------
Consumer Products &
Services - 1.2%
100,000 * Fruit Of The Loom, Inc.
Cl. A ............... 2,562,500
---------------
Electrical Equipment &
Services - 2.5%
70,000 General Electric Co. .... 5,136,250
-------------
Food & Beverage
Products - 4.5%
100,000 Philip Morris
Companies, Inc. ......... 4,531,250
130,000 RJR Nabisco Holdings
Corp. .................... 4,875,000
-------------
9,406,250
--------------
Healthcare Products &
Services - 6.2%
48,000 American Home Products
Corp. ................... 3,672,000
50,000 Bristol-Myers Squibb
Co. ..................... 4,731,250
200,000 * MedPartners, Inc. ...... 4,475,000
------------
12,878,250
-------------
Information Services &
Technology - 2.0%
40,000 International Business
Machines
Corp. .................. 4,182,500
------------
Metal Products &
Services - 2.0%
60,000 Aluminum Co. of America 4,222,500
-------------
Oil/Energy - 12.4%
440,000 Chesapeake Energy Corp. .. 3,327,500
125,000 Enron Corp. .............. 5,195,312
85,000 Phillips Petroleum Co. ... 4,133,125
110,000 Sonat, Inc. .............. 5,032,500
70,000 Texaco, Inc. ............. 3,806,250
125,000 YPF Sociedad Anonima,
ADR ...................... 4,273,438
-----------
25,768,125
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C>
COMMON STOCKS - continued
Real Estate - 2.0%
100,000 Avalon Properties, Inc.
REIT .................. $ 3,093,750
30,000 FelCor Suite Hotels, Inc.
REIT ................... 1,065,000
------------
4,158,750
-------------
Transportation - 1.8%
40,280 Burlington Northern
Santa Fe (b) ........... 3,743,523
-------------
Utilities-Electric - 18.9%
160,000 Allegheny Energy, Inc. ... 5,200,000
140,000 CINergy Corp. ............ 5,363,750
130,000 CMS Energy Corp. ......... 5,728,125
125,000 GPU, Inc. ................ 5,265,625
198,000 Houston Industries, Inc. .. 5,284,125
240,000 PacifiCorp ................ 6,555,000
150,000 UtiliCorp United, Inc. .... 5,821,875
-------------
39,218,500
---------------
Utilities-Gas - 2.5%
120,000 NICOR, Inc. .............. 5,062,500
------------
Utilities-Telephone -4.0%
100,000 GTE Corp. ................ 5,225,000
100,000 * LCI International, Inc.... 3,075,000
-------------
8,300,000
-------------
Total Common Stocks
(cost $120,963,607) 166,719,523
-------------
CONVERTIBLE PREFERRED - 8.1%
Capital Goods - 1.4%
20,000 Case Corp.
4.50%, Series A, 144A .. 2,872,500
-------------
Oil/Energy - 2.5%
65,000 Tosco Financing Trust
5.75%, 144A ............ 4,208,750
15,000 Tosco Financing Trust
5.75% ................. 971,250
------------
5,180,000
--------------
Paper &
Packaging - 2.5%
110,000 Crown Cork & Seal Co., Inc.
4.50%, MIPS ............ 5,170,000
------------
Real Estate - 1.7%
125,000 Felcor Suite Hotels,
Inc. .................. 3,578,125
-------------
Total Convertible
Preferred
(cost $16,314,485) ..... 16,800,625
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C>
CONVERTIBLE DEBENTURES - 2.8%
Building, Construction &
Furnishings - 0.8%
$ 1,500,000 Masco Corp.
5.25%, 2/15/12 ............. 1,792,500
-----------
Information Services &
Technology - 2.0%
4,000,000 Adaptec, Inc.
4.75%, 2/1/04, 144A ........ 4,120,000
-----------
Total Convertible Debentures
(cost $5,518,684) .......... 5,912,500
-----------
</TABLE>
32
<PAGE>
- ------------------------------------------------------------------------------
EVERGREEN
Select Equity Income Fund
- ------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 7.4%
Treasury Notes & Bonds - 7.4%
U.S. Treasury Notes
$ 2,000,000 6.125%, 7/31/00 ........... $ 2,020,626
2,000,000 6.125%, 9/30/00 ........... 2,021,876
2,000,000 6.125%, 12/31/01 .......... 2,027,502
1,500,000 6.50%, 4/30/99 ............ 1,516,876
2,000,000 6.50%, 8/31/01 ............ 2,050,002
500,000 6.625%, 6/30/01 ........... 514,219
1,940,000 6.875%, 7/31/99 ........... 1,974,557
1,000,000 7.25%, 2/15/98 ............ 1,002,188
500,000 7.25%, 5/15/04 ............ 539,844
1,000,000 7.75%, 11/30/99 ........... 1,037,188
600,000 7.875%, 4/15/98 ........... 604,313
-----------
Total U.S. Government & Agency
Obligations (cost $15,044,108) 15,309,191
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 1.3%
Money Market Shares - 1.2%
2,417,606 Valiant General Fund ... $2,417,606
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C>
Repurchase Agreement - 0.1%
$ 249,191 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $249,278 (cost
$249,191) (a)...................... 249,191
-----------
Total Short-Term Investments
(cost $2,666,797).................. 2,666,797
----------
Total Investments -
(cost $160,507,681)..... 100.0% 207,408,636
Other Assets and
Liabilities - Net ...... 0.0 (54,860)
------- ------------
Net Assets .............. 100.0% $207,353,776
======= ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$255,000 U.S. Treasury Notes, 5.875%, 11/15/99; value including accrued
interest -$257,541.
(b) All or a portion of these securities have been segregated to cover open
written call options.
Summary of Abbreviations:
ADR American Depository Receipts
MIPS Monthly Income Preferred Shares
REIT Real Estate Investment Trust
144A Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. These securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
COVERED CALL OPTIONS WRITTEN
<TABLE>
<CAPTION>
Shares Subject
Common Stocks/Expiration Date/Exercise Price to Call Contracts Value
- ---------------------------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
Burlington Northern, 1/18/98, $100.00 40,000 400 $ 2,500
Summit Bancorp, 1/18/98, $40.00 30,000 200 360,000
--------
Total (premiums received $233,192) $362,500
========
</TABLE>
See Combined Notes to Financial Statements.
33
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- -------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 95.4%
Automotive Equipment &
Manufacturing - 2.5%
131,900 Ford Motor Co. ......... $ 6,421,881
84,940 General Motors Corp. ... 5,149,488
------------
11,571,369
-------------
Banks - 11.1%
209,000 Banc One Corp. ......... 11,351,312
135,200 BankBoston Corp. ....... 12,700,350
60,070 Bankers Trust Corp. .... 6,754,121
51,200 Chase Manhattan Corp. .. 5,606,400
83,000 First Chicago NBD
Corp. .................. 6,930,500
25,000 Fleet Financial Group,
Inc. ................... 1,873,437
98,900 Union Planters Corp..... 6,719,019
--------------
51,935,139
--------------
Building, Construction &
Furnishings - 2.6%
242,400 Masco Corp. ........... 12,332,100
------------
Capital Goods - 1.2%
91,470 Case Corp. ........... 5,528,218
------------
Communication Systems &
Services - 1.2%
99,000 Cisco Systems, Inc. .... 5,519,250
------------
Consumer Products &
Services - 5.6%
413,800 * Cendant Corp. .......... 14,224,375
82,000 Colgate-Palmolive Co. .. 6,027,000
125,350 Stanley Works .......... 5,914,953
-----------
26,166,328
------------
Diversified Companies - 4.9%
243,000 AlliedSignal, Inc. ...... 9,461,813
293,000 Tyco International Ltd. .. 13,203,312
------------
22,665,125
-----------
Electrical Equipment &
Services - 2.7%
172,560 General Electric Co. ..... 12,661,590
------------
Finance & Insurance - 5.7%
68,800 Allstate Corp. (The)...... 6,252,200
127,050 American International
Group, Inc. ............. 13,816,687
118,500 Travelers Group, Inc. ... 6,384,188
-----------
26,453,075
------------
Food & Beverage
Products - 5.1%
92,910 Coca Cola Co. (The)...... 6,190,129
253,400 Philip Morris
Companies, Inc. ......... 11,482,187
111,200 Sara Lee Corp. .......... 6,261,950
-------------
23,934,266
--------------
Healthcare Products &
Services - 18.8%
124,000 Bristol-Myers Squibb
Co..................... 11,733,500
296,700 HBO & Co. ............. 14,241,600
418,000 HEALTHSOUTH Corp. ..... 11,599,500
172,885 Johnson & Johnson ..... 11,388,800
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - continued
203,590 * Lincare Holdings, Inc. ... $11,604,630
98,870 Pfizer, Inc. ............ 7,371,994
244,875 SmithKline Beecham Plc,
ADR ..................... 12,595,758
148,000 * Universal Health ....... 7,455,500
-------------
Services, Inc. Cl. B .... 87,991,282
----------------
Information Services &
Technology - 10.9%
185,265 * 3Com Corp. ............. 6,472,696
121,100 * Adaptec, Inc. .......... 4,495,837
184,310 Compaq Computer Corp.... 10,401,996
192,500 * EMC Corp. ............. 5,281,719
488,000 * Iomega Corp. ......... 6,069,500
43,835 * Microsoft Corp. ......... 5,665,674
124,000 * Networks Associates,
Inc. ................... 6,556,500
90,480 * Sanmina Corp. .......... 6,130,020
-------------
51,073,942
-------------
Metal Products &
Services - 2.4%
161,400 Aluminum Co. of America... 11,358,525
-------------
Oil/Energy - 7.5%
78,000 Mobil Corp. ............. 5,630,625
197,400 Texaco, Inc. ............ 10,733,625
330,825 Tosco Corp. ............ 12,509,321
174,700 YPF Sociedad Anonima,
ADR .................... 5,972,556
------------
34,846,127
------------
Oil Field Services - 2.3%
108,590 Diamond Offshore
Drilling, Inc. .......... 5,225,894
135,000 * Reading & Bates Corp. ... 5,653,125
------------
10,879,019
------------
Real Estate - 1.0%
137,800 FelCor Suite Hotels,
Inc. REIT................ 4,891,900
-------------
Retailing & Wholesale - 1.3%
138,415 * Federated Department
Stores, Inc. ............ 5,960,496
------------
Transportation - 1.2%
58,600 Burlington Northern ..... 5,446,137
-------------
Santa Fe
Utilities - Electric - 5.3%
323,700 CINergy Corp. .......... 12,401,756
145,600 CMS Energy Corp. ...... 6,415,500
220,000 PacifiCorp ............ 6,008,750
--------------
24,826,006
----------------
Utilities - Telephone - 2.1%
87,700 Century Telephone Enterprises,
Inc. ................... 4,368,556
75,000 SBC Communications,
Inc. ................... 5,493,750
--------------
9,862,306
---------------
Total Common Stocks
(cost $334,568,746)..... 445,902,200
------------
</TABLE>
34
<PAGE>
- -------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 4.5%
Money Market Shares - 0.5%
2,109,452 Valiant General Fund ... $2,109,452
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
Repurchase Agreement - 4.0%
$18,642,672 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $18,649,145 (cost
$18,642,672) (a)................. 18,642,672
----------
Total Short-Term Investments
(cost $20,752,124)............... 20,752,124
----------
Total Investments -
(cost $355,320,870)..... 99.9% 466,654,324
Other Assets and
Liabilities - Net ...... 0.1 626,520
------ -------------
Net Assets ............. 100.0% $467,280,844
====== ===============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$5,017,000 U.S. Treasury Notes, 9.25%, 8/15/98; value including accrued
interest -$5,299,194, $3,205,000 U.S. Treasury Notes, 5.875%, 11/15/99; value
including accrued interest - $3,236,939 and $10,140,000 U.S. Treasury Notes,
6%, 7/31/02; value including accrued interest - $10,481,574.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
35
<PAGE>
- ----------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- -----------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 82.4%
Banks - 9.4%
2,500 ABC Bancorp ........... $ 49,375
7,500 Beverly
Bancorporation, Inc. .... 171,562
800 Britton & Koontz
Capital Corp. ............ 17,600
25,000 * Civic Bancorp ............ 487,500
20,000 First State Bancorp ...... 427,500
15,000 Granite State
Bankshares, Inc........... 401,250
8,000 Hancock Holding Co........ 484,000
10,000 Seacoast Banking Corp.
of Florida Cl. A ......... 385,000
------------
2,423,787
------------
Building, Construction &
Furnishings - 4.7%
20,000 * Eagle Hardware &
Garden, Inc. .......... 387,500
10,000 La-Z-Boy Chair Co. .... 431,250
10,000 * US Home Corp. ......... 392,500
-------------
1,211,250
----------------
Communication Systems &
Services - 1.9%
20,000 * Andrew Corp. ....... 480,000
-------------
Consumer Products &
Services - 7.0%
25,000 CPI Corp. .......... 565,625
20,000 Russ Berrie & Co.,
Inc. ............... 525,000
30,000 Stride Rite Corp. .. 360,000
15,000 York Group, Inc. ... 365,625
--------------
1,816,250
--------------
Electrical Equipment &
Services - 7.9%
1,800 BGS Systems, Inc. ..... 63,000
10,000 * Dupont Photomasks,
Inc. .................. 348,750
10,000 * Hadco Corp. ........ 452,500
10,000 Harman International
Industries, Inc. ....... 424,375
17,000 * Photronic, Inc. .... 412,250
15,000 * SMART Modular
Technologies, Inc. ...... 345,000
------------
2,045,875
------------
Finance &
Insurance - 5.2%
20,000 Frontier Insurance
Group, Inc. ............. 457,500
25,000 * Grand Premier
Financial, Inc. .......... 356,250
11,400 Interstate/Johnson
Lane, Inc. .............. 302,100
8,800 Meadowbrook Insurance
Group, Inc. ............. 229,350
--------------
1,345,200
--------------
Healthcare Products &
Services - 7.9%
40,000 * ADAC Laboratories ...... 790,000
20,000 * Empi, Inc. ............. 395,000
7,000 * Maxxim Medical, Inc. . 152,250
15,000 * VISX, Inc. ......... 331,875
20,000 Vital Signs, Inc. .. 390,000
-----------
2,059,125
-------------
Industrial Specialty
Products & Services - 1.8%
27,700 Met-Pro Corp. ...... 457,050
-------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Metal Products &
Services - 1.2%
20,000 * Steel Dynamics, Inc. ...... $ 320,000
----------
Oil/Energy - 7.2%
15,000 * Barrett Resources
Corp....................... 453,750
5,000 Berry Petroleum Co.
Cl. A...................... 87,188
4,000 Cabot Oil & Gas Corp.
Cl. A .................... 77,750
40,000 * COHO Energy, Inc. ........ 365,000
10,000 * Nuevo Energy Co. ........ 407,500
15,000 Quaker State Corp. ..... 213,750
20,000 Southwestern Energy Co. ... 257,500
------------
1,862,438
------------
Oil Field
Services - 10.5%
10,000 * Atwood Oceanics, Inc..... 473,750
10,000 * Cliffs Drilling Co. ..... 498,750
30,000 * Hvide Marine, Inc. Cl. A... 772,500
2,000 Lufkin Industries,
Inc. ...................... 71,500
20,000 * Offshore Logistics,
Inc. ...................... 427,500
8,000 * SEACOR SMIT, Inc. ......... 482,000
----------
2,726,000
------------
Real Estate - 4.3%
10,000 Brandywine Realty
Trust REIT ............... 251,250
10,000 Eastgroup Properties,
Inc. REIT ............... 216,250
10,000 Gables Residential
Trust REIT .............. 276,250
12,500 Innkeepers USA Trust
REIT .................... 193,750
10,000 Sunstone Hotel Investors,
Inc.REIT ................ 172,500
------------
1,110,000
------------
Retailing &
Wholesale - 3.0%
10,000 * Anntaylor Stores Corp. .... 133,750
12,000 * Cole National Corp.
Cl. A .................... 359,250
10,000 * Petco Animal Supplies,
Inc. ..................... 240,000
2,500 Seaway Food Town, Inc. ... 47,500
-----------
780,500
-----------
Textile &
Apparel - 0.1%
2,000 Superior Surgical
Manufacturing Co.,
Inc. ............... 32,000
------------
Thrift
Institutions - 5.6%
20,000 Horizon Financial
Corp. .............. 355,000
20,000 Maryland Federal
Bancorp, Inc. ....... 700,000
20,000 Monterey Bay Bancorp,
Inc. ................. 390,000
---------------
1,445,000
---------------
Transportation - 1.1%
13,000 * Airnet Systems, Inc. .... 279,500
-----------
Utilities - Electric - 1.8%
20,000 Madison Gas & Electric
Co. ................... 460,000
Utilities - Gas - 1.8%
1,300 South Jersey
Industries, Inc. ....... 39,406
15,000 UGI Corp. .......... 439,688
------------
479,094
------------
Total Common Stocks
(cost $20,746,284).. ... 21,333,069
------------
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- -------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS - 51.5%
Government Agency Notes &
Bonds - 51.5%
13,390,000 Federal Home Loan Mortgage
5.74%, 1/23/98 ................... $ 13,343,031
------------
Total Short-Term Investments
(cost $13,343,031)................ 13,343,031
------------
Total Investments -
(cost $34,089,315)...... 133.9% 34,676,100
Other Assets and
Liabilities - Net ...... (33.9) (8,781,740)
------- -------------
Net Assets ............. 100.0% $ 25,894,360
======= =============
</TABLE>
* Non-income producing securities.
Summary of Abbreviations:
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
37
<PAGE>
- ----------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- -----------------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 95.6%
Banks - 7.5%
25,000 BankBoston Corp. ............... $2,348,437
54,000 SouthTrust Corp. ............... 3,425,625
57,000 Summit Bancorp ................. 3,035,250
44,000 Union Planters Corp. ........... 2,989,250
------------
11,798,562
-------------
Building, Construction &
Furnishings - 2.6%
52,000 Medusa Corp. ................... 2,174,250
55,000 * NCI Building Systems, Inc. ..... 1,952,500
------------
4,126,750
-------------
Business Equipment &
Services - 1.4%
54,000 * Robert Half International, Inc. .. 2,160,000
------------
Capital Goods - 2.1%
110,000 AGCO Corp. ..................... 3,217,500
-------------
Consumer Products &
Services - 1.0%
40,000 * Starbucks Corp. ................ 1,535,000
------------
Environmental Services - 2.4%
80,000 * Allied Waste Industries, Inc. .. 1,865,000
53,000 American Disposal Services, Inc. . 1,934,500
------------
3,799,500
------------
Finance & Insurance - 6.8%
40,000 AFLAC, Inc. .................... 2,045,000
18,000 Franklin Resources, Inc. ....... 1,564,875
85,000 Money Store, Inc. .............. 1,785,000
80,000 Partnerre Ltd. ................. 3,710,000
40,000 ReliaStar Financial Corp. ...... 1,647,500
------------
10,752,375
-------------
Food & Beverage Products - 3.0%
38,000 Dean Foods Co. ................. 2,261,000
85,000 Richfood Holdings, Inc. ........ 2,401,250
-------------
4,662,250
-------------
Healthcare Products &
Services - 14.1%
32,000 * Boston Scientific Corp. ........ 1,468,000
80,000 Genesis Health Ventures, Inc. .. 2,110,000
84,000 HBO & Co. ...................... 4,032,000
38,000 * HealthCare COMPARE Corp. ....... 1,942,750
150,000 * HEALTHSOUTH Corp. .............. 4,162,500
36,000 * Lincare Holdings, Inc. ......... 2,052,000
120,000 * Orthodontic Centers America, Inc. 1,995,000
62,000 * Pediatrix Medical Group, Inc. .. 2,650,500
30,000 * Safeskin Corp. ................. 1,702,500
-----------
22,115,250
------------
Industrial Specialty Products &
Services - 2.5%
32,000 Magna Group, Inc. Cl. A ........ 2,010,000
70,000 Roper Industries, Inc. ......... 1,977,500
----------
3,987,500
----------
Information Services &
Technology - 13.2%
48,000 * 3Com Corp. ..................... 1,677,000
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Information Services & Technology - continued
75,000 * Adaptec, Inc. .................. $2,784,375
120,000 * EMC Corp. ...................... 3,292,500
120,000 * Iomega Corp. ................... 1,492,500
72,000 * Networks Associates, Inc. ...... 3,807,000
62,000 * PMC-Sierra, Inc. ............... 1,922,000
58,000 * Remedy Corp. ................... 1,218,000
30,000 * Sanmina Corp. .................. 2,032,500
60,000 * Uniphase Corp. ................. 2,482,500
-----------
20,708,375
-------------
Leisure & Tourism - 3.4%
55,000 Brunswick Corp. ................ 1,667,187
62,000 Callaway Golf Co. .............. 1,770,875
90,000 * Cannondale Corp. ............... 1,957,500
---------------
5,395,562
---------------
Oil/Energy - 3.0%
51,000 Sonat, Inc. .................... 2,333,250
75,000 Ultramar Diamond Shamrock Corp. 2,390,625
------------
4,723,875
-----------
Oil Field Services - 4.9%
250,000 * Newpark Resources, Inc. ........ 4,375,000
85,000 * Pride International, Inc. ...... 2,146,250
22,000 Tidewater, Inc. ................ 1,212,750
-----------
7,734,000
-------------
Paper & Packaging - 1.6%
95,000 Rock Tennessee Co. Cl. A ....... 1,947,500
27,500 Wausau Mosinee Paper Corp. ...... 553,438
-----------
2,500,938
----------
Pharmaceuticals - 3.8%
150,000 Biochem Pharmaceuticals, Inc ... 3,131,250
56,000 * Elan Corp., Plc-ADR ............. 2,866,500
----------
5,997,750
----------
Real Estate - 3.1%
70,000 FelCor Suite Hotels, Inc. REIT ... 2,485,000
56,000 * Promus Hotel Corp. ............. 2,352,000
----------
4,837,000
----------
Retailing & Wholesale - 5.2%
50,000 Dollar General Corp. ........... 1,812,500
78,000 Family Dollar Stores, Inc. ..... 2,286,375
120,000 * General Nutrition Companies, Inc. 4,080,000
----------
8,178,875
----------
Telecommunication Services &
Equipment - 2.2%
65,000 * Pairgain Technologies, Inc. .... 1,259,375
42,000 * Tellabs, Inc. .................. 2,220,750
----------
3,480,125
----------
Textile & Apparel - 1.4%
55,000 Unifi, Inc. .................... 2,237,813
------------
Transportation - 2.7%
172,500 Comair Holdings, Inc. .......... 4,161,562
----------
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Utilities - Electric - 5.3%
80,000 CINergy Corp. .................... $ 3,065,000
68,000 Sierra Pacific Resources ......... 2,550,000
68,000 UtiliCorp United, Inc. ........... 2,639,250
------------
8,254,250
------------
Utilities - Telephone - 2.4%
38,000 Century Telephone Enterprises, Inc. 1,892,875
62,000 * LCI International, Inc. .......... 1,906,500
------------
3,799,375
-------------
Total Common Stocks
(cost $105,495,473)............... 150,164,187
-------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 2.9%
Money Market Shares - 1.6%
2,532,984 Valiant General Fund ............. $ 2,532,984
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
Repurchase Agreement - 1.3%
$ 2,055,158 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $2,055,872 (cost
$2,055,158) (a).................. 2,055,158
---------
Total Short-Term Investments
(cost $4,588,142)................ 4,588,142
---------
Total Investments -
(cost $110,083,615)..... 98.5% 154,752,329
Other Assets and
Liabilities - Net ...... 1.5 2,286,093
------- -----------
Net Assets ............. 100.0% $157,038,422
======= ===============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997 the repurchase agreement was collateralized by:
$2,080,000 U.S. Treasury Notes, 5.875%, 11/15/99; value including accrued
interest - $2,100,728.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 94.7%
Aerospace & Defense - 3.1%
55,264 Thiokol Corp. ...... $ 4,490,200
55,550 United Technologies
Corp.............. 4,044,734
-----------
8,534,934
-----------
Automotive Equipment &
Manufacturing - 1.7%
98,716 Ford Motor Co. ..... 4,806,235
-----------
Building, Construction &
Furnishings - 4.3%
66,325 Centex Corp. ....... 4,174,329
74,610 Home Depot, Inc. (The) 4,392,664
56,701 Southdown, Inc. .... 3,345,359
-----------
11,912,352
-----------
Business Equipment &
Services - 2.8%
142,995 * AccuStaff, Inc. .... 3,288,885
109,570 * Robert Half
International, Inc. 4,382,800
-----------
7,671,685
-----------
Communication Systems &
Services - 1.3%
14,298 Cisco Systems, Inc. 797,114
50,789 * Tellabs, Inc. ...... 2,685,468
-----------
3,482,582
-----------
Consumer Products &
Services - 7.6%
160,731 * Cendant Corp. ...... 5,525,128
267,045 * Foodmaker, Inc. .... 4,022,365
88,740 Procter & Gamble Co. 7,082,561
(The)
105,750 Universal Corp. .... 4,348,969
-----------
20,979,023
-----------
Diversified
Companies - 2.3%
141,434 Tyco International
Ltd............... 6,373,370
-----------
Electrical Equipment &
Services - 0.3%
11,200 General Electric Co. . 821,800
-----------
Finance &
Insurance - 12.2%
52,225 American Express Co. . 4,661,081
67,755 EXEL Ltd. .......... 4,293,973
58,725 Merrill Lynch & Co.,
Inc................. 4,283,255
81,602 MGIC Investment Corp. 5,426,533
78,900 Morgan Stanley, Dean
Witter, Discover
& Co. .............. 4,664,963
83,768 Price (T.) Rowe &
Associates, Inc. ... 5,266,913
117,295 SunAmerica, Inc. ... 5,014,361
-----------
33,611,079
-----------
Food & Beverage
Products - 9.8%
153,200 Coca Cola Co. (The) 10,206,950
131,760 Interstate Bakeries
Corp. .............. 4,924,530
164,400 Philip Morris
Companies, Inc. .... 7,449,375
69,130 * Safeway, Inc. ...... 4,372,473
-----------
26,953,328
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 18.0%
12,242 Abbott Laboratories $ 802,616
80,173 Bristol-Myers Squibb
Co. ................. 7,586,370
96,415 HBO & Co. ........... 4,627,920
110,330 Health Care &
Retirement Corp. .... 4,440,783
201,796 Health Management
Associates, Inc. .... 5,095,349
12,540 Johnson & Johnson .. 826,073
74,000 * Lincare Holdings, Inc. 4,218,000
8,501 Merck & Co., Inc. .. 903,231
105,000 * Patterson Dental Co. . 4,751,250
11,025 Pfizer, Inc. ......... 822,052
122,700 * Quintiles
Transnational Corp. .. 4,708,612
93,991 Schering-Plough Corp. 5,839,191
100,100 * Universal Health
Services, Inc. Cl. B 5,042,537
-----------
49,663,984
-----------
Hotel/Lodging - 1.7%
236,145 * Prime Hospitality
Corp. .............. 4,811,454
-----------
Industrial Specialty
Products &
Services - 1.5%
90,800 Parker Hannifin Corp. . 4,165,450
-----------
Information Services &
Technology - 15.7%
58,241 * BMC Software, Inc. . 3,822,066
85,569 * Cadence Design
Systems, Inc. ...... 2,096,440
60,902 Compaq Computer Corp. 3,437,157
128,930 * Computer Horizons
Corp. ............... 5,866,315
39,547 * Dell Computer Corp. . 3,321,948
10,540 Intel Corp. ........ 740,435
297,470 * Iomega Corp. ....... 3,699,783
57,688 * Microsoft Corp. .... 7,456,174
182,530 * PMC-Sierra, Inc. ... 5,658,430
71,070 * Sanmina Corp. ...... 4,814,992
60,537 * Sun Microsystems, Inc. 2,413,913
-----------
43,327,653
-----------
Metal Products &
Services - 0.8%
65,908 USX United States
Steel Group ......... 2,059,625
-----------
Oil Field Services - 3.1%
59,270 * BJ Services Co., Inc. 4,263,736
124,070 Ensco International,
Inc. ................ 4,156,345
-----------
8,420,081
-----------
Publishing,
Broadcasting &
Entertainment - 3.6%
63,650 McGraw-Hill Companies,
Inc. ................. 4,710,100
140,685 * Valassis
Communications, Inc. 5,205,345
-----------
9,915,445
-----------
Retailing & Wholesale - 4.9%
147,980 * CompUSA, Inc. ...... 4,587,380
109,100 * Costco Companies, Inc. 4,868,588
113,760 TJX Co., Inc. (The) 3,910,500
-----------
13,366,468
-----------
Total Common Stocks
(cost $225,579,855). 260,876,548
-----------
</TABLE>
40
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 3.4%
Money Market Shares - 2.8%
7,781,054 Valiant General Fund ... $7,781,054
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
Repurchase Agreement - 0.6%
$ 1,549,746 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $1,550,284 (cost
$1,549,746) (a).................. 1,549,746
---------
Total Short-Term Investments
(cost $9,330,800)................ 9,330,800
---------
Total Investments
(cost $234,910,655)..... 98.1% 270,207,348
Other Assets and
Liabilities - Net ...... 1.9 5,191,182
----- ------------
Net Assets ............. 100.0% $275,398,530
===== ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$1,570,000 U.S. Treasury Notes, 5.875%, 11/15/99; value including accrued
interest -$1,585,646.
See Combined Notes to Financial Statements.
41
<PAGE>
- -----------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- ----------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 96.1%
Automotive Equipment &
Manufacturing - 1.4%
40,000 Goodyear Tire & Rubber Co. (The) .. $ 2,545,000
-----------
Banks - 23.0%
48,000 BankBoston Corp. .................. 4,509,000
45,300 Chase Manhattan Corp. ............. 4,960,350
38,900 Citicorp .......................... 4,918,419
57,000 First Chicago NBD Corp. ........... 4,759,500
30,000 Fleet Financial Group, Inc. ....... 2,248,125
110,000 Hibernia Corp. Cl. A .............. 2,069,375
29,000 NationsBank Corp. ................. 1,763,563
83,000 PNC Bank Corp. .................... 4,736,187
39,000 SouthTrust Corp. .................. 2,474,063
87,150 Summit Bancorp .................... 4,640,737
75,500 Union Planters Corp. .............. 5,129,281
-----------
42,208,600
------------
Business Equipment &
Services - 0.9%
42,000 * Stratus Computer, Inc. ............ 1,588,125
-----------
Capital Goods - 1.6%
50,000 Case Corp. ........................ 3,021,875
------------
Chemical & Agricultural
Products - 1.0%
18,750 Dow Chemical Co. .................. 1,903,125
-----------
Electrical Equipment &
Services - 0.7%
56,000 Silicon Valley Group, Inc. ........ 1,267,000
-----------
Finance & Insurance - 12.8%
22,700 Allstate Corp. (The) .............. 2,062,863
61,500 Countrywide Credit Industries,Inc. 2,636,813
36,225 Lehman Brothers Holdings, Inc. .... 1,847,475
29,400 Loews Corp. ....................... 3,120,075
61,900 Merrill Lynch & Co., Inc. ......... 4,514,831
55,000 Nationwide Financial Services,
Inc. Cl. A ........................ 1,986,875
83,600 ReliaStar Financial Corp. ......... 3,443,275
70,500 Travelers Group, Inc. ............. 3,798,187
-----------
23,410,394
-----------
Food & Beverage Products - 3.7%
36,000 Fortune Brands, Inc. .............. 1,334,250
119,350 Philip Morris Companies, Inc. ..... 5,408,047
-----------
6,742,297
-----------
Healthcare Products &
Services - 4.3%
51,600 Bristol-Myers Squibb Co. .......... 4,882,650
88,600 * Tenet Healthcare Corp. ............ 2,934,875
-----------
7,817,525
-----------
Information Services &
Technology - 6.3%
47,000 Intel Corp. ....................... 3,301,750
43,300 International Business Machines Corp. 4,527,556
92,000 * Sun Microsystems, Inc. ............ 3,668,500
------------
11,497,806
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Manufacturing - Distributing - 2.0%
61,500 Philips Electronics NV ............ $ 3,720,750
-----------
Metal Products & Services - 3.6%
70,000 * Alumax, Inc. ...................... 2,380,000
37,600 Aluminum Co. of America ........... 2,646,100
50,000 USX United States Steel Group ..... 1,562,500
-----------
6,588,600
------------
Oil/Energy - 13.3%
33,400 Atlantic Richfield Co. ............ 2,676,175
105,500 Cabot Corp. ....................... 2,914,437
155,000 Chesapeake Energy Corp. ........... 1,172,188
63,840 Mobil Corp. ....................... 4,608,450
33,600 Texaco, Inc. ...................... 1,827,000
108,000 Tosco Corp. ....................... 4,083,750
66,000 Ultramar Diamond Shamrock Corp. .... 2,103,750
173,950 Williams Companies, Inc. (The) .... 4,935,831
-----------
24,321,581
-----------
Oil Field Services - 3.7%
44,600 Diamond Offshore Drilling, Inc. ... 2,146,375
110,000 * Reading & Bates Corp. ............. 4,606,250
------------
6,752,625
-------------
Retailing & Wholesale - 1.5%
62,000 Sears, Roebuck & Co. .............. 2,805,500
------------
Telecommunication Services &
Equipment - 2.1%
54,700 Nokia Corp., ADR .................. 3,829,000
-----------
Textile & Apparel - 1.8%
70,000 V. F. Corp. ....................... 3,215,625
------------
Transportation - 1.8%
36,000 Burlington Northern Santa Fe ...... 3,345,750
------------
Utilities - Electric - 5.8%
108,402 Houston Industries, Inc. .......... 2,892,978
138,000 PacifiCorp ........................ 3,769,125
48,000 Pinnacle West Capital Corp. ........ 2,034,000
52,000 UtiliCorp United, Inc. ............ 2,018,250
------------
10,714,353
-------------
Utilities - Gas - 1.9%
84,000 NICOR Inc. ........................... 3,543,750
------------
Utilities - Telephone - 2.9%
105,500 Century Telephone Enterprises, Inc. . 5,255,219
------------
Total Common Stocks
(cost $123,690,859)................ 176,094,500
------------
</TABLE>
42
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- -------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 4.6%
Money Market Shares - 1.8%
3,356,893 Valiant General Fund ... $3,356,893
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
Repurchase Agreement - 2.8%
$ 5,116,538 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $5,118,315 (cost
$5,116,538) (a)................... 5,116,538
------------
Total Short-Term Investments
(cost $8,473,431)................. 8,473,431
----------
Total Investments -
(cost $132,164,289)..... 100.7% 184,567,931
Other Assets and
Liabilities - Net ...... ( 0.7) (1,199,723)
------ ------------
Net Assets ............. 100.0% $183,368,208
====== ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$5,050,000 U.S. Treasury Notes, 6%, 7/31/02; value including accrued interest -
$5,220,163.
Summary of Abbreviations:
ADR American Depository Receipts
NV Naamloze (Dutch for "corporation")
See Combined Notes to Financial Statements.
43
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Equity Funds
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Equity Large Cap
Stock Income Blend
Fund Fund Fund
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets
Investments at value (identified
cost - $1,317, 330,711,
$160,507,681, $355,320,870,
$34,089,315, $110,083,615,
$234,910,655, and
$132,164,289, respectively).......... $1,886,518,698 $ 207,408,636 $ 466,654,324
Cash ................................. 12,655 0 0
Receivable for investments sold ...... 428,404 0 2,374,898
Receivable for Fund shares sold ...... 0 10,264 134,956
Dividends and interest receivable..... 3,505,182 804,363 611,766
Prepaid expenses and other
assets .............................. 59,883 59,883 91,711
- --------------------------------------- -------------- ------------- -------------
Total assets ....................... 1,890,524,822 208,283,146 469,867,655
- --------------------------------------- -------------- ------------- -------------
Liabilities
Distributions payable ................ 1,586,356 410,452 202,819
Payable for investments
purchased ........................... 905,874 0 2,084,758
Written call options, at value
(premiums received,
$233,192)............................ 0 362,500 0
Payable for Fund shares
repurchased ......................... 0 26,530 17,907
Advisory fee payable ................. 911,818 102,093 218,883
Due to affilliates ................... 52,025 5,679 12,774
Due to custodian ..................... 0 0 0
Accrued expenses and other
liabilities ......................... 208,859 22,116 49,670
- --------------------------------------- -------------- ------------- -------------
Total liabilities .................. 3,664,932 929,370 2,586,811
- --------------------------------------- -------------- ------------- -------------
Net assets ............................ $1,886,859,890 $ 207,353,776 $ 467,280,844
======================================= ============== ============= =============
Net assets represented by
Paid-in capital ...................... $1,327,403,572 $ 157,975,221 $ 341,829,262
Undistributed net investment
income (loss) ....................... 453,038 118,305 104,450
Accumulated distributions in
excess of net investment
income .............................. 0 0 0
Accumulated net realized gain
(loss) on investments ...............
and written options ................. (10,184,707) 2,488,603 14,013,678
Net unrealized appreciation on
investments and written
options ............................. 569,187,987 46,771,647 111,333,454
- --------------------------------------- -------------- ------------- -------------
Total net assets ................... $1,886,859,890 $ 207,353,776 $ 467,280,844
======================================= ============== ============= =============
Net assets consist of
Class I .............................. 1,886,859,890 207,353,776 266,571
Class IC ............................. 0 0 467,014,273
- --------------------------------------- -------------- ------------- -------------
Total net assets ................... $1,886,859,890 $ 207,353,776 $ 467,280,844
======================================= ============== ============= =============
Shares outstanding
Class I .............................. 22,721,226 2,288,364 5,788
Class IC ............................. 0 0 10,140,612
======================================= ============== ============= =============
Net asset value per share .............
Class I .............................. $ 83.04 $ 90.61 $ 46.05
======================================= ============== ============= =============
Class IC ............................. $ - $ - $ 46.05
======================================= ============== ============= =============
<CAPTION>
Small Social Strategic Strategic
Company Value Principles Growth Value
Fund Fund Fund Fund
--------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Assets
Investments at value (identified
cost - $1,317, 330,711,
$160,507,681, $355,320,870,
$34,089,315, $110,083,615,
$234,910,655, and
$132,164,289, respectively).......... $34,676,100 $154,752,329 $ 270,207,348 $ 184,567,931
Cash ................................. 266,963 0 0 0
Receivable for investments sold ...... 565,606 791,274 9,095,870 0
Receivable for Fund shares sold ...... 0 2,316,000 326,927 66,030
Dividends and interest receivable..... 1,400 90,915 213,469 208,986
Prepaid expenses and other
assets .............................. 50 93,213 59,883 59,883
- --------------------------------------- ----------- ------------ ------------- -------------
Total assets ....................... 35,510,119 158,043,731 279,903,497 184,902,830
- --------------------------------------- ----------- ------------ ------------- -------------
Liabilities
Distributions payable ................ 0 0 77,828 62,675
Payable for investments
purchased ........................... 9,609,469 782,279 4,206,128 1,270,852
Written call options, at value
(premiums received,
$233,192)............................ 0 0 0 0
Payable for Fund shares
repurchased ......................... 0 116,000 36,138 91,366
Advisory fee payable ................. 4,993 84,828 120,538 84,336
Due to affilliates ................... 228 4,255 7,974 6,028
Due to custodian ..................... 0 0 26,328 0
Accrued expenses and other
liabilities ......................... 1,069 17,947 30,033 19,365
- --------------------------------------- ----------- ------------ ------------- -------------
Total liabilities .................. 9,615,759 1,005,309 4,504,967 1,534,622
- --------------------------------------- ----------- ------------ ------------- -------------
Net assets ............................ $25,894,360 $157,038,422 $ 275,398,530 $ 183,368,208
======================================= =========== ============ ============= =============
Net assets represented by
Paid-in capital ...................... $25,288,662 $111,127,810 $ 218,352,464 $ 129,551,102
Undistributed net investment
income (loss) ....................... 19,063 (21,880) 65,861 65,039
Accumulated distributions in
excess of net investment
income .............................. 0 (17,278) 0 0
Accumulated net realized gain
(loss) on investments ...............
and written options ................. (150) 1,281,055 21,683,512 1,348,425
Net unrealized appreciation on
investments and written
options ............................. 586,785 44,668,715 35,296,693 52,403,642
- --------------------------------------- ----------- ------------ ------------- -------------
Total net assets ................... $25,894,360 $157,038,422 $ 275,398,530 $ 183,368,208
======================================= =========== ============ ============= =============
Net assets consist of
Class I .............................. 25,894,360 117,458 275,398,530 183,368,208
Class IC ............................. 0 156,920,964 0 0
- --------------------------------------- ----------- ------------ ------------- -------------
Total net assets ................... $25,894,360 $157,038,422 $ 275,398,530 $ 183,368,208
======================================= =========== ============ ============= =============
Shares outstanding
Class I .............................. 2,528,866 3,282 8,372,519 874,765
Class IC ............................. 0 4,383,820 0 0
======================================= =========== ============ ============= =============
Net asset value per share .............
Class I .............................. $ 10.24 $ 35.79 $ 32.89 $ 209.62
======================================= =========== ============ ============= =============
Class IC ............................. $ - $ 35.80 $ - $ -
======================================= =========== ============ ============= =============
</TABLE>
See Combined Notes to Financial Statements.
44
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Equity Funds
- -------------------------------------------------------------------------------
Statements of Operations
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Equity Large Cap
Stock Income Blend
Fund* Fund* Fund*
---------------- ------------- --------------
<S> <C> <C> <C>
Investment income
Interest ..................................... $ 499,482 $ 156,329 $ 62,188
Dividends (net foreign withholding taxes
of $41,828 and $1,101 for the
Common Stock Fund and the Social
Principles Fund, respectively) .............. 3,407,950 611,664 643,291
- ------------------------------------------------ -------------- ---------- ------------
Total income ................................ 3,907,432 767,993 705,479
- ------------------------------------------------ -------------- ---------- ------------
Expenses
Advisory fee ................................. 1,361,397 147,347 332,566
Administrative services fees ................. 63,985 6,917 15,630
Transfer agent fees .......................... 97 97 97
Registration fees ............................ 109,819 18,498 32,761
Professional fees ............................ 5,475 2,891 3,328
Trustees' fees ............................... 4,683 479 1,136
Miscellaneous ................................ 58,995 8,751 15,990
- ------------------------------------------------ -------------- ---------- ------------
Total expenses .............................. 1,604,451 184,980 401,508
Less: Fee waiver ............................. (243,054) (22,898) (64,191)
- ------------------------------------------------ -------------- ---------- ------------
Net expenses ................................ 1,361,397 162,082 337,317
- ------------------------------------------------ -------------- ---------- ------------
Net investment income (loss) ................. 2,546,035 605,911 368,162
================================================ ============== ========== ============
Net realized and unrealized gain (loss)
on investments and written call
options
Net realized gain (loss) on investments ...... (10,184,707) 2,488,603 14,013,678
- ------------------------------------------------ -------------- ---------- ------------
Net change in unrealized appreciation
(depreciation) on:
Investments ................................. 11,330,549 5,076,606 (3,996,452)
Written options ............................. 0 (92,500) 0
- ------------------------------------------------ -------------- ---------- ------------
Net change in unrealized appreciation
(depreciation) on investments and
written options ............................. 11,330,549 4,984,106 (3,996,452)
- ------------------------------------------------ -------------- ---------- ------------
Net realized and unrealized gain (loss) on
investments and written options ............. 1,145,842 7,472,709 10,017,226
- ------------------------------------------------ -------------- ---------- ------------
Net increase (decrease) in net assets
resulting from operations ................... $ 3,691,877 $8,078,620 $ 10,385,388
================================================ ============== ========== ============
<CAPTION>
Small Social Strategic Strategic
Company Value Principles Growth Value
Fund** Fund* Fund* Fund*
--------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Investment income
Interest ..................................... $ 23,904 $ 28,354 $ 121,818 $ 33,596
Dividends (net foreign withholding taxes
of $41,828 and $1,101 for the
Common Stock Fund and the Social
Principles Fund, respectively) .............. 1,400 86,146 228,746 255,621
- ------------------------------------------------- -------- ------------ -------------- ----------
Total income ................................ 25,304 114,500 350,564 289,217
- ------------------------------------------------- -------- ------------ -------------- ----------
Expenses
Advisory fee ................................. 5,617 126,864 195,518 127,008
Administrative services fees ................. 206 5,217 9,662 5,969
Transfer agent fees .......................... 22 97 97 97
Registration fees ............................ 2,036 16,399 24,917 17,054
Professional fees ............................ 673 2,822 3,072 2,845
Trustees' fees ............................... 0 383 775 413
Miscellaneous ................................ 555 6,985 9,777 7,556
- ------------------------------------------------- -------- ------------ -------------- ----------
Total expenses .............................. 9,109 158,767 243,818 160,942
Less: Fee waiver ............................. (2,868) (22,387) (42,750) (24,862)
- ------------------------------------------------- -------- ------------ -------------- ----------
Net expenses ................................ 6,241 136,380 201,068 136,080
- ------------------------------------------------- -------- ------------ -------------- ----------
Net investment income (loss) ................. 19,063 (21,880) 149,496 153,137
================================================= ======== ============ ============== ==========
Net realized and unrealized gain (loss)
on investments and written call
options
Net realized gain (loss) on investments ...... (150) 1,281,055 21,683,512 1,348,426
- ------------------------------------------------- -------- ------------ -------------- ----------
Net change in unrealized appreciation
(depreciation) on:
Investments ................................. 586,785 (4,938,293) (18,054,180) 4,008,835
Written options ............................. 0 0 0 0
- ------------------------------------------------- -------- ------------ -------------- ----------
Net change in unrealized appreciation
(depreciation) on investments and
written options ............................. 586,785 (4,938,293) (18,054,180) 4,008,835
- ------------------------------------------------- -------- ------------ -------------- ----------
Net realized and unrealized gain (loss) on
investments and written options ............. 586,635 (3,657,238) 3,629,332 5,357,261
- ------------------------------------------------- -------- ------------ -------------- ----------
Net increase (decrease) in net assets
resulting from operations ................... $605,698 $ (3,679,118) $ 3,778,828 $5,510,398
================================================= ======== ============ ============== ==========
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
** For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
45
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Equity Funds
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the period ended December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Equity Large Cap
Stock Income Blend
Fund* Fund* Fund*
----------------- --------------- ---------------
<S> <C> <C> <C>
Operations
Net investment income (loss) ....... $ 2,546,035 $ 605,911 $ 368,162
Net realized gain (loss) on
investments ....................... (10,184,707) 2,488,603 14,013,678
Net change in unrealized
appreciation (depreciation) on
investments and written
options ........................... 11,330,549 4,984,106 (3,996,452)
- ------------------------------------- -------------- ------------ ------------
Net increase (decrease) in net
assets resulting from
operations ........................ 3,691,877 8,078,620 10,385,388
- ------------------------------------- -------------- ------------ ------------
Distributions to shareholders
from
Net investment income
Class I ........................... (2,092,997) (487,606) (45)
Class IC .......................... 0 0 (263,667)
In excess of net investment
income
Class I ........................... 0 0 0
Class IC .......................... 0 0 0
- ------------------------------------- -------------- ------------ ------------
Total distributions to
shareholders ..................... (2,092,997) (487,606) (263,712)
- ------------------------------------- -------------- ------------ ------------
Capital share transactions
Proceeds from shares sold .......... 1,900,796,102 202,103,957 465,060,360
Proceeds from reinvestment of
distributions ..................... 4,529 1,483 13
Payment for shares redeemed ........ (15,539,621) (2,342,678) (7,901,205)
- ------------------------------------- -------------- ------------ ------------
Net increase in net assets
resulting from capital share
transactions ..................... 1,885,261,010 199,762,762 457,159,168
- ------------------------------------- -------------- ------------ ------------
Total increase in net assets ..... 1,886,859,890 207,353,776 467,280,844
Net assets
Beginning of period ................ 0 0 0
- ------------------------------------- -------------- ------------ ------------
End of period ...................... $1,886,859,890 $207,353,776 $467,280,844
===================================== ============== ============ ============
Undistributed net investment
income (Accumulated
distributions in excess of
net investment income) ............. $ 453,038 $ 118,305 $ 104,450
===================================== ============== ============ ============
<CAPTION>
Small Social Strategic Strategic
Company Value Principles Growth Value
Fund** Fund* Fund* Fund*
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss) ....... $ 19,063 $ (21,880) $ 149,496 $ 153,137
Net realized gain (loss) on
investments ....................... (150) 1,281,055 21,683,512 1,348,426
Net change in unrealized
appreciation (depreciation) on
investments and written
options ........................... 586,785 (4,938,293) (18,054,180) 4,008,835
- -------------------------------------- ----------- ------------ ------------- ------------
Net increase (decrease) in net
assets resulting from
operations ........................ 605,698 (3,679,118) 3,778,828 5,510,398
- -------------------------------------- ----------- ------------ ------------- ------------
Distributions to shareholders
from
Net investment income
Class I ........................... 0 0 (83,635) (88,098)
Class IC .......................... 0 0 0 0
In excess of net investment
income
Class I ........................... 0 (13) 0 0
Class IC .......................... 0 (17,265) 0 0
- -------------------------------------- ----------- ------------ ------------- ------------
Total distributions to
shareholders ..................... 0 (17,278) (83,635) (88,098)
- -------------------------------------- ----------- ------------ ------------- ------------
Capital share transactions
Proceeds from shares sold .......... 25,288,662 162,038,326 276,519,796 179,703,016
Proceeds from reinvestment of
distributions ..................... 0 0 5,807 2,941
Payment for shares redeemed ........ 0 (1,303,508) (4,822,266) (1,760,049)
- -------------------------------------- ----------- ------------ ------------- ------------
Net increase in net assets
resulting from capital share
transactions ..................... 25,288,662 160,734,818 271,703,337 177,945,908
- -------------------------------------- ----------- ------------ ------------- ------------
Total increase in net assets ..... 25,894,360 157,038,422 275,398,530 183,368,208
Net assets
Beginning of period ................ 0 0 0 0
- -------------------------------------- ----------- ------------ ------------- ------------
End of period ...................... $25,894,360 $157,038,422 $ 275,398,530 $183,368,208
====================================== =========== ============ ============= ============
Undistributed net investment
income (Accumulated
distributions in excess of
net investment income) ............. $ 19,063 $ (39,158) $ 65,861 $ 65,039
====================================== =========== ============ ============= ============
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
** For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
46
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Select Equity Funds consist of Evergreen Select Common Stock Fund
("Common Stock"), Evergreen Select Equity Income Fund ("Equity Income"),
Evergreen Select Large Cap Blend Fund ("Large Cap"), Evergreen Select Small
Company Value Fund ("Small Company"), Evergreen Select Social Principles Fund
("Social Principles"), Evergreen Select Strategic Growth Fund ("Strategic
Growth") and Evergreen Select Strategic Value Fund ("Strategic Value"), each of
which is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a diversified, open-end management investment company. Each of
the Funds is a separate series of Evergreen Select Equity Trust, a Delaware
business trust organized on September 17, 1997, and are collectively referred
to herein as the "Funds".
The Funds offer an Institutional Class of shares ("Class I") and an
Institutional Service Class of shares ("Class IS"). Additionally, Large Cap and
Social Principles offer an Institutional Charitable Class of shares ("Class
IC"). Each Class of shares is sold without a front-end sales charge or
contingent deferred sales charge. Class IS shares pay an ongoing service fee.
Class I and Class IS shares are available to institutional investors through
broker dealers, banks and other financial intermediaries. Class IC shares are
available only to those investors that qualify as a non-profit organization
under the Internal Revenue Code. Such organizations would include charitable
trusts, non-profit hospitals, private foundations, private schools and
colleges, public charities, religious entities and charitable remainder trusts.
2. CONVERSION INFORMATION
On November 24, 1997, the Common Stock, Equity Income, Strategic Growth and
Strategic Value Funds commenced operations of their respective Class I shares
as a result of a conversion of common trust funds managed by First Union
National Bank ("FUNB"), a subsidiary of First Union Corporation ("First
Union"). Also, the Large Cap and Social Principles Funds commenced operations
of their respective Class IC shares as a result of similar common trust fund
conversions. The following chart summarizes pertinent data related to each Fund
on the date of conversion:
<TABLE>
<S> <C> <C>
Common Equity
Stock Income
-------- -------
Shares issued ............................. 22,828,425 2,271,990
Net assets ................................ $ 1,894,078,143 $ 198,356,197
Net asset value per share ................. $ 82.97 $ 87.31
Unrealized appreciation of Investments .... $ 557,857,438 $ 41,787,541
<S> <C> <C> <C> <C>
Large Social Strategic Strategic
Cap Principles Growth Value
------ --------- -------- --------
Shares issued ............................. 10,264,770 4,293,581 5,750,026 831,617
Net assets ................................ $ 462,393,873 $ 157,379,236 $ 186,600,811 $ 169,109,520
Net asset value per share ................. $ 45.05 $ 36.65 $ 32.45 $ 203.35
Unrealized appreciation of Investments .... $ 115,329,906 $ 49,607,008 $ 53,350,873 $ 48,394,807
</TABLE>
The forgoing amounts are reflected in proceeds from shares sold in the
statements of changes in net assets.
3. ACQUISITION INFORMATION
Immediately following the common trust fund conversion, on November 24, 1997,
Strategic Growth acquired substantially all of the net assets of Equity Growth
Fund, a common trust fund managed by FUNB. The net assets were acquired through
a taxable exchange for 2,517,542 Class I shares of Strategic Growth, valued at
$32.45 per share. The acquired net assets consisted primarily of portfolio
securities with unrealized appreciation of $25,897,713. The aggregate net
assets of Equity Growth and Strategic Growth immediately prior to the
acquisition were $81,699,736 and $186,600,811, respectively. The aggregate net
assets and shares outstanding of Strategic Growth immediately after the
acquisition were $268,300,547 and 8,267,568, respectively.
4. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
A. Valuation of Securities
Securities traded on a national securities exchange or included on the NASDAQ
National Market System ("NMS") are valued at the last reported sales price on
the exchange where primarily traded. Securities traded on an exchange or NMS
for which there has been no sale and other securities traded in the
over-the-counter market are valued at the mean between the last reported bid
and asked price. Securities for which market quotations are not readily
available, including restricted securities, are valued at fair value as
determined in good faith according to procedures approved by the Board of
Trustees.
47
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will require the seller
to provide additional collateral in the event the market value of the
securities pledged falls below the carrying value of the repurchase agreement,
including accrued interest. Each Fund will only enter into repurchase
agreements with banks and other financial institutions which are deemed by the
investment advisor to be creditworthy pursuant to guidelines established by the
Board of Trustees.
C. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-dividend date.
D. Options Written
Equity Income is authorized to write covered call options. When the Fund writes
an option, an amount equal to the premium received is recorded as a liability
and is subsequently adjusted to the current market value of the written option.
Premiums received from writing options, which expire unexercised, are treated
by the Fund on the expiration date as realized gains from investments. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is treated as a realized
gain or loss. If a call option is exercised, the premium is added to the
proceeds from the sale of the underlying security in calculating the realized
gain or loss on the sale. If a put option is exercised, the premium reduces the
cost of the security purchased. The Fund as writer of an option bears the
market risk of an unfavorable change in the price of the security underlying
the written option.
E. Federal Taxes
The Funds intend to qualify as regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). Thus, the Funds will
not incur any federal income tax liability since they are expected to
distribute all of their net investment company taxable income and net capital
gains, if any, to their shareholders. The Funds also intend to avoid any excise
tax liability by making the required distributions under the Code. Accordingly,
no provision for federal taxes is required. To the extent that realized capital
gains can be offset by capital loss carryforwards, it is each Fund's policy not
to distribute such gains.
F. Distributions
Distributions from net investment income for the Funds are declared and paid
monthly. Distributions from net realized capital gains, if any, are paid at
least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles
G. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the
relative net assets of each class. Currently, class specific expenses are
limited to expenses incurred under the Distribution Plans for Class IS.
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with no par
value authorized. Shares of beneficial interest of the Funds are currently
divided into Class I, Class IS and/or Class IC. Transactions in shares of the
Funds were as follows:
48
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
COMMON STOCK
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
---------------------------------
Shares Amount
---------- -------------
Class I
Shares sold ............................................ 22,909,969 $1,900,796,102
Shares issued in reinvestment of distributions ......... 55 4,529
Shares redeemed ........................................ (188,798) (15,539,621)
- -------------------------------------------------------- ------------ ---------------
Net increase ........................................... 22,721,226 $1,885,261,010
======================================================== ============ ===============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
EQUITY INCOME
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
------------------------------
Shares Amount
--------- ------------
Class I
Shares sold ............................................ 2,314,872 $202,103,957
Shares issued in reinvestment of distributions ......... 16 1,483
Shares redeemed ........................................ (26,524) (2,342,678)
- -------------------------------------------------------- ----------- -------------
Net increase ........................................... 2,288,364 $199,762,762
======================================================== =========== =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
LARGE CAP BLEND
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997
-------------------------------
Shares Amount
----------- -------
Class I**
Shares sold ............................................ 5,788 $ 260,000
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ 0 0
- -------------------------------------------------------- ----------- --------------
Net increase (decrease) ................................ 5,788 260,000
- -------------------------------------------------------- ----------- --------------
Class IC*
Shares sold ............................................ 10,316,648 464,800,360
Shares issued in reinvestment of distributions ......... 1 13
Shares redeemed ........................................ (176,037) (7,901,205)
- -------------------------------------------------------- ----------- --------------
Net increase ........................................... 10,140,612 456,899,168
- -------------------------------------------------------- ----------- --------------
Net increase ........................................... 10,146,400 $457,159,168
======================================================== =========== ==============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
**For the period from December 19, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
SMALL COMPANY VALUE
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
---------------------------
Shares Amount
--------- -----------
Class I
Shares sold ............................................ 2,528,866 $25,288,662
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ 0 0
- -------------------------------------------------------- ---------- ------------
Net increase ........................................... 2,528,866 $25,288,662
======================================================== ========== ============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
49
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
SOCIAL PRINCIPLES
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997
-----------------------------
Shares Amount
---------- --------
Class I*
Shares sold ............................................ 3,282 $ 117,459
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ 0 0
- -------------------------------------------------------- ---------- -------------
Net increase ........................................... 3,282 117,459
- -------------------------------------------------------- ---------- -------------
Class IC*
Shares sold ............................................ 4,420,732 $161,920,867
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ (36,912) (1,303,508)
- -------------------------------------------------------- ---------- -------------
Net increase ........................................... 4,383,820 160,617,359
- -------------------------------------------------------- ---------- -------------
Net increase ........................................... 4,387,102 $160,734,818
======================================================== ========== =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations)
December 31, 1997.
- --------------------------------------------------------------------------------
STRATEGIC GROWTH
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
------------------------------
Shares Amount
--------- ------------
Class I
Shares sold ............................................ 8,522,477 $276,519,796
Shares issued in reinvestment of distributions ......... 177 5,807
Shares redeemed ........................................ (150,135) (4,822,266)
- -------------------------------------------------------- ----------- -------------
Net increase ........................................... 8,372,519 $271,703,337
======================================================== =========== =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
STRATEGIC VALUE
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
----------------------------
Shares Amount
------- ------------
Class I
Shares sold ............................................ 883,304 $179,703,016
Shares issued in reinvestment of distributions ......... 14 2,941
Shares redeemed ........................................ (8,553) (1,760,049)
- -------------------------------------------------------- --------- -------------
Net increase ........................................... 874,765 $177,945,908
======================================================== ========= =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the period ended December 31, 1997:
<TABLE>
<S> <C> <C>
Cost of Proceeds
Purchases from Sales
----------- --------------
Common Stock* .............. $68,650,938 $97,627,717
Equity Income* ............. 13,675,609 10,719,427
Large Cap* ................. 20,275,895 40,959,788
Small Company** ............ 21,311,665 565,606
Social Principles* ......... 9,812,515 7,440,215
Strategic Growth* .......... 113,881,556 111,549,909
Strategic Value* ........... 7,505,122 2,061,976
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
** For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
50
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
During the period ended December 31, 1997, the Equity Income Fund had the
following written call option activity:
<TABLE>
<S> <C> <C>
Number of
Contracts Premium
--- -----
Open written call options, beginning of period... 600 233,192
Options written ................................. 0 0
Options exercised ............................... 0 0
Options expired ................................. 0 0
--- -------
Open written call options, end of period ........ 600 233,192
=== =======
</TABLE>
7. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of The BISYS
Group Inc. ("BISYS") serves as principal underwriter to the Funds. Each Fund
has adopted a Distribution Plan for Class IS shares, as allowed by Rule 12b-1
of the 1940 Act. Distribution plans permit a fund to reimburse its principal
underwriter for costs related to selling shares of the fund and for various
other services. These costs, which consist primarily of commissions and service
fees to broker-dealers who sell shares of the fund, are paid by the fund
through expenses called "Distribution Plan expenses". Class IS, currently pays
a service fee equal to 0.25% of the average daily net asset of the class.
Distribution Plan expenses are calculated daily and paid monthly. During the
period ended December 31, 1997, no Distribution Plan expenses were incurred by
the Funds.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class.
8. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
The investment advisor to each Fund, other than Small Company, is First Union
National Bank ("FUNB"). Each Fund, other than Small Company, pays FUNB a fee
for its services as set forth below. The annual advisory fees are calculated
daily and paid monthly and are based on a percentage of average daily net
assets.
<TABLE>
<S> <C>
Annual
Advisory fee
----------------
Common Stock .............. 0.70%
Equity Income ............. 0.70%
Large Cap ................. 0.70%
Social Principles ......... 0.80%
Strategic Growth .......... 0.70%
Strategic Value ........... 0.70%
</TABLE>
Evergreen Asset Management Corp ("Evergreen Asset"), a subsidiary of First
Union, is the investment advisor to Small Company. Small Company pays Evergreen
Asset an annual fee of 0.90% of average daily net assets.
Leiber & Company, a subsidiary of First Union, is the investment sub-advisor to
Small Company and also provides brokerage services with respect to
substantially all security transactions effected on either the New York or
American Stock Exchanges. For the period ended December 31, 1997, Small Company
incurred $26,856 in brokerage commissions with Leiber & Company. Leiber &
Company is reimbursed by Evergreen Asset, at no additional cost to the Fund,
for its cost of providing investment advisory services.
Each investment advisor has voluntarily agreed to reduce the investment
advisory fee on each Fund by 0.10% and to reimburse a portion of each Fund's
annual operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses). For the period ended December 31, 1997, the investment
advisors voluntarily reduced their fees by the following amounts:
<TABLE>
<S> <C>
Fee
Reduction
-------
Common Stock ................ $ 243,054
Equity Income ............... 22,898
Large Cap Blend ............. 64,191
Small Company Value ......... 2,868
Social Principles ........... 22,387
Strategic Growth ............ 42,750
Strategic Value ............. 24,862
</TABLE>
51
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Evergreen Investment Services ("EIS"), a subsidiary of First Union, is the
administrator and BISYS Fund Services is sub-administrator to the Funds. As
administrator, EIS provides the Funds with facilities, equipment and personnel.
As sub-administrator to the Funds, BISYS Fund Services provides the officers of
the Funds. The administrator and sub-administrator for each Fund are entitled
to an annual fee based on the average daily net assets of the funds
administered by EIS for which First Union or its investment advisory
subsidiaries are also the investment advisers. The administration fee is
calculated by applying percentage rates, which start at 0.05% and decline to
0.01% per annum as net assets increase, to the average daily net asset value of
the Fund. The sub-administration fee is calculated by applying percentage
rates, which start at 0.01% and decline to .004% per annum as net assets
increase, to the average daily net asset value of the Fund.
Evergreen Service Company ("ESC"), a subsidiary of First Union, serves as the
transfer and dividend disbursing agent for the Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
9. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
10. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Funds may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly
installments for up to ten years at their election, not earlier than either the
year in which the Trustee ceases to be a member of the Board of Trustees or
January 1, 2000. As of December 31, 1997, there were no balances outstanding in
the Trustee deferral accounts for the Funds.
52
<PAGE>
65660 542780
2/98
BULK RATE
U.S. POSTAGE
PAID
CHARLOTTE, NC
PERMIT NO. 136
(EVERGREEN FUNDS(SM) LOGO)
201 S. College St.
Charlotte, NC 28288
<PAGE>
EVERGREEN KEYSTONE FUNDS
EVERGREEN KEYSTONE INVESTMENT SERVICES, INC.
200 Berkeley Street
Boston, MA 02116-5034
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, D.C.
Attn: File Room
Re: Evergreen Select Equity Trust
Evergreen Select Common Stock Fund
Evergreen Select Equity Income Fund
Evergreen Select Large Cap Blend Fund
Evergreen Select Small Company Value Fund
Evergreen Select Social Principles Fund
Evergreen Select Strategic Growth Fund
Evergreen Select Strategic Value Fund
File No. 811-08363
CCC# igs@muw6
CIK# 0001045688
Commissioners:
Please be advised that the 12/31/97 Semi-Annual Report for the above referenced
Funds were submitted to your office on February 25, 1998, via electronic
transmission (EDGAR).
Any questions or comments about this document should be directed to the
undersigned at (617) 210-3570.
Very truly yours,
/s/ Doug Miller
Doug Miller
Assistant Vice President
COREFUNDS, INC.
Statement of Additional Information
November 1, 1997
TABLE OF CONTENTS
THE COMPANY..........................................................B-2
INVESTMENT POLICIES..................................................B-3
INVESTMENT RESTRICTIONS..............................................B-10
TEMPORARY INVESTMENTS................................................B-15
SPECIAL CONSIDERATIONS...............................................B-17
PURCHASE AND REDEMPTION INFORMATION..................................B-17
NET ASSET VALUE......................................................B-19
DIVIDENDS............................................................B-20
PERFORMANCE .........................................................B-21
ADDITIONAL INFORMATION CONCERNING TAXES..............................B-27
DESCRIPTION OF SHARES................................................B-30
DIRECTORS AND OFFICERS...............................................B-32
INVESTMENT ADVISER...................................................B-33
SUB-ADVISERS.........................................................B-35
PORTFOLIO TRANSACTIONS...............................................B-37
ADMINISTRATOR........................................................B-39
DISTRIBUTOR..........................................................B-41
EXPENSES.............................................................B-43
LEGAL COUNSEL........................................................B-44
MISCELLANEOUS........................................................B-44
PRINCIPAL HOLDERS OF SECURITIES......................................B-44
FINANCIAL STATEMENTS.................................................B-53
APPENDIX.............................................................B-54
This Statement of Additional Information is meant to be read in
conjunction with the applicable Prospectuses for the portfolios offered by
CoreFunds, Inc. dated November 1, 1997, and is incorporated by reference in its
entirety into those Prospectuses. Because this Statement of Additional
Information is not itself a Prospectus, no investment in shares of any portfolio
should be made solely upon the information contained herein. Copies of the
Prospectuses for the portfolios may be obtained by writing CoreFunds, Inc., c/o
SEI Investments, P.O. Box 470, Wayne, Pennsylvania 19087-0470, or by telephoning
1-800-355-CORE.
B-2
<PAGE>
THE COMPANY
CoreFunds, Inc. (the "Company") is an open-end management investment
company that consists of twenty-one diversified and non-diversified portfolios
(the "Fund" or "Funds"). The Company is authorized to offer separate series of
shares of beneficial interest (the "Shares") of each Fund. Shareholders may
purchase Shares through four separate classes, Class Y, Class A, Class B, and
Class C, which provide for variations in sales charges, distribution costs,
transfer agent fees, voting rights, and dividends. Except for these differences
between the Class Y, Class A, Class B and Class C Shares, each Share of each
Fund represents an equal proportionate interest in that Fund. See "Description
of Shares."
THE FUNDS
The information disclosed herein relates to all of the Funds, and all
of the Classes of Shares of the Funds, unless otherwise noted. Sections that are
particular to a certain Fund will be so referenced, or the Funds may be grouped
according to types of investment, as illustrated below.
EQUITY FUNDS:
- - Equity Index Fund
- - Core Equity Fund
- - Growth Equity Fund
- - Special Equity Fund
- - International Growth Fund
- - Balanced Fund
FIXED INCOME FUNDS:
- - Short Term Income Fund
- - Short-Intermediate Bond Fund
- - Government Income Fund
- - Bond Fund
- - Global Bond Fund
TAX-EXEMPT FIXED INCOME FUNDS:
- Intermediate Municipal Bond Fund
- Pennsylvania Municipal Bond Fund
- New Jersey Municipal Bond Fund
TAXABLE MONEY MARKET FUNDS:
- - Treasury Reserve
- - Cash Reserve
- - Elite Treasury Reserve
- - Elite Cash Reserve
- - Elite Government Reserve*
TAX-EXEMPT MONEY MARKET FUNDS:
- - Tax-Free Reserve
- - Elite Tax-Free Reserve
* This Fund has not yet commenced operations
SALE OF SHARES
Class Y Shares in the Funds are sold primarily to various types of
institutional investors, which may include CoreStates Bank, N.A., and its
affiliates and correspondent banks, for the investment of their own funds or
funds for which they serve in a fiduciary, agency, or custodial capacity.
Class A, Class B and Class C Shares of the Funds are offered to the
general public as well as to various types of institutional investors, which may
include CoreStates Bank, N.A., and its affiliates and correspondent banks, for
the investment of their own funds or funds for which they serve in a fiduciary,
agency, or custodial capacity. Investors may also include shareholders of other
investment companies which are advised by a Fund's adviser or sub-adviser, and
whose assets a Fund acquires in a tax-free reorganization, who propose to become
shareholders of the Fund as a result of such reorganization. In addition, Class
C Shares are offered to cash sweep customers of CoreStates Bank, N.A.
B-3
<PAGE>
INVESTMENT POLICIES
IN GENERAL
The following policies supplement the investment objectives and
policies described in the Prospectuses for the Funds set forth below.
- TAX-EXEMPT MONEY MARKET FUNDS -
- TAX-EXEMPT FIXED INCOME FUNDS -
MUNICIPAL SECURITIES
Municipal securities include debt obligations issued by or on behalf of
governmental entities or public authorities to obtain funds for various
purposes, including the construction of a wide range of public and
privately-operated facilities; the refunding of outstanding obligations; the
payment of general operating expenses; and the extension of loans to public
institutions and facilities.
There are, of course, variations in the quality of municipal securities
both within a particular classification and between classifications, and the
yields on municipal securities depend upon a variety of factors, including
general money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation, and the rating of the issue. The ratings of Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P")
described in the Appendix to this Statement of Additional Information represent
their opinions as to the quality of municipal securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and municipal securities with the same maturity, interest rate and
rating may have different yields, while municipal securities of the same
maturity and interest rate with different ratings may have the same yield.
Subsequent to its purchase by a Fund, an issue of municipal securities may cease
to be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. As Investment Adviser, CoreStates Investment Advisers,
Inc. ("CoreStates Advisers") will consider such an event in determining whether
a Fund should continue to hold the obligation.
The payment of principal and interest on most municipal securities
purchased by a Fund will depend upon the ability of the issuers to meet their
obligations. An issuer's obligations to make payments on its municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Code, and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment of interest on, and principal of, its
municipal securities may be materially adversely affected by litigation or other
conditions. For purposes of the investment limitations described in this
Statement of Additional Information and the Prospectuses, the District of
Columbia, each state, each of their political subdivisions, agencies,
instrumentalities and authorities and each multi-state agency of which a state
is a member is considered to be an "issuer." Further, the non-governmental user
of facilities financed by industrial development bonds is considered to be an
"issuer." With respect to those municipal securities that are supported by a
bank guarantee or other credit facility, the bank or other institution (or
governmental agency) providing the guarantee or credit facility may also be
considered to be an "issuer" in connection with the guarantee or facility.
Among other types of municipal securities, the Funds may purchase
short-term general obligation notes, tax anticipation notes, bond anticipation
notes, revenue anticipation notes, tax-exempt commercial paper, construction
loan notes and other forms of short-term loans. Such instruments are issued with
a short-term maturity in anticipation of the receipt of tax funds, the proceeds
of bond placements, or other revenues. In addition, these Funds may invest in
other types of tax-exempt instruments such as municipal bonds, industrial
development bonds
B-4
<PAGE>
and pollution control bonds, provided (for the Tax-Exempt Money Market Funds)
they have remaining maturities of 397 days or less at the time of purchase.
To the extent that certain of the Funds invest in securities of issuers
located in a single state (E.G., Pennsylvania and New Jersey), the Funds are
subject to the risks associated with municipal issuers in those states. In
particular, these Funds are subject to the risk that issuers in those states may
be affected by adverse economic conditions in those states, or by legislative or
judicial actions that impair the ability of issuers in those states to make
principal or interest payments on such securities.
INFORMATION ON INVESTMENT PRACTICES
1. VARIABLE RATE DEMAND OBLIGATIONS. Variable rate demand obligations
held by the Intermediate Municipal Bond, Pennsylvania Municipal Bond, New Jersey
Municipal Bond and Tax-Exempt Money Market Funds may have maturities of more
than 397 days, provided (i) the Funds are entitled to the payment of principal
and accrued interest at specified intervals not exceeding 397 days and upon not
more than 30 days' notice, or (ii) the rate of interest on such obligations is
adjusted automatically at periodic intervals, which normally will not exceed 31
days but may extend up to 397 days. This 397 day limit does not apply to the
Intermediate Municipal Bond Fund. The rate of interest on such notes is
generally based upon the interest rates for commercial paper issued by the
master demand note issuer. The rate will be adjusted automatically at periodic
intervals which normally will not exceed 31 days but may extend longer. Because
master demand notes are direct lending arrangements between such Fund and the
issuer, they are not normally traded.
2. WHEN-ISSUED SECURITIES. The Tax-Exempt Fixed Income and Tax-Exempt
Money Market Funds may purchase municipal securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). When a Fund agrees to purchase when-issued securities, the Company will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. The Fund may be required subsequently to place
additional assets in the separate account in order to ensure that the value of
the account remains equal to the amount of the Fund's commitment. Therefore, it
may be expected that the Fund's net assets will fluctuate to a greater degree
when they set aside portfolio securities to cover such purchase commitments than
when they set aside cash. In addition, because a Fund will set aside cash or
liquid assets to satisfy its purchase commitments in the manner described, the
Fund's liquidity and ability to manage its investment portfolios might be
affected in the event its commitments to purchase when-issued securities ever
exceeded 25% of the value of its total assets. CoreStates Advisers intends,
however, to take reasonable precautions in connection with the Tax-Free Money
Market Funds' investment practices with respect to when-issued securities to
avoid any adverse effect on a Fund's policy of maintaining a net asset value per
Share at $1.00.
When acquiring when-issued securities for a Fund, CoreStates Advisers
will assess such factors as the stability or instability of prevailing interest
rates, the amount and period of a Fund's commitment with respect to the
when-issued securities being acquired, the interest rate to be paid on those
securities, and the length of a Fund's average weighted portfolio maturity at
the time.
When a Fund engages in when-issued transactions, it relies upon the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous.
B-5
<PAGE>
- SHORT TERM INCOME FUND -
- SHORT-INTERMEDIATE BOND FUND -
- GOVERNMENT INCOME FUND -
- BOND FUND -
- ELITE GOVERNMENT RESERVE -
GNMAS
These Funds may invest in securities issued by the Government National
Mortgage Association ("GNMA"), a wholly-owned U.S. Government corporation which
guarantees the timely payment of principal and interest. Obligations of GNMA are
backed by the full faith and credit of the U.S. Government. The market value and
interest yield of GNMA securities can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of federally insured mortgage loans. GNMA
certificates consist of underlying mortgages with a maximum maturity of 30
years. However, due to scheduled and unscheduled principal payments, GNMA
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to accurately predict the average maturity of a particular
GNMA pool. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be passed through to investors. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. As a result, there
will be monthly scheduled payments of principal and interest. In addition, there
may be unscheduled principal payments representing prepayments on the underlying
mortgages. Although GNMA certificates may offer yields higher than those
available from other types of U.S. Government securities, GNMA certificates may
be less effective than other types of securities as a means of locking in
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a GNMA certificate likely will not rise as
much as comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a GNMA certificate originally purchased
at a premium to decline in price to its par value, which may result in a loss.
- SHORT TERM INCOME FUND-
- SHORT-INTERMEDIATE BOND FUND -
- GLOBAL BOND FUND -
- INTERMEDIATE MUNICIPAL BOND FUND -
- PENNSYLVANIA MUNICIPAL BOND FUND -
- NEW JERSEY MUNICIPAL BOND FUND -
- TAX-FREE RESERVE -
PUTS
The Short Term Income Fund, Short-Intermediate Bond Fund, Global Bond
Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund and Tax-Free Reserve reserve the right to engage in
put transactions. CoreStates Advisers may purchase securities at a price which
would result in a yield to maturity lower than that generally offered by the
seller at the time of purchase when a Fund can simultaneously acquire the right
to sell the securities back to the seller, the issuer, or a third party (the
"writer") at an agreed-upon price at any time during a stated period or on a
certain date. Such a right is generally denoted as a "standby commitment" or a
"put." The purpose of engaging in transactions involving puts is to maintain
flexibility and liquidity and to permit each Fund to meet redemptions and remain
as fully invested as possible. The right to put the securities depends on the
writer's ability to pay for the securities at the time the put is exercised.
Each Fund would limit its put transactions to institutions which its adviser
believes present minimal credit risks, and the adviser would use its best
efforts to initially determine and continue to monitor the financial strength of
the sellers of the options by evaluating their financial statements and such
other information as is available in the marketplace. It may, however, be
difficult to monitor the financial strength of the writers because adequate
current financial information may not be available. In the event that any writer
is unable to honor a put for financial reasons, each
B-6
<PAGE>
Fund would be general creditor (i.e., on par with all other unsecured creditors)
of the writer. Furthermore, particular provisions of the contract between the
Fund and the writer may excuse the writer from repurchasing the securities; for
example, a change in the published rating of the underlying securities or any
similar event that has an adverse effect on the issuer's credit or a provision
in the contract that the put will not be exercised except in certain special
cases, for example, to maintain portfolio liquidity. A Fund could, however, at
any time, sell the underlying portfolio security in the open market or wait
until the portfolio security matures, at which time it should realize the full
par value of the security.
The securities purchased subject to a put may be sold to third persons
at any time, even though the put is outstanding, but the put itself, unless it
is an integral part of the security as originally issued, may not be marketable
or otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or a lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such option. If such a renewal cannot be negotiated on terms
satisfactory to a Fund, the Fund could, of course, sell the security. The
maturity of the underlying security will generally be different from that of the
put. There will not be a limit to the percentage of portfolio securities that
the Funds may purchase subject to a put, but the amount paid directly or
indirectly for premiums on all puts outstanding will not exceed 2% of the value
of the total assets of such Fund calculated immediately after any such put is
acquired. For the purpose of determining the maturity of securities purchased
subject to an option to put, and for purposes of determining the dollar-weighted
average maturity of a Fund including such securities, the Company will consider
the maturity to be the first date on which it has the right to demand payment
from the writer of the put although the final maturity of the security is later
than such date.
- CORE EQUITY FUND -
- GROWTH EQUITY FUND -
- SPECIAL EQUITY FUND -
- INTERNATIONAL GROWTH FUND -
CONVERTIBLE SECURITIES
Some securities purchased by these Funds (usually bonds, debentures or
preferred stock) may have a conversion or exchange feature. This allows the
holder to exchange the security for another class of security (usually common
stock) according to the specific terms and conditions of the issue. The interest
or dividend rate may be lower than the market rate on a comparable
non-convertible security, but the market value of the convertible security will
rise if the common stock price rises sufficiently. The value of a security is
also affected by prevailing interest rates, the credit quality of the issuer,
and any put or call provisions.
- CORE EQUITY FUND -
- SPECIAL EQUITY FUND -
- INTERNATIONAL GROWTH FUND -
- GLOBAL BOND FUND -
FUTURES AND OPTIONS
As stated in the Prospectuses, International Growth Fund and Global
Bond Fund may purchase futures contracts and purchase or sell options on
securities for, among other things, the purposes of hedging against market risks
related to the Fund's Portfolio securities, remaining fully invested, and
reducing transaction costs and currency fluctuations. In addition, Core Equity
Fund and Special Equity Fund may purchase or sell options on securities on a
hedged and unhedged basis for, among other things, hedging against market risks,
to remain fully invested, reduce transaction costs and increase income.
B-7
<PAGE>
FUTURES. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instruments are traded
on national futures exchanges. Although futures contracts by their terms call
for actual delivery or acceptance of the underlying securities, in most cases
the contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking an
opposite position (buying a contract which has previously been sold, selling a
contract previously purchased) in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract is bought
or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of an
additional variation margin will be required. Conversely, change in the contract
value may reduce the required margin, resulting in a repayment of excess margin
to the contract holder. Variation margin payments are made to and from the
futures broker for as long as the contract remains open. These Funds expect to
earn interest income on its margin deposits.
Regulations of the Commodity Futures Trading Commission ("CFTC") permit
the use of future transactions for bona fide hedging purposes without regard to
the percentage of assets committed to futures margin and options premiums. In
addition, CFTC regulations also allow funds to employ futures transactions for
other non-hedging purposes to the extent that aggregate initial futures margins
and options premiums do not exceed 5% of total assets. The International Growth
and Global Bond Funds will only sell futures contracts to protect securities
they own against price declines or purchase contracts to protect against an
increase in the price of securities intended for purchase.
The use of such futures contracts is an effective way in which the
International Growth and Global Bond Funds may control the exposure of its
income to market fluctuations. While these Funds may incur commission expenses
in both opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of U.S. Government
securities.
OPTIONS. Different uses of options have different risk and return
characteristics. Generally, purchasing put options and writing call options are
strategies designed to protect against falling securities prices. However, the
use of such options can limit potential gains if prices rise. Purchasing call
options and writing put options are strategies whose returns tend to rise and
fall together with securities prices and can cause losses if prices fall. If
securities prices remain unchanged over time option writing strategies tend to
be profitable, while option buying strategies tend to decline in value.
By writing a call option, a Fund becomes obligated during the term of
the option to deliver the securities underlying the option upon payment of the
exercise price if the option is exercised. By writing a put option, a Fund
becomes obligated during the term of the option to purchase the securities
underlying the option at the exercise price if the option is exercised. Writing
covered options means that so long as a Fund is obligated as the writer of a
call option, it will cover the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of securities
exchanges). Apart from owning the underlying security, a Fund will be considered
"covered" with respect to a put option, if it deposits and maintains liquid
assets having a value equal to or greater than the exercise price of the option.
B-8
<PAGE>
Through the writing of call or put options, a Fund may obtain a greater
current return than would be realized on the underlying securities alone. The
Funds receive premiums from writing call or put options, which they retain
whether or not the options are exercised. By writing a call option, a Fund might
lose the potential for gain on the underlying security while the option is open,
and by writing a put option a Fund might become obligated to purchase the
underlying security for more than its current market price upon exercise.
The Fund may purchase put options in order to protect portfolio
holdings in an underlying security against a decline in the market value of such
holdings. Such protection is provided during the life of the put because a Fund
may sell the underlying security at the put exercise price, regardless of a
decline in the underlying security's market price. Any loss to a Fund is limited
to the premium paid for, and transaction costs paid in connection with, the put
plus the initial excess, if any, of the market price of the underlying security
over the exercise price. However, if the market price of such security
increases, the profit a Fund realizes on the sale of the security will be
reduced by the premium paid for the put option less any amount for which the put
is sold.
A Fund may wish to protect certain portfolio securities against a
decline in market value at a time when no put options on those particular
securities are available for purchase. The Fund may therefore purchase a put
option on securities other than those it wishes to protect even though it does
not hold such other securities in its portfolio. While the Fund will only
purchase put option on securities where, in the opinion of the Adviser, changes
in the value of the put option should generally offset changes in the value of
the securities to be hedged, the correlation will be less than in transactions
in which the Funds purchase put options on underlying securities they own.
The Funds may also purchase call options. During the life of the call
option, the Fund may buy the underlying security at the call exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, a Fund will reduce any
profit it might have realized had it bought the underlying security at the time
it purchased the call option by the premium paid for the call option and by
transaction costs.
The securities exchanges have established limitations governing the
maximum number of options which may be written or held by an investor or group
of investors acting in concert. These position limits may restrict a Fund's
ability to purchase or sell options on a particular security. Similarly, the
securities exchanges have also established limitations governing the maximum
number of options which may be exercised by an investor or group of investors
acting as concert. It is possible that with respect to a Fund, the Fund and
other clients of the Adviser or any Sub-Adviser, may be considered to be a group
of investors acting in concert. Thus, the number of options which a Fund may
hold or write may be affected by the options transactions of other investment
advisory clients of the Adviser or of any Sub-Advisers.
RISKS ASSOCIATED WITH FUTURES AND OPTIONS. The primary risks associated
with the use of futures and options are (i) imperfect correlation between the
changes in market value of the securities held by a Fund and the prices of
futures and options, and (ii) possible lack of a liquid secondary market for a
futures contract and the resulting inability to close a futures position prior
to its maturity date. The risk of imperfect correlation will be minimized by
investing only in those contracts whose behavior is expected to resemble that of
a Fund's underlying securities. The risk that the Funds will be unable to close
out an outstanding futures and/or options position will be minimized by entering
into such transactions on a national exchange with an active and liquid
secondary market. In addition, although these Funds will not use futures and/or
options contracts for speculative purposes, there is the risk that the advisers
of these Funds could be incorrect in their assessment of the direction of stock
prices.
B-9
<PAGE>
- INTERNATIONAL GROWTH FUND -
- GLOBAL BOND FUND -
FORWARD CURRENCY CONTRACTS
Forward currency contracts involve an obligation to purchase or sell a
specified currency at a future date at a price set at the time of the contract.
Forward currency contracts do not eliminate fluctuations in the values of
portfolio securities but, rather, allow the Funds to establish a rate of
exchange for a future point in time.
When entering into a forward currency contract for the purchase or sale
of a security in a foreign currency, these Funds may enter into a contract for
the amount of the purchase or sale price to protect against variations between
the date the security is purchased or sold and the date on which payment is made
or received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
Also, when the advisers anticipate that a particular foreign currency
may decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, the Funds may enter into a contract to
sell, for a fixed amount, the amount of foreign currency approximating the value
of its securities denominated in such foreign currency. With respect to any such
forward currency contract, it will not generally be possible to match precisely
the amount covered by that contract and the value of the securities involved due
to changes in the values of such securities resulting from market movements
between the date the contract is entered into and the date it matures. In
addition, while forward currency contracts may offer protection from losses
resulting from declines in value of a particular foreign currency, they also
limit potential gains which might result from increases in the value of such
currency. The Funds will also incur costs in connection with forward currency
contracts and conversions of foreign currencies into U.S. dollars.
- ALL FUNDS -
ILLIQUID SECURITIES
The Funds may invest some of their assets in illiquid securities. Each
Fund's advisers, under procedures adopted by the Board of Directors, determine
the liquidity of the Fund's investments. The absence of a trading market can
make it difficult to determine a market value for illiquid investments.
Disposing these investments can involve time-consuming negotiations and legal
expenses, and it may be difficult or impossible for a Fund to sell them promptly
at an acceptable price.
- ALL FUNDS -
LENDING OF SECURITIES
The Funds may lend their portfolio securities to qualified brokers,
dealers, banks, and other financial institutions in exchange for cash, letters
of credit, government or government agency securities as collateral in an amount
equal to at least 100% of the current market value of the loaned securities plus
accrued interest. Cash collateral received by the Funds will be invested in
short-term debt securities.
These Funds will retain most rights of beneficial ownership, including
the right to receive dividends, interest, or other distributions. Voting rights
pass with the lending. If a material issue affecting the investment needs to be
voted upon, then the Funds will call the loans to vote proxies.
The Funds will only loan securities to borrowers that CoreStates
Advisers deems to be of good standing. Such loans still would involve the risk
of delay in receiving additional collateral in the event the value of the
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<PAGE>
collateral decreased below the value of the securities loaned, or the risk of
delay in recovering the securities loaned, or even the loss of rights in the
collateral, should the borrower fail financially.
- GLOBAL BOND FUND -
SWAPS
Swap agreements will tend to shift the Fund's investment exposure from
one type of investment to another. For example, if this Fund agrees to exchange
payments in U.S. dollars for receipts in foreign currency, the swap agreement
would tend to increase the Fund's exposure to foreign currency and interest
rates. Caps and floors have an effect similar to buying or writing options.
Depending upon how the Fund uses these agreements, swap agreements may increase
or decrease the overall volatility of the Global Bond Fund's investments as well
as its share price and yield. The Fund will only enter swaps with counterparties
that its advisers deem creditworthy.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
These agreements are subject to the risks related to the counterparty's ability
to perform, and may decline in value if the counterparty's creditworthiness
deteriorates. A Fund may also suffer losses if it is unable to terminate
outstanding swap agreements or reduce their exposure through offsetting
transactions. Any obligation a Fund may have under these types of arrangements
will be covered by setting aside liquid assets in a segregated account.
INVESTMENT RESTRICTIONS
IN GENERAL
The Prospectuses relating to the Funds list certain investment
restrictions that may be changed only by a vote of a majority of the outstanding
Shares of each Fund, as defined in the Prospectuses. The additional investment
limitations and restrictions listed herein supplement those contained in the
applicable Prospectuses. Except as otherwise indicated, these limitations and
restrictions may be changed only by such a shareholder vote.
The percentage limitations noted will apply at the time of the purchase
of a security and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of a purchase of
such security.
FUNDAMENTAL INVESTMENT LIMITATIONS AND RESTRICTIONS
- EQUITY FUNDS -
The following policies are applicable to the Equity Funds, EXCEPT International
Growth Fund, which is subject only to Restrictions #5, #7, #8, #10 and #11. In
addition, the Core Equity and Special Equity Funds are NOT subject to
Restrictions #2 and #4.
AN EQUITY FUND MAY NOT:
1. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any
securities trading account.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or
development programs, or real estate (although investments in
marketable securities of companies engaged in such activities
are not hereby precluded).
B-11
<PAGE>
3. Purchase securities of other investment companies, except as
they may be acquired as part of a merger, consolidation,
reorganization, acquisition of assets, or where otherwise
permitted by the Investment Company Act of 1940 (the
"Investment Company Act").
4. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof.
5. Invest in any issuer for purposes of exercising control or
management.
6. Purchase securities with legal or contractual restrictions.
7. Purchase or retain securities of any issuer, if the Officers
or Directors of the Company or its investment adviser owning
beneficially more than one-half of 1% of the securities of
such issuer together own beneficially more than 5% of such
securities.
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of
less than three years continuous operation.
9. Underwrite the securities of other issuers, except to the
extent that the purchase of debt obligations directly from an
issuer thereof, in accordance with an Equity Fund's investment
objective, policies, and restrictions, may be deemed to be an
underwriting.
10. Purchase any securities which would cause 25% or more of its
total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal
business activities in the same industry.
11. Make loans, except that each Fund may purchase or hold certain
debt instruments, engage in lending of portfolio securities,
in accordance with its policies and limitations, and enter
into repurchase agreements, in accordance with its policies
and limitations.
- FIXED INCOME FUNDS -
The following policies are applicable to the Fixed Income Funds (including the
Tax-Exempt Fixed Income Funds).
A FIXED INCOME FUND MAY NOT:
1. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any
securities trading account.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or
development programs, or real estate (although investments in
marketable securities of companies engaged in such activities
are not hereby precluded), EXCEPT that the Global Bond Fund
may engage in future contracts.
3. Purchase securities of other investment companies, except as
they may be acquired as part of a merger, consolidation,
reorganization, acquisition of assets, or where otherwise
permitted by the Investment Company Act.
4. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof, except that Government
Income Fund, Intermediate Municipal Bond Fund,
B-12
<PAGE>
Global Bond Fund, Pennsylvania Municipal Bond Fund and New
Jersey Municipal Bond Fund may engage in put transactions.
5. Buy common stocks or voting securities.
6. Invest in any issuer for purposes of exercising control or
management.
7. With respect to the Short Intermediate Bond Fund, purchase
securities with legal or contractual restrictions.
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of
less than three years continuous operation.
9. Purchase or retain securities of any issuer, if the Officers
or Directors of the Company or its investment adviser owning
beneficially more than one-half of 1% of the securities of
such issuer together own beneficially more than 5% of such
securities.
10. Underwrite the securities of other issuers, except to the
extent that the purchase of debt obligations directly from an
issuer thereof, in accordance with a Fixed Income Fund's
investment objective, policies, and restrictions, may be
deemed to be an underwriting.
11. Make loans, except that each Fund may purchase or hold certain
debt instruments, engage in lending of portfolio securities,
in accordance with its policies and limitations, and enter
into repurchase agreements, in accordance with its policies
and limitations.
- TAXABLE MONEY MARKET FUNDS -
The following policies are applicable to the Taxable Money Market Funds.
A TAXABLE MONEY MARKET FUND MAY NOT:
1. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any
securities trading account.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or
development programs, or real estate (although investments in
marketable securities of companies engaged in such activities
are not hereby precluded).
3. Purchase securities of other investment companies, except as
they may be acquired as part of a merger, consolidation,
reorganization, acquisition of assets, or where otherwise
permitted by the Investment Company Act.
4. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof.
5. Buy common stocks or voting securities, or state, municipal
or industrial revenue bonds.
6. Invest in any issuer for purposes of exercising control or
management.
7. Purchase securities with legal or contractual restrictions.
B-13
<PAGE>
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of
less than three years continuous operation.
9. Purchase or retain securities of any issuer, if the Officers
or Directors of the Company or its investment adviser owning
beneficially more than one-half of 1% of the securities of
such issuer together own beneficially more than 5% of such
securities.
10. Underwrite the securities of other issuers, except to the
extent that the purchase of debt obligations directly from an
issuer thereof, in accordance with a taxable Money Market
Fund's investment objective, policies, and restrictions, may
be deemed to be an underwriting.
11. Make loans, except that each Fund may purchase or hold certain
debt instruments, engage in lending of portfolio securities,
in accordance with its policies and limitations, and enter
into repurchase agreements, in accordance with its policies
and limitations.
- TAX-EXEMPT MONEY MARKET FUNDS -
The following policies are applicable to the Tax-Exempt Money Market Funds.
A TAX-EXEMPT MONEY MARKET FUND MAY NOT:
1. Invest less than 80% of its total assets in securities, the
interest on which is exempt from federal income tax, except
during temporary defensive periods.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or
development programs, or real estate (although investments in
marketable securities of companies engaged in such activities
are not hereby precluded).
3. Purchase the securities of any one issuer if, as a result
thereof, more than 5% of the value of its total assets would
be invested in the securities of such issuer, except that this
5% limitation does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities; provided, however, that the Fund may invest
up to 25% of its total assets without regard to this
restriction as permitted by applicable law.
For purposes of this limitation, a security is considered to
be issued by the governmental entity (or entities) whose
assets and revenues back the security, or, with respect to an
industrial development bond that is backed only by the assets
and revenues of a non-governmental user, such non-governmental
user. The guarantor of a guaranteed security may also be
considered to be an issuer in connection with such guarantee,
except that a guarantee of a security shall not be deemed to
be a security issued by the guarantor when the value of all
securities issued or guaranteed by the guarantor, and owned by
a Tax-Exempt Money Market Fund, does not exceed 10% of the
value of the Fund's total assets.
4. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any
securities trading account.
5. Purchase securities of other investment companies, except as
they may be acquired as part of a merger, consolidation,
reorganization, acquisition of assets, or where otherwise
permitted by the Investment Company Act.
B-14
<PAGE>
6. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof.
7. Buy common stocks or voting securities.
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of
less than three years continuous operation.
9. Invest in any issuer for purposes of exercising control or
management.
10. Purchase securities with legal or contractual restrictions.
11. Purchase or retain securities of any issuer, if the Officers
or Directors of the Company or the Fund's investment adviser
or sub-adviser owning beneficially more than one-half of 1% of
the securities of such issuer together own beneficially more
than 5% of such securities.
12. Underwrite the securities of other issuers, except to the
extent that the purchase of debt obligations directly from an
issuer thereof, in accordance with a Tax-Exempt Money Market
Fund's investment objective, policies, and restrictions, may
be deemed to be an underwriting.
13. Make loans, except that each Fund may purchase or hold certain
debt instruments, engage in lending of portfolio securities,
in accordance with its policies and limitations, and enter
into repurchase agreements, in accordance with its policies
and limitations.
NON-FUNDAMENTAL INVESTMENT LIMITATIONS
The following are non-fundamental investment restrictions that may be
changed by a majority of the Board of Directors.
- ALL FUNDS -
1. With regard to Restriction #2 for each Fund, all Funds have a
non-fundamental investment limitation which precludes
investments in oil, gas, or other mineral leases, as well as
investments in real estate limited partnerships, except for
readily marketable interests in real estate investment trusts.
2. Notwithstanding the language in Restriction #8 for each Fund,
each Fund currently has no intention of investing more than 5%
of its total assets in the securities of issuers which
together with any predecessors have a record of less than
three years continuous operation.
B-15
<PAGE>
- CORE EQUITY FUND -
- SPECIAL EQUITY FUND -
- BALANCED FUND -
- SHORT TERM INCOME FUND -
- GOVERNMENT INCOME FUND -
- BOND FUND -
- GLOBAL BOND FUND -
- INTERMEDIATE MUNICIPAL BOND FUND -
- PENNSYLVANIA MUNICIPAL BOND FUND -
- NEW JERSEY MUNICIPAL BOND FUND -
Each of the above Funds may not knowingly invest more than 15% of its
total assets in illiquid securities, including repurchase agreements providing
for settlement more than seven days after notice.
TEMPORARY INVESTMENTS
IN GENERAL
As stated in the Prospectuses, the Funds may invest a portion of their
assets in certain "Temporary Investments." Short-term taxable investments which
these Funds may utilize include fixed income securities (such as bonds) and/or
money market instruments (such as Treasury bills, certificates of deposit,
commercial paper, and repurchase agreements).
Generally, the Equity and Tax-Exempt Money Market Funds' use of such
Temporary Investments is subject to certain minimum ratings by Moody's and/or
S&P. These Funds may utilize Temporary Investments that are not rated by either
agency if, in the opinion of their investment adviser, they are determined to be
of comparable investment quality. See the Appendix to this Statement of
Additional Information for a description of applicable ratings.
-EQUITY FUNDS -
- TAX-EXEMPT MONEY MARKET FUNDS -
1. MONEY MARKET INSTRUMENTS. Short-term money market instruments issued
in the U.S. (or abroad with respect to International Growth Fund) in which the
Equity and Tax-Exempt Money Market Funds may invest temporary cash balances
include bankers' acceptances, certificates of deposit, and commercial paper.
Bankers' acceptances are negotiable drafts or bills of exchange normally drawn
by an importer or exporter to pay for specific merchandise which are "accepted"
by a bank; meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument upon maturity. A certificate of deposit is a
negotiable certificate issued against funds deposited in a commercial bank for a
definite period of time and earning a specified return. Commercial paper
consists of unsecured short-term promissory notes issued by corporations and
must be rated at least A-1 by S&P or Prime-1 by Moody's.
Except for International Growth Fund, the Funds will limit their
purchases of bank obligations to those of domestic branches of U.S. banks having
total assets at the time of purchase of $1 billion or more.
2. GOVERNMENT OBLIGATIONS. The Equity and Tax-Exempt Money Market Funds
may invest in obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities. U.S. Treasury bills and notes and obligations of
certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association, are supported by the full faith and
credit of the United States; others, such as those of the Export-Import Bank of
the United States, are supported by the right of the issuer to borrow from the
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<PAGE>
Treasury; others, such as those of the Fannie Mae, are supported by the
discretionary authority of the U.S. Treasury to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated to
do so by law.
In addition, International Growth Fund may invest in the obligations of
foreign governments or foreign governmental agencies deemed to be creditworthy
under guidelines approved by the Company's management. Such investments may
include securities issued by supranational organizations, such as the European
Economic Community and the World Bank, which are chartered to promote economic
development and are supported by various governments and governmental entities.
3. REPURCHASE AGREEMENTS. The Equity and Tax-Exempt Money Market Funds
may enter into repurchase agreements with respect to portfolio securities. Under
the terms of a repurchase agreement, a Fund purchases securities ("collateral")
from financial institutions such as banks and broker-dealers ("seller") which
are deemed to be creditworthy under guidelines approved by the Funds'
management, subject to the seller's agreement to repurchase them at a mutually
agreed-upon date and price. The repurchase price generally equals the price paid
by a Fund (plus interest) negotiated on the basis of current short-term rates
(which may be more or less than the rate on the underlying portfolio
securities). The seller under a repurchase agreement is required to maintain the
value of the collateral held pursuant to the agreement at not less than 100% of
the repurchase price, and securities subject to repurchase agreements are held
by the Custodian in the Federal Reserve's book-entry system. Default by the
seller would, however, expose a Fund to possible loss because of adverse market
action or delay in connection with the disposition of the underlying securities.
Repurchase agreements are considered to be loans by the Funds under the
Investment Company Act.
4. REVERSE REPURCHASE AGREEMENTS. The Equity and Tax-Exempt Money
Market Funds may borrow money for temporary purposes by entering into reverse
repurchase agreements. Pursuant to such agreements, a Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them at a mutually agreed-upon date and price. A Fund enters into
reverse repurchase agreements only to avoid otherwise selling securities during
unfavorable market conditions to meet redemptions. At the time a Fund enters
into a reverse repurchase agreement, it places in a segregated custodial account
liquid assets having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which it is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by the Funds under the Investment
Company Act.
5. FIXED INCOME SECURITIES. The Equity Funds may make short-term
investments in investment-grade fixed income debt securities (such as bonds and
notes) issued by banks, corporations, and the U.S. Government or governmental
entities. The Equity Funds anticipate that their investments in investment-grade
debt securities will be generally in those with the most active trading markets.
See the attached Appendix for a description of investment-grade securities
ratings.
In addition, International Growth Fund may invest in fixed income
investment-grade debt securities of foreign governments or foreign governmental
entities. See the attached Appendix for a description of investment-grade
securities ratings.
B-17
<PAGE>
SPECIAL CONSIDERATIONS
- EQUITY FUNDS -
COMMON STOCKS
An investment in Shares of the Equity Funds should be made with an
understanding of the risks which an investment in common stocks entails,
including the risk that the financial condition of the issuers of securities
held by an Equity Fund or the general condition of the stock markets may worsen,
and the value of the securities held by the Fund and, therefore, the value of
the Fund's Shares may decline.
The rights of holders of common stocks to receive payments from the
issuers of such common stocks are generally inferior to those of creditors, or
holders of preferred stocks of such issuers. Holders of common stocks of the
type held by the Equity Funds have a right to receive dividends only when and
if, and in the amounts, declared by the issuer's board of directors, and have a
right to participate in amounts available for distribution by the issuer upon
liquidation only after all other claims on the issuer have been paid or provided
for. By contrast, holders of preferred stocks generally have the right to
receive dividends at a fixed rate when and as declared by the issuer's board of
directors, frequently on a cumulative basis, but do not participate in other
amounts available for distribution by the issuing corporation. Common stocks do
not represent a secured obligation of the issuer and therefore do not offer an
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest, and dividends,
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock, or the rights of holders of common
stock with respect to assets of the issuer upon liquidation or bankruptcy. The
value of common stocks is subject to market fluctuations for as long as the
common stocks remain outstanding. Thus, the value of such securities held by the
Equity Funds may be expected to fluctuate.
- TAX-EXEMPT MONEY MARKET FUNDS -
- TAX-EXEMPT FIXED INCOME FUNDS -
MUNICIPAL SECURITIES
From time to time, proposals have been introduced in Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities, and the Funds cannot predict what legislation
relating to municipal securities, if any, may be introduced in Congress in the
future. It may be noted, however, that the Treasury Department has in the past
proposed, as a part of general tax reform, to limit the exemption for state and
local bonds to those issued for governmental purposes. Such proposals, if
enacted, might materially adversely affect the availability of municipal
securities for investment by the Funds and hence the value of their portfolios.
In such an event, the Funds would re-evaluate their investment objectives and
policies and consider changes in their structure or possible dissolution.
PURCHASE AND REDEMPTION INFORMATION
- ALL FUNDS -
The various types of customer accounts maintained by institutional
investors which may be used to purchase Shares of the Funds include: Qualified
Individual Retirement and Keogh Plan Accounts (for non-tax-exempt Funds); trust
accounts; managed agency accounts; custodial accounts; and various other
depository accounts. Investors purchasing Fund Shares may include officers,
directors, or employees of CoreStates Financial Corp or its affiliated and
subsidiary banks.
B-18
<PAGE>
A Fund may suspend the right of redemption or postpone the date of
payment for Shares during any period when: (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission; (b) the Exchange is closed for other
than customary weekend and holiday closings; (c) the Securities and Exchange
Commission has by order permitted such suspension; or (d) an emergency exists as
determined by the Securities and Exchange Commission. Upon the occurrence of any
of the foregoing conditions, a Fund may also suspend or postpone the recordation
of the transfer of its Shares.
The Company also reserves the right to suspend sales of Shares of the
Company for any period during which the New York Stock Exchange, the Adviser,
the Administrator and/or the Custodian are not open for business. The New York
Stock Exchange will not open in observance of the following holidays: New Year's
Day; Martin Luther King, Jr.'s Birthday; Presidents' Day; Good Friday; Memorial
Day; Independence Day; Labor Day; Columbus Day; Veterans' Day; Thanksgiving; and
Christmas.
In addition, a Fund may compel the redemption of, reject any order for,
or refuse to give effect on the Fund's books to the transfer of, its Shares in
an effort to prevent personal holding company status within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code"). A Fund may also make
payment for redemption in portfolio securities if it appears appropriate to do
so in light of the Fund's responsibilities under the Investment Company Act. See
"Net Asset Value."
SALES CHARGE WAIVERS
From time to time, the Company may enter into arrangements with certain
classes of purchasers who are eligible to purchase Class A Shares of the Funds
without a sales charge (see "Sales Charge" in the Individual Shares prospectus).
RIGHTS OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases
of Class A Shares of the Fixed Income and Equity Funds by a "single purchaser,"
the Company will cumulate current purchases at the offering price with total
market value or net investment, whichever is higher, of Class A Shares which are
sold subject to a sales charge ("Eligible Funds").
The term "single purchaser" refers to (i) an individual; (ii) an
individual and spouse purchasing Shares of an Eligible Fund for their own
account or for trust or custodial accounts for their minor children; or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account, including
employee benefit plans created under Sections 401 or 457 of the Code, including
related plans of the same employer. To be entitled to a reduced sales charge
based upon Shares already owned, the investor must ask the Distributor for such
reduction at the time of purchase and provide the account number(s) of the
investor, the investor and spouse, and their children (under age 21), and give
the ages of such children. The Funds may amend or terminate this Right of
Accumulation at any time as to subsequent purchases.
LETTER OF INTENT
The reduced sales charges described in the Prospectus for Class A
Shares are also applicable to the aggregate amount of purchases made by any such
purchaser previously enumerated within a 13-month period pursuant to a written
Letter of Intent provided by the Distributor, and not legally binding on the
signer or a Fund which provides for the holding in escrow by the Administrator
of 5% of the total amount intended to be purchased until such purchase is
completed within the 13-month period. A Letter of Intent may be dated to include
Shares purchased up to 90 days prior to the date the Letter is signed. The
13-month period begins on the date of the earliest purchase. If the intended
investment is not completed, the purchaser will be asked to pay an amount equal
to the
B-19
<PAGE>
difference between the sales charge on the Shares purchased at the reduced rate
and the sales charge otherwise applicable to the total Shares purchased. If such
payment is not made within 20 days following the expiration of the 13-month
period, the Administrator will surrender an appropriate number of the escrowed
Shares for redemption in order to realize the difference. Such purchasers may
include the market value of all their Shares of the Fund, and of any of the
other Funds, previously purchased and still held as of the date of their Letter
of Intent toward the completion of such Letter.
CONVERSION FEATURE (CLASS B SHARES)
As described in the Prospectus, Class B Shares of the Funds will
automatically convert to Class A Shares and will no longer be subject to the
higher distribution and service fees or the contingent deferred sales charge
applicable to Class B Shares after six years after the beginning of the month in
which the Shares were issued. Such conversion will be on the basis of the
relative net asset values of the two Classes, without the imposition of a sales
charge, fee or other charge. Because the per share net asset value of the Class
A Shares may be higher than that of the Class B Shares at the time of
conversion, a shareholder may receive fewer Class A Shares than the number of
Class B Shares converted, although the dollar value will be the same.
NET ASSET VALUE
- TAXABLE MONEY MARKET FUNDS -
- TAX-EXEMPT MONEY MARKET FUNDS -
RULE 2A-7
Each Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the Investment Company Act. This involves
valuing an instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. This method
may result in periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price a Money Market Fund would
receive if it sold the instrument. The value of securities held by the Money
Market Funds can be expected to vary inversely with changes in prevailing
interest rates.
Pursuant to Rule 2a-7, as amended, each Money Market Fund will maintain
a dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per share, provided that a Money Market
Fund will neither purchase any security with a remaining maturity of more than
397 days (securities subject to repurchase agreements and certain other
securities may bear longer maturities) nor maintain a dollar-weighted average
portfolio maturity which exceeds 90 days.
In addition, each Money Market Fund may acquire only U.S.
dollar-denominated obligations that present minimal credit risks and that are
"First Tier Securities" at the time of investment. First Tier Securities are
those that are rated in the highest rating category by at least two nationally
recognized security rating organizations ("NRSROs") or by one if it is the only
NRSRO rating such obligation or, if unrated, determined to be of comparable
quality. A security is deemed to be rated if the issuer has any security
outstanding of comparable priority and security which has received a short-term
rating by an NRSRO. CoreStates Advisers will determine that an obligation
presents minimal credit risks or that unrated investments are of comparable
quality, in accordance with guidelines established by CoreFunds' Board of
Directors.
CoreFunds' Board of Directors has also established procedures
reasonably designed, taking into account current market conditions and a Money
Market Fund's investment objective, to stabilize such Fund's net asset value per
Share for purposes of sales and redemptions at $1.00. These procedures include
review by the Board of
B-20
<PAGE>
Directors, at such intervals as it deems appropriate, to determine the extent,
if any, to which a Money Market Fund's net asset value per Share calculated by
using available market quotations deviates from $1.00 per Share. In the event
such deviation exceeds one-half of one percent, the Rule requires that the Board
of Directors promptly consider what action, if any, should be initiated. If the
Board of Directors believes that the extent of any deviation from a Money Market
Fund's $1.00 amortized cost price per Share may result in material dilution or
other unfair results to new or existing investors, it will take such steps as it
considers appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may include:
selling portfolio instruments prior to maturity; shortening the average
portfolio maturity; withholding or reducing dividends; or redeeming Shares in
kind.
- FIXED INCOME FUNDS -
Portfolio securities which are traded both over-the-counter and on a
national securities exchange are valued according to the broadest and most
representative market, and it is expected that for bonds, and other fixed income
securities, this would ordinarily be the over-the-counter market. Valuation of
such securities is the currently quoted bid price on each business day. When
securities exchange valuations are used, the valuation will be the latest sale
price on such exchange on such business day or, if there is no such reported
sale, the current bid price. Short-term investments (if any) are stated at cost,
which approximates market value. Other assets and securities for which no
quotations are readily available will be valued in a manner determined in good
faith by the Board of Directors to reflect their fair market value.
Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. The prices provided by a pricing
service take into account a variety of factors in determining fair market value.
Even though the market prices of intermediate term, fixed income
securities tend to be relatively stable, the prices of such securities vary
inversely with changes in interest rates and are therefore subject to market
price fluctuations. The longer maturity a bond has, the greater the potential
for fluctuations in prices.
DIVIDENDS
- EQUITY FUNDS -
The policy of the Equity Index, Core Equity, Growth Equity, Special
Equity and Balanced Funds is to generally declare and distribute dividends from
their net investment income on a quarterly basis. Distributions of any net
realized long-term capital gains will be made at least annually.
The policy of the International Growth Fund is to generally declare and
distribute dividends from its net investment income periodically. Distributions
of any net realized capital gains will be made at least annually.
The shareholders of the Equity Funds have the privilege of reinvesting
both income dividends and capital gains distributions, if any, in additional
full or fractional Shares of the respective Funds at the net asset value in
effect on the reinvestment date. The Company's management believes that most
investors will wish to take advantage of this privilege. The Equity Funds have,
therefore, made arrangements with the Transfer Agent to have all income
dividends and capital gains distributions declared by each Fund automatically
reinvested in the account of each shareholder. At any time, a shareholder may
request in writing to the Company or with the Transfer Agent to have subsequent
dividends and/or distributions paid in cash. In the absence of such a written
request, each purchase of Shares of an Equity Fund is made upon the condition
and understanding that the Transfer Agent is automatically appointed to receive
the dividends and distributions upon all Shares in the shareholder's account and
B-21
<PAGE>
to reinvest them in full and fractional Shares of the Fund at the net asset
value in effect at the close of business on the reinvestment date.
Any dividend or capital gains distribution received by a shareholder
shortly after the purchase of Shares of an Equity Fund may have the effect of
reducing the per share net asset value of such Shares by the amount of the
dividend or distribution. Furthermore, such a dividend or distribution, although
in effect a return of capital, may be subject to income taxes.
- FIXED INCOME FUNDS -
- TAXABLE MONEY MARKET FUNDS -
- TAX-EXEMPT MONEY MARKET FUNDS -
The policy of the Short Intermediate Bond, Bond, Short-Term Income,
Government Income, Intermediate Municipal Bond, Pennsylvania Municipal Bond and
New Jersey Municipal Bond Funds is to generally declare their net investment
income on a daily basis and to make distributions to shareholders in the form of
monthly dividends. The policy of Global Bond Fund is to distribute its net
investment income in the form of quarterly dividends.
Net income for dividend purposes includes (i) interest and dividends
accrued and discount earned on the Funds' assets (including both original issue
and market discount), less (ii) amortization of any premium on such assets and
accrued expenses directly attributable to the Funds, and the general expenses
(E.G., legal, auditing, and Board of Directors' fees) of the Company prorated to
each portfolio on the basis of its relative net assets. For the Fixed Income
Funds, realized and unrealized gains and losses on portfolio securities are
reflected in fluctuations in net asset value. Net realized long-term capital
gains (if any) are distributed at least annually.
PERFORMANCE
- EQUITY FUNDS -
- FIXED INCOME FUNDS -
TOTAL RETURN
From time to time, the Funds may advertise total return on an average
annual total return basis and on an aggregate total return basis for various
periods. Average annual total return reflects the average annual percentage
change in the value of an investment in a Fund over the particular measuring
period. Aggregate total return reflects the cumulative percentage change in
value over the measuring period. Aggregate total return is computed according to
a formula prescribed by the SEC. The formula can be expressed as follows: P (1 +
T)n = ERV, where P = a hypothetical initial payment of $1,000; T = average
annual total return; n = number of years; and ERV = ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the designated time period
as of the end of such period or the life of the fund. The formula for
calculating aggregate total return can be expressed as (ERV/P)-1.
The calculation of total return assumes reinvestment of all dividends
and capital gain distribution on the reinvestment dates during the period and
that the entire investment is redeemed at the end of the period. In addition the
maximum sales charge for each Fund is deducted from the initial $1,000 payment.
Total return may also be shown without giving effect to any sales charges.
The Funds' performance may from time to time be compared to other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical
Services) or financial and business publications and periodicals, broad groups
of comparable mutual funds, unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs or to other investment alternatives. The Funds
B-22
<PAGE>
may quote Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance, and Ibbotson Associates of Chicago, Illinois, which
provides historical returns of the capitals markets in the U.S. The Funds may
use long term performance of these capital markets to demonstrate general
long-term risk versus reward scenarios and could include the value of a
hypothetical investment in any of the capital markets. The Funds may also quote
financial and business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
The Funds may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.
The performance results listed below refer to results on Class Y Shares
and Class A Shares (where applicable) of the Funds for the fiscal year ended
June 30, 1997. Class B Shares were not offered as of June 30, 1997.
<TABLE>
<CAPTION>
FUND Class Average Annual Total Return
--------------------------------------------------------------------
ONE YEAR Five Year Ten Year Since
Inception
<S> <C> <C> <C> <C> <C>
Equity Index Fund Y 34.44% 18.90% 13.43% 16.09%
A without Load ** ** ** 41.56%
A with Load ** ** ** 30.93%
Core Equity Fund Y 33.10% 18.74% ** 18.03%
A without Load 32.74% 18.64% ** 17.96%
A with Load 25.41% 17.31% ** 17.06%
Special Equity Fund Y 17.94% ** ** 17.31%
A without Load 17.73% ** ** 17.20%
A with Load 11.25% ** ** 15.22%
Growth Equity Fund Y 21.67% 15.86% ** 11.90%
A without Load 21.29% 15.62% ** 11.69%
A with Load 14.65% 14.32% ** 10.53%
International Growth Y 15.43% 11.87% ** 9.57%
Fund
A without Load 15.09% 11.67% ** 9.44%
A with Load 8.78% 10.42% ** 8.60%
Balanced Fund Y 16.44% ** ** 12.01%
A without Load 16.15% ** ** 11.56%
B-23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUND Class Average Annual Total Return
--------------------------------------------------------------------
ONE YEAR Five Year Ten Year Since
Inception
<S> <C> <C> <C> <C> <C>
A with Load 9.79% ** ** 10.10%
Short-Intermediate Y 6.90% 5.51% ** 5.56%
Bond Fund
A without Load 6.64% 5.26% ** 5.34%
A with Load 3.15% 4.56% ** 4.69%
Bond Fund Y 7.43% 6.03% ** 7.73%
A without Load 7.15% 5.91% ** 7.65%
A with Load 2.03% 4.88% ** 6.94%
Short Term Income Y 5.82% ** ** 5.42%
Fund
A without Load 5.59% ** ** 5.07%
A with Load 2.19% ** ** 3.43%
Government Income Y 8.15% ** ** 5.66%
Fund
A without Load 7.88% ** ** 5.21%
A with Load 4.41% ** ** 4.37%
Intermediate Y 5.62% ** ** 4.07%
Municipal Bond Fund
A without Load 5.36% ** ** 3.81%
A with Load 1.97% ** ** 2.98%
Pennsylvania Y 7.92% ** ** 6.90%
Municipal Bond Fund
A without Load 7.65% ** ** 6.64%
A with Load 2.54% ** ** 4.98%
New Jersey Y 6.70% ** ** 6.15%
Municipal Bond Fund
A without Load 6.44% ** ** 5.85%
A with Load 1.40% ** ** 4.21%
Global Bond Fund Y 6.18% ** ** 3.92%
A without Load 5.92% ** ** 3.65%
A with Load 0.92% ** ** 2.23%
** Not in operation during that period
</TABLE>
B-24
<PAGE>
YIELD
- TAXABLE MONEY MARKET FUNDS -
- TAX-EXEMPT MONEY MARKET FUNDS -
From time to time, the Funds may advertise their current yield and
effective compound yield. Both yield figures are based on historical earnings
and are not intended to indicate future performance. The yield of the Funds
refers to the income generated by an investment in a Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
annualized. That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
CURRENT OR SEVEN-DAY YIELD
The current yield of the Funds will be calculated daily based upon the
seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The effective
compound yield of the Funds is determined by computing the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula: Effective Yield =[(Base
Period Return + 1)365/7] - 1. The current and the effective yields reflect the
reinvestment of net income earned daily on portfolio assets.
TAXABLE EQUIVALENT YIELD
For a Tax-Exempt Money Market Fund, the taxable equivalent yield is
determined by dividing that portion of the Fund's yield which is tax-exempt by
one minus a stated federal income tax rate and adding the product to that
portion, if any, of the Fund's yield that is not tax-exempt (tax equivalent
yields assume the payment of federal income taxes at a rate of 39.6%).
The resulting yield is what an investor generally would need to earn
from a taxable investment in order to realize an after-tax benefit equal to the
tax-free yield provided by a Tax-Exempt Money Market Fund.
Below are the Taxable & Tax-Exempt Money Market Funds' current,
effective and tax-equivalent yields for the 7-day period ended June 30, 1997. As
of June 30, 1997, Class B Shares of the Cash Reserve, Class C Shares of the
Elite Cash Reserve, Elite Treasury Reserve, and Elite Tax-Free Reserve, and
Shares of the Elite Government Reserve were not offered.
FUND Class Current Yield Effective Yield Tax-Equivalent Yield
Treasury Reserve Y 5.01% 5.13% N/A
C 4.76% 4.87% N/A
B-25
<PAGE>
FUND Class Current Yield Effective Yield Tax-Equivalent Yield
Cash Reserve Y 5.20% 5.34% N/A
C 4.96% 5.08% N/A
Tax-Free Reserve Y 3.61% 3.67% 5.98%
C 3.36% 3.41% 5.56%
Elite Cash Reserve Y 5.51% 5.67% N/A
Elite Treasury Reserve Y 5.36% 5.51% N/A
Elite Tax-Free Reserve Y 3.99% 4.07% 6.61%
- EQUITY FUNDS-
- FIXED INCOME FUNDS -
THIRTY-DAY YIELD
The Equity and Fixed Income Funds may advertise a 30-day yield. These
figures will be based on historical earnings and are not intended to indicate
future performance. The yield of these Funds refers to the annualized income
generated by an investment in the Funds over a specified 30-day period. The
yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = 2[(A-B + 1)6 - 1]
CD
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursements)
C = the average daily number of Shares outstanding
during the period that were entitled to receive
dividends
D = net asset value per share on the last day of the period
Yields are one basis upon which investors may compare the Funds with
other funds; however, yields of other funds and other investment vehicles may
not be comparable because of the factors set forth above and differences in the
methods used in valuing portfolio instruments.
The yield of these Funds fluctuates, and the annualization of a week's
dividend is not a representation by the Company as to what an investment in the
Fund will actually yield in the future. Actual yields will depend on such
variables as asset quality, average asset maturity, the type of instruments the
Fund invests in, changes in interest rates on money market instruments, changes
in the expenses of the Fund and other factors.
TAXABLE EQUIVALENT YIELD
The tax equivalent yield for the Intermediate Municipal Bond,
Pennsylvania Municipal Bond and New Jersey Municipal Bond Funds is computed by
dividing that portion of the Fund's yield which is tax-exempt by one minus a
stated federal and/or state income tax rate and adding the product to that
portion, if any, of the Fund's yield that is not tax-exempt. (Tax equivalent
yields assume the payment of federal income taxes at a rate of
B-26
<PAGE>
39.6% and, if applicable, New Jersey income taxes at a rate of 6.5% and
Pennsylvania income taxes at a rate of 2.8%).
The resulting yield is what an investor generally would need to earn
from a taxable investment in order to realize an after-tax benefit equal to the
tax-free yield provided by the Fund.
For the 30-day period ended June 30, 1997, the yields on the Funds,
other than the Money Market Funds and Class B Shares of the Funds which were not
in operation, were as follows:
<TABLE>
<CAPTION>
FUND CLASS SEC 30-DAY YIELD TAX EQUIVALENT YIELD
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Growth Equity Y 0.05% N/A
- -----------------------------
A 0.00% N/A
----------------------------- ----------------------------- -----------------------------
Core Equity Y 0.44% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 0.19% N/A
----------------------------- ----------------------------- -----------------------------
Special Equity Y 0.00% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 0.00% N/A
----------------------------- ----------------------------- -----------------------------
Equity Index Y 1.38% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 1.30% N/A
----------------------------- ----------------------------- -----------------------------
International Growth Y 0.00% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 0.00% N/A
----------------------------- ----------------------------- -----------------------------
Balanced Y 2.57% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 2.20% N/A
----------------------------- ----------------------------- -----------------------------
Short-Intermediate Bond Y 5.96% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 5.52% N/A
----------------------------- ----------------------------- -----------------------------
Bond Y 6.37% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 5.88% N/A
----------------------------- ----------------------------- -----------------------------
Short-Term Income Y 5.43% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 5.01% N/A
----------------------------- ----------------------------- -----------------------------
Government Income Y 6.40% N/A
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 5.95% N/A
----------------------------- ----------------------------- -----------------------------
Intermediate Municipal
Bond Y 4 6.69%
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
A 3.70% 6.13%
----------------------------- ----------------------------- -----------------------------
Pennsylvania Municipal
Bond Y 4.97% 6.36%
----------------------------- ----------------------------- -----------------------------
A 4.53% 5.80%
----------------------------- ----------------------------- -----------------------------
New Jersey Municipal
Bond Y 4.97% 8.23%
----------------------------- ----------------------------- -----------------------------
A 4.50% 7.45%
----------------------------- ----------------------------- -----------------------------
Global Bond Y 4.29% N/A
----------------------------- ----------------------------- -----------------------------
A 3.85% N/A
</TABLE>
B-27
<PAGE>
ADDITIONAL INFORMATION CONCERNING TAXES
- ALL FUNDS -
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Funds' prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders and the
discussion here and in the Funds' prospectuses is not intended as a substitute
for careful tax planning.
The following discussion of federal income tax consequences is based on
the Code and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. New legislation, as well as administrative
changes or court decisions, may significantly change the conclusions expressed
herein, and may have a retroactive effect with respect to the transactions
contemplated herein.
IN GENERAL
The Company's policy is to distribute as dividends substantially all of
its net investment company income (whether taxable or tax-exempt) and any net
realized long-term capital gains to shareholders each year.
Information as to the tax status of distributions to shareholders will
be furnished at least annually by each Fund. Investors considering purchasing
Shares of any Fund should consult competent tax counsel regarding the state and
local, as well as federal, tax consequences before investing.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with the Company's other Funds. Each Fund intends
to qualify as a "regulated investment company" ("RIC") under Subchapter M of the
Code so that it will be relieved of federal income tax on that part of its
income that is distributed to shareholders. In order to qualify as a RIC, each
Fund must distribute dividends each year equal to at least the aggregate of (i)
90% of its tax-exempt interest income, net of certain deductions, and (ii) 90%
of its investment company taxable income, if any. In addition, each Fund must
meet numerous tests regarding derivation of gross income and diversification of
assets.
Specifically, a Fund must derive at least 90% of its gross income each
taxable year from certain specified investment sources, such as dividends,
interest, and gains from the sale of stock or securities. In addition, each Fund
must diversify its assets such that at the close of each fiscal quarter of the
Fund's taxable year, at least 50% of the value of its assets is made up of cash
and cash items, U.S. government securities, securities of other RICs, and
certain other securities, such "other" securities being limited with respect to
each issuer to an amount not greater than 10% of the outstanding voting
securities of such issuer and not more than 5% of the value of the Fund's
assets. Furthermore, at the close of each fiscal quarter of the Fund's taxable
year, no more than 25% of the value of its assets may be invested in the
securities (other than U.S. government securities and securities of other RICs)
of any one issuer or of two or more issuers which the Fund controls and which
are engaged in the same, similar, or related trades or businesses.
While none of the Money Market or Fixed Income Funds expect to realize
any net capital gains (the excess of net long-term capital gains over net
short-term capital losses), any Fund that does realize such gains will
distribute them at least annually. A Fund will have no tax liability with
respect to distributed gains and the distributions will be taxable to Fund
shareholders as gain from the sale or exchange of a capital asset held for more
than one year, regardless of how long a shareholder has held Fund Shares. Such
distributions will be designated as capital gains dividends in a written notice
mailed by each Fund to shareholders not later than sixty days after the close of
the Fund's taxable year.
B-28
<PAGE>
Any gain or loss recognized on a sale, exchange or redemption of Shares
of a Fund by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital gain or loss if the
Shares have been held for more than eighteen months, mid-term capital gain if
the share have been held for more than twelve months but not more than eighteen
months, and otherwise will be treated as short-term capital gain or loss.
However, if Shares on which a shareholder has received a net capital gain
distribution are subsequently sold, exchanged or redeemed and such Shares have
been held for six months or less, any loss recognized will be treated as a
long-term capital loss to the extent of the net capital gain distribution.
Long-term capital gains are currently taxed at a maximum rate of 20%, mid-term
capital gains are currently taxed at a maximum rate of 28%, and short-term
capital gains are currently taxed at ordinary income tax rates.
A non-deductible, 4% federal excise tax will be imposed on any
regulated investment company that does not distribute to investors in each
calendar year an amount equal to (i) 98% of its calendar year ordinary income,
(ii) 98% of its capital gain net income (the excess of short- and long-term
capital gain over short- and long-term capital loss) for the one-year period
ending October 31, and (iii) ordinary income and capital gain net income from
the prior years, to the extent that such amounts were not distributed or taxed
at the RIC level in previous years. Each Fund intends to declare and pay
dividends and any capital gains distributions so as to avoid imposition of the
federal excise tax.
If for any taxable year a Fund does not qualify for the special tax
treatment afforded to RICs, all of the taxable income of that Fund will be
subject to federal income tax at regular corporate rates (without any deduction
for distributions to Fund shareholders). In such event, all dividend
distributions made by the Fund (whether or not derived from tax-exempt interest)
would be taxable to shareholders to the extent of the Fund's earnings and
profits, and such dividend distributions may be eligible for the
dividends-received deduction for corporate shareholders.
Generally, the Funds are required to withhold 31% of ordinary income
dividends, capital gains distributions, and redemptions paid to shareholders who
have not complied with IRS taxpayer identification regulations and in certain
other circumstances. Shareholders who are not otherwise subject to back-up
withholding may avoid this withholding requirement by certifying on the Account
Application Form their proper Social Security or Taxpayer Identification Number
and certifying that they are not subject to back-up withholding.
- TAX-EXEMPT MONEY MARKET FUNDS -
- TAX-EXEMPT FIXED INCOME FUNDS -
As described herein and in the Prospectuses relating to the Tax-Exempt
Money Market Funds and Tax-Exempt Fixed Income Funds, each of these Funds is
designed to provide investors with current tax-exempt interest income and is not
intended to constitute a balanced investment program. Shares of the Tax-Exempt
Funds would not be suitable for tax-exempt shareholders and plans, since such
shareholders and plans would not gain any additional benefit from the Funds'
dividends being tax-exempt.
In addition, the Funds may not be appropriate investments for entities
which are "substantial users" (or related to substantial users) of facilities
financed by "private activity bonds" or industrial development bonds. For these
purposes, the term "substantial user" is defined under U.S. Treasury Regulations
to include a non-exempt person who regularly uses a part of such facilities in a
trade or business.
Each Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by satisfying the Code's requirement that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
consists of securities the interest on which is exempt from federal income tax.
Current federal tax law limits the types and volume of bonds qualifying for
federal income tax exemption of interest, which may have an effect on the
ability of the funds to purchase sufficient amounts of tax-exempt securities to
satisfy this requirement. Exempt interest dividends are excludable from
shareholders' gross income for regular federal income tax purposes but may have
collateral federal income tax consequences. Exempt-interest dividends may be
subject to the alternative minimum
B-29
<PAGE>
tax (the "AMT") imposed by Section 55 of the Code or the environmental tax (the
"Environmental Tax") imposed by Section 59A of the Code. The AMT is imposed at a
rate of up to 28% in the case of non-corporate taxpayers and at the rate of 20%
in the case of corporate taxpayers, to the extent it exceeds the taxpayer's
regular tax liability. The Environmental Tax is imposed at the rate of 0.12% and
applies only to corporate taxpayers. The AMT and the Environmental Tax may be
affected by the receipt of exempt-interest dividends in two circumstances.
First, exempt-interest dividends derived from certain "private activity bonds"
issued after August 7, 1986 will generally be an item of tax preference for both
corporate and non-corporate taxpayers. Second, exempt-interest dividends,
regardless of when the bonds from which they are derived were issued or whether
they are derived from private activity bonds, will be included in a corporate
shareholder's "adjusted current earnings," as defined in Section 56(g) of the
Code, in calculating the corporation's alternative minimum taxable income for
purposes of determining the AMT and the Environmental Tax.
The deduction otherwise allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Foreign corporations engaged in a trade or business in the United States will be
subject to a "branch profits tax" on their "dividend equivalent amount" for the
taxable year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85 percent of the Social
Security benefits or railroad retirement benefits received by an individual
during any taxable year will be included in the gross income of such individual
if the individual's modified adjusted gross income (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.
Issuers of bonds purchased by a Fund (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Shareholders should be aware
that exempt-interest dividends may become subject to federal income taxation
retroactively to the date of issuance of the bonds to which such dividends are
attributable if such representations are determined to have been inaccurate or
if the issuers (or the beneficiary) of the bonds fail to comply with certain
covenants made at that time.
The percentage of total dividends paid by each Fund with respect to
any taxable year which qualifies as federal exempt-interest dividends will be
the same for all shareholders receiving dividends during such year. Interest on
indebtedness incurred by a shareholder to purchase or carry Fund Shares will
generally not be deductible for federal income tax purposes. Any loss on the
sale or exchange of Shares held for six months or less will be disallowed to the
extent of any exempt-interest dividends received by the selling shareholder with
respect to such Shares.
In addition, while each of these Funds will seek to invest
substantially all of its assets in tax-exempt obligations (except on a temporary
basis or for temporary defensive periods), any investment company taxable income
earned by a Fund will be distributed. In general, a Fund's investment company
taxable income would include interest income received from Temporary Investments
(as defined herein), plus any net short-term capital gains realized by the Fund,
subject to certain adjustments and excluding net long-term capital gains for the
taxable year over the net short-term capital losses, if any, for such year ("net
capital gains"). To the extent such income is distributed by a Fund (whether in
cash or additional Shares), it will generally be taxable to shareholders as
ordinary income. Additionally, any net capital gains distributed to shareholders
will be taxable to shareholders as gain from the sale or exchange of a capital
asset held for more than one year, regardless of how long a shareholder has held
Fund Shares.
B-30
<PAGE>
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to 30 billion full and fractional Shares of Common Stock.
The Company presently consists of twenty-one portfolios, each having an
institutional class of Shares (Class Y) and individual classes of Shares (Class
A, Class B and/or Class C), as listed below:
CLASS OF SHARES # OF SHARES FUND
- --------------- ----------- ----
CLASS Y 1 BILLION CASH RESERVE
- ------- --------- ------------
CLASS B 1 BILLION CASH RESERVE
- ------- --------- ------------
CLASS C 1 BILLION CASH RESERVE
- ------- --------- ------------
CLASS Y 1.25 BILLION TREASURY RESERVE
- ------- ------------ ----------------
CLASS C 1.25 BILLION TREASURY RESERVE
- ------- ------------ ----------------
CLASS Y 50 MILLION CORE EQUITY FUND
- ------- ---------- ----------------
CLASS A 50 MILLION CORE EQUITY FUND
- ------- ---------- ----------------
CLASS B 50 MILLION CORE EQUITY FUND
- ------- ---------- ----------------
CLASS Y 25 MILLION INTERNATIONAL GROWTH FUND
- ------- ---------- -------------------------
CLASS A 25 MILLION INTERNATIONAL GROWTH FUND
- ------- ---------- -------------------------
CLASS B 25 MILLION INTERNATIONAL GROWTH FUND
- ------- ---------- -------------------------
CLASS Y 500 MILLION EQUITY INDEX FUND
- ------- ----------- -----------------
CLASS A 500 MILLION EQUITY INDEX FUND
- ------- ----------- -----------------
CLASS B 500 MILLION EQUITY INDEX FUND
- ------- ----------- -----------------
CLASS Y 100 MILLION GROWTH EQUITY FUND
- ------- ----------- ------------------
CLASS A 100 MILLION GROWTH EQUITY FUND
- ------- ----------- ------------------
CLASS B 100 MILLION GROWTH EQUITY FUND
- ------- ----------- ------------------
CLASS Y 100 MILLION SHORT-INTERMEDIATE BOND FUND
- ------- ----------- ----------------------------
CLASS A 100 MILLION SHORT-INTERMEDIATE BOND FUND
- ------- ----------- ----------------------------
CLASS Y 250 MILLION TAX-FREE RESERVE
- ------- ----------- ----------------
CLASS C 250 MILLION TAX-FREE RESERVE
- ------- ----------- ----------------
CLASS Y 100 MILLION BALANCED FUND
- ------- ----------- -------------
CLASS A 100 MILLION BALANCED FUND
- ------- ----------- -------------
CLASS B 100 MILLION BALANCED FUND
- ------- ----------- -------------
CLASS Y 100 MILLION GOVERNMENT INCOME FUND
- ------- ----------- ----------------------
CLASS A 100 MILLION GOVERNMENT INCOME FUND
- ------- ----------- ----------------------
CLASS Y 100 MILLION INTERMEDIATE MUNICIPAL BOND FUND
- ------- ----------- --------------------------------
B-31
<PAGE>
CLASS OF SHARES # OF SHARES FUND
CLASS A 100 MILLION INTERMEDIATE MUNICIPAL BOND FUND
- ------- ----------- --------------------------------
CLASS Y 25 MILLION GLOBAL BOND FUND
- ------- ---------- ----------------
CLASS A 25 MILLION GLOBAL BOND FUND
- ------- ---------- ----------------
CLASS Y 100 MILLION PENNSYLVANIA MUNICIPAL BOND FUND
- ------- ----------- --------------------------------
CLASS A 100 MILLION PENNSYLVANIA MUNICIPAL BOND FUND
- ------- ----------- --------------------------------
CLASS Y 100 MILLION NEW JERSEY MUNICIPAL BOND FUND
- ------- ----------- ------------------------------
CLASS A 100 MILLION NEW JERSEY MUNICIPAL BOND FUND
- ------- ----------- ------------------------------
CLASS Y 750 MILLION ELITE CASH RESERVE
- ------- ----------- ------------------
CLASS C 750 MILLION ELITE CASH RESERVE
- ------- ----------- ------------------
CLASS Y 250 MILLION ELITE TREASURY RESERVE
- ------- ----------- ----------------------
CLASS C 250 MILLION ELITE TREASURY RESERVE
- ------- ----------- ----------------------
CLASS Y 1 BILLION ELITE GOVERNMENT RESERVE
- ------- --------- ------------------------
CLASS C 1 BILLION ELITE GOVERNMENT RESERVE
- ------- --------- ------------------------
CLASS Y 250 MILLION ELITE TAX-FREE RESERVE
- ------- ----------- ----------------------
CLASS C 250 MILLION ELITE TAX-FREE RESERVE
- ------- ----------- ----------------------
CLASS Y 1 BILLION SPECIAL EQUITY FUND
- ------- --------- -------------------
CLASS A 1 BILLION SPECIAL EQUITY FUND
- ------- --------- -------------------
CLASS B 100 MILLION SPECIAL EQUITY FUND
- ------- ----------- -------------------
CLASS Y 1 BILLION BOND FUND
- ------- --------- ---------
CLASS A 1 BILLION BOND FUND
- ------- --------- ---------
CLASS Y 1 BILLION SHORT TERM INCOME FUND
- ------- --------- ----------------------
CLASS A 1 BILLION SHORT TERM INCOME FUND
- ------- --------- ----------------------
Previously, Class A Shares and Class C Shares were known as Series B
Shares, while Class Y Shares were known as Series A Shares. Corefunds has
changed their designation to conform to the standard designations suggested by
the Investment Company Institute.
The Board of Directors may classify or reclassify any authorized but
unissued Shares of the Company into one or more additional portfolios or series
of Shares within a portfolio.
Shares have no subscription or pre-emptive rights and only such
conversion or exchange rights as the Board may grant in its discretion. When
issued for payment as described in the Prospectuses relating to the Funds and in
this Statement of Additional Information, a Fund's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Company,
Shares of each Fund are entitled to receive the assets available for
distribution belonging to the Fund, and a proportionate distribution, based upon
the relative asset values of the Fund and the Company's other portfolios, of any
general assets not belonging to any particular Fund which are available for
distribution.
B-32
<PAGE>
DIRECTORS AND OFFICERS
The names and general background information of the Company's Directors
and Executive Officers are set forth beloW:
ERIN ANDERSON (6/10/55) - DIRECTOR - PROFESSOR OF MARKETING, INSEAD,
FOUNTAINEBLEU, FRANCE SINCE 1994; ASSOCIATE PROFESSOR OF MARKETING, THE
WHARTON SCHOOL OF THE UNIVERSITY OF PENNSYLVANIA, 1981- 1994.
EMIL J. MIKITY (8/31/28) - DIRECTOR - RETIRED; SENIOR VICE PRESIDENT
INVESTMENTS, ATOCHEM NORTH AMERICA, 1979-1989.
GEORGE H. STRONG (7/15/26) - DIRECTOR - FINANCIAL CONSULTANT SINCE
1985; DIRECTOR AND SENIOR VICE PRESIDENT, UNIVERSAL HEALTH SERVICES,
INC., 1979-1984.
THOMAS J. TAYLOR (1/26/39) - DIRECTOR - CONSULTANT; CHAIRMAN, CONESTOGA
FUNDS SINCE 1995 AND A TRUSTEE 1990-1995; TRUSTEE OF COMMUNITY HERITAGE
FUND SINCE 1993.
CHERYL H. WADE (11/7/47) - DIRECTOR - ASSOCIATE GENERAL SECRETARY AND
TREASURER, AMERICAN BAPTIST CHURCHES SINCE 1993; TREASURER, THE
MINISTERS AND MISSIONARIES BENEFIT BOARD, AMERICAN BAPTIST CHURCHES,
1990-1993.
DAVID LEE (4/16/52) - PRESIDENT, CHIEF EXECUTIVE OFFICER - SENIOR VICE
PRESIDENT OF THE ADMINISTRATOR AND DISTRIBUTOR SINCE 1993; VICE
PRESIDENT OF THE ADMINISTRATOR AND DISTRIBUTOR SINCE 1991; PRESIDENT,
GW SIERRA TRUST FUNDS PRIOR TO 1991.
JAMES W. JENNINGS (1/15/37) - SECRETARY - PARTNER OF THE LAW FIRM OF
MORGAN, LEWIS & BOCKIUS LLP SINCE 1970.
KEVIN P. ROBINS (4/15/61) - VICE PRESIDENT, ASSISTANT SECRETARY -
SENIOR VICE PRESIDENT AND GENERAL COUNSEL OF SEI INVESTMENTS AND THE
DISTRIBUTOR SINCE 1994; VICE PRESIDENT AND ASSISTANT SECRETARY OF THE
ADMINISTRATOR AND THE DISTRIBUTOR, 1992-1994; ASSOCIATE, MORGAN, LEWIS
& BOCKIUS LLP (LAW FIRM) PRIOR TO 1992.
SANDRA K. ORLOW (10/18/53) - VICE PRESIDENT, ASSISTANT SECRETARY - VICE
PRESIDENT AND ASSISTANT SECRETARY OF THE ADMINISTRATOR AND DISTRIBUTOR
SINCE 1983.
KATE STANTON (11/18/58) - VICE PRESIDENT, ASSISTANT SECRETARY - VICE
PRESIDENT AND ASSISTANT SECRETARY OF THE ADMINISTRATOR AND DISTRIBUTOR
SINCE 1994. ASSOCIATE, MORGAN, LEWIS & BOCKIUS LLP (LAW FIRM) BEFORE
1994.
TODD CIPPERMAN (2/14/66) - VICE PRESIDENT, ASSISTANT SECRETARY - MR.
CIPPERMAN HAS BEEN VICE PRESIDENT AND ASSISTANT SECRETARY OF SEI
INVESTMENTS SINCE NOVEMBER 1995. FROM 1994 TO MAY 1995, MR. CIPPERMAN
WAS AN ASSOCIATE WITH DEWEY BALLENTINE. PRIOR TO 1994, MR. CIPPERMAN
WAS AN ASSOCIATE WITH WINSTON & STRAWN.
MARC H. CAHN (6/19/57) - VICE PRESIDENT, ASSISTANT SECRETARY - MR. CAHN
HAS BEEN VICE PRESIDENT AND ASSISTANT SECRETARY OF SEI INVESTMENTS
SINCE JULY 1996. FROM 1995 TO 1996, MR. CAHN SERVED AS SPECIAL COUNSEL
TO BARCLAYS BANK. PRIOR TO 1995, HE WAS COUNSEL FOR FIRST FIDELITY
BANCORPORATION; ASSOCIATE, MORGAN, LEWIS & BOCKIUS LLP (LAW FIRM) PRIOR
THERETO.
B-33
<PAGE>
CAROL ROONEY (5/8/64) - CONTROLLER, TREASURER, AND ASSISTANT SECRETARY
- A DIRECTOR OF SEI FUND RESOURCES SINCE 1992.
JOHN H. GRADY, JR. (6/01/61) - ASSISTANT SECRETARY - PARTNER, MORGAN,
LEWIS & BOCKIUS LLP, COUNSEL TO THE COMPANY, ADMINISTRATOR AND
DISTRIBUTOR.
EDWARD B. BAER (9/27/68) - ASSISTANT SECRETARY - ASSOCIATE, MORGAN,
LEWIS & BOCKIUS LLP, COUNSEL TO THE COMPANY, ADMINISTRATOR AND
DISTRIBUTOR, SINCE 1995. ATTORNEY, AQUILA MANAGEMENT CORPORATION, 1994.
RUTGERS UNIVERSITY SCHOOL OF LAW - NEWARK, 1991-1994.
The Directors of the Company receive fees and expenses for each meeting
of the Board of Directors attended, and an annual retainer. During the fiscal
year ended June 30, 1997, the Company paid a total of $174,350 on behalf of the
Funds to its Directors. No officer or employee of the Administrator or
Distributor receives any compensation from the Company for acting as a director
of the Company, and the officers of the Company receive no compensation from the
Company for performing the duties of their offices. Morgan, Lewis & Bockius LLP,
of which mr. Jennings is a partner, receives legal fees as counsel to the
Company. The Directors and Officers of the Company as a group own less than 1%
of the outstanding Shares of each Fund.
The following table shows aggregate compensation paid to each of the
Fund's Directors by the Fund and the Fund Complex respectively, for the year
ended June 30, 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL COMPENSATION
PERSON, COMPENSATION RETIREMENT ANNUAL FROM REGISTRANT
POSITION FROM REGISTRANT BENEFITS ACCRUED BENEFITS AND FUND COMPLEX
FOR THE FISCAL AS PART OF FUND UPON PAID TO DIRECTORS
YEAR ENDED EXPENSES RETIREMENT FOR THE FISCAL YEAR
JUNE 30, 1997 ENDED JUNE 30, 1997
- -------------------------------------------------------------------------------------------------------------------
ERIN ANDERSON, $29,900 N/A N/A $29,900
DIRECTOR
EMIL J. MIKITY, 54,750 N/A N/A 54,750
DIRECTOR
GEORGE H. STRONG, 29,900 N/A N/A 29,900
DIRECTOR
THOMAS J. TAYLOR, 29,900 N/A N/A 29,900
DIRECTOR
CHERYL H. WADE, 29,900 N/A N/A 29,900
DIRECTOR
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISER
- ALL FUNDS -
CoreStates Investment Advisers, Inc. ("CoreStates Advisers"), a
wholly-owned subsidiary of CoreStates Bank, N.A. ("CoreStates Bank"), itself a
wholly-owned subsidiary of CoreStates Financial Corp ("CoreStates Corp"), is the
Company's investment adviser.
B-34
<PAGE>
The services provided and the expenses assumed by CoreStates Advisers
as investment adviser, as well as the fees payable to it, are described in the
Funds' Prospectuses.
CoreStates Corp is a bank holding company registered under the Bank
Holding Company Act. CoreStates Corp is engaged through its principal
subsidiary, CoreStates Bank, N.A. (a national banking association), in
commercial, international and consumer banking, and in providing trust services.
CoreStates Corp, through other direct and indirect subsidiaries also provides
consumer financing, factoring, commercial financing, and financial advisory
services. The principal executive offices of CoreStates Corp are located at 1500
Market Street, Philadelphia, Pennsylvania 19102.
GLASS-STEAGALL ACT
CoreStates Corp and its banking subsidiaries are permitted to perform
the services contemplated by the investment advisory agreements with the Funds
and to engage in certain activities in connection with the investment of their
customer accounts in Class A, Class B or Class C Shares of the Funds without
violating the federal banking law commonly referred to as the Glass-Steagall
Act, or other applicable banking laws or regulations. Future changes to any of
these laws or regulations or administrative or judicial interpretations of such
laws or regulations, however, could prevent or restrict CoreStates Corp (and its
banking subsidiaries) from performing such services. If CoreStates Advisers were
thereby prohibited from serving as investment adviser to the Funds, the Board of
Directors would promptly seek to retain another qualified investment adviser for
the Funds.
THE INVESTMENT ADVISORY AGREEMENTS
The Investment Advisory Agreements between each Fund and CoreStates
Advisers provide that CoreStates Advisers shall not be liable for any error of
judgment or mistake of law or for any loss suffered by a Fund in connection with
its performance under the respective Investment Advisory Agreements, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of CoreStates Advisers in the performance
of its duties, or from reckless disregard by it of its duties and obligations
thereunder.
Unless sooner terminated, the Investment Advisory Agreements will
remain in effect from year to year if such continuance is approved at least
annually by CoreFunds' Board of Directors, or by vote of a majority of the
outstanding Shares of each Fund (as defined in the Prospectuses), and by a
majority of the Directors who are not parties to the Investment Advisory
Agreements or interested persons (as defined in the Investment Company Act) of
any party to the Investment Advisory Agreements, by vote cast in person at a
meeting called for such purpose. The Investment Advisory Agreements are
terminable at any time on sixty days' written notice without penalty by the
Directors, by vote of a majority of the outstanding Shares of the respective
Funds, or by CoreStates Advisers. The Investment Advisory Agreements also
terminate automatically in the event of their assignment, as defined in the
Investment Company Act.
INVESTMENT ADVISORY FEES
For the fiscal years ended June 30, 1995, 1996 and 1997, the Funds paid
the following investment advisory fees to CoreStates Advisers:
<TABLE>
<CAPTION>
FUND ADVISORY FEES PAID ADVISORY FEES WAIVED
1995 1996 1997 1995 1996 1997
======================================================== ===========================================================
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund $386,678 $728,921 $1,003,799 $193,333 $84,312 $19,771
Core Equity Fund 199,645 1,973,776 3,459,108 51,162 0 0
</TABLE>
B-35
<PAGE>
<TABLE>
<CAPTION>
FUND ADVISORY FEES PAID ADVISORY FEES WAIVED
1995 1996 1997 1995 1996 1997
======================================================== ===========================================================
<S> <C> <C> <C> <C> <C> <C>
Special Equity Fund * 25,955 396,971 * 573,349 609,289
Equity Index Fund 85,692 182,967 283,548 259,535 365,435 516,386
International Growth 861,592 964,647 1,131,220 57,439 20,021 0
Balanced Fund 240,853 441,222 642,244 133,801 106,546 146,497
Short-Intermediate
Bond Fund 203,083 267,327 463,789 87,019 137,169 378,953
Bond Fund * 457,043 681,517 * 509,285 759,385
Short Term Income
Fund * 55,281 81,604 * 108,344 160,231
Intermediate Municipal
Bond Fund 2,752 871 2,779 6,425 5,571 6,279
Government Income
Fund 22,528 49,103 87,561 33,796 23,318 13,544
Pennsylvania
Municipal Bond Fund 0 0 0 10,956 22,299 55,962
New Jersey Municipal
Bond Fund 0 0 0 8,045 7,888 8,073
Global Bond Fund 77,740 145,856 174,911 77,729 45,157 32,160
Cash Reserve 1,196,254 1,825,668 2,569,922 1,522,489 1,236,846 971,784
Treasury Reserve 1,039,138 1,694,725 2,613,273 1,322,599 1,101,807 993,819
Tax-Free Reserve 172,635 208,997 358,201 219,739 134,575 135,897
Elite Treasury Reserve 0 0 5,202 109,215 96,785 46,509
Elite Cash Reserve 0 0 51,000 2,011,375 1,892,127 659,442
Elite Tax-Free Reserve 0 0 26,012 424,166 405,929 196,322
</TABLE>
* Not in operation during such period.
** The Elite Government Reserve was not in operation during this period.
SUB-ADVISERS
- INTERNATIONAL GROWTH FUND -
Martin Currie, Inc. ("Martin Currie"), a subsidiary of Martin Currie,
Ltd., and Aberdeen Fund Managers, Inc. ("Aberdeen"), a subsidiary of Aberdeen
Asset Management PLC, are the International Growth Fund's sub- advisers.
Martin Currie, Ltd., through its various subsidiaries, performs various
investment advisory services for a number of open- and closed-end mutual funds,
investment trusts, unit trusts, offshore funds, pension funds, foundations,
charities and individual accounts. Martin Currie's current assets under
management total over $3.2 billion. Martin Currie's offices are located at
Saltire Court, 20 Castle Terrace, Edinburgh, Scotland.
Aberdeen Asset Management PLC performs various investment advisory
services for a number of investment trusts, unit trusts, institutional funds and
individual clients. Current assets under management total over $18.1 billion.
Aberdeen Asset Management PLC's offices are located at 10 Queens Terrace,
Aberdeen AB9 1QJ Scotland and Aberdeen officers are located at Nations Bank
Tower, 22nd Floor, Ft. Lauderdale, Florida 33396.
B-36
<PAGE>
The services provided and the expenses assumed by Martin Currie and
Aberdeen as sub-advisers, as well as the fees payable to them, are described in
the Prospectuses relating to International Growth Fund.
- GLOBAL BOND FUND -
Analytico TSA International, Inc. ("Analytic") is the sub-adviser to
the Global Bond Fund.
Analytic is a specialist manager of fixed income securities and cash
for institutional investors. Based in London, England, it is a wholly-owned
subsidiary of United Asset Management Corporation of Boston, Massachusetts,
whose assets under management currently exceed $190 billion. Analytic is a
member of the Investment Management Regulatory Organization, one of the
regulatory bodies approved by the UK Government, and its activities are
regulated accordingly.
SUB-ADVISORY AGREEMENTS
The Sub-Advisory Agreements between CoreStates Advisers and Martin
Currie, Aberdeen, and Analytic provide that Martin Currie, Aberdeen, and
Analytic shall not be liable for any error of judgment or mistake of law or for
any loss suffered by a Fund in connection with its performance under its
Sub-Advisory Agreement, except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services or loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Martin Currie,
Aberdeen, and Analytic in the performance of its duties, or from reckless
disregard by it of its duties and obligations thereunder.
Unless sooner terminated, each Sub-Advisory Agreement will remain in
effect from year to year if such continuance is approved at least annually by
CoreFunds' Board of Directors, or by vote of a majority of the outstanding
Shares of the relevant Fund (as defined in the Prospectuses), and by a majority
of the Directors who are not parties to this Sub-Advisory Agreement or
interested persons (as defined in the Investment Company Act) of any party to
this Sub-Advisory Agreement, by vote cast in person at a meeting called for such
purpose. Each Sub-Advisory Agreement is terminable at any time on sixty days'
written notice without penalty by the Directors, by vote of a majority of the
outstanding Shares of the Fund, by CoreStates Advisers, or by Martin Currie,
Aberdeen, or Analytic. Each Sub-Advisory Agreement also terminates automatically
in the event of its assignment, as defined in the Investment Company Act.
INVESTMENT SUB-ADVISORY FEES
For the fiscal years ended June 30, 1995, 1996 and 1997, the CoreStates
Advisers paid the following investment sub-advisory fees to Martin Currie,
Aberdeen, and Analytic:
<TABLE>
<CAPTION>
FUND SUB-ADVISORY FEES PAID SUB-ADVISORY FEES WAIVED
------------------------------------------- ------------------------------------------
1995 1996 1997 1995 1996 1997
============= ============= ============== ============= ============= =============
<S> <C> <C> <C> <C> <C> <C>
International Growth Fund $493,328 $509,474 $362,901 $0 $0 $0
(to Martin Currie)
International Growth Fund 0* 15,115 79,385 0 0 0
(to Aberdeen)
Global Bond Fund 77,727 95,377 103,658 0 0 0
(to Analytic)
* Aberdeen became a sub-adviser to the International Growth Fund on April 14, 1996.
</TABLE>
B-37
<PAGE>
PORTFOLIO TRANSACTIONS
- ALL FUNDS -
IN GENERAL
Pursuant to the Funds' respective advisory agreements, CoreStates
Advisers and/or the sub-advisers with regard to the International Growth and
Global Bond Funds (collectively, the "Advisers") determine which securities are
to be sold and purchased by each Fund and which brokers are to be eligible to
execute the portfolio transactions. Fund securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of certain portfolio securities include
a commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. While the Advisers generally seeks competitive spreads or
commissions, each Fund may not necessarily pay the lowest spread or commission
available on each transaction for reasons discussed below.
Allocation of security transactions, including their frequency, to
various dealers is determined by the Advisers in their best judgment and in a
manner deemed fair and reasonable to shareholders. The primary consideration is
the prompt execution of orders in an effective manner at the most favorable
price. Subject to this consideration, broker/dealers who provide supplemental
investment research to the Advisers may receive orders for transactions by a
Fund, although consideration of such supplemental investment research is not
applicable with respect to Equity Index Fund. Information so received is in
addition to and not in lieu of services required to be performed by the
Advisers, nor would the receipt of such information reduce the Advisers' fees.
Such information may be useful to the Advisers in serving the Funds as well as
their other clients, and conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Advisers in carrying
out their respective obligations to the Funds. In addition, the Funds may direct
commission business to one or more designated broker/dealers, including the
Distributor or an affiliate of the Adviser, in connection with such
broker/dealer's payment of certain of the Fund's expenses.
A Fund will not acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase or reverse repurchase agreements with the
Advisers, the Administrator, the Distributor, or their affiliates, and will not
give preference to any correspondents of the Advisers with respect to such
transactions, securities, savings deposits, repurchase agreements, and reverse
repurchase agreements. However, a Fund may, on a non-preferential basis, enter
into such transactions with institutional investors who purchase Shares of a
Fund on behalf of their customers.
Investment decisions for each Fund are made independently from those
for any other investment portfolios or accounts ("accounts") managed by the
Advisers. Such accounts may also invest in the same securities as a Fund. When a
purchase or sale of the same security is made at substantially the same time on
behalf of a Fund and another account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
Advisers believe to be equitable to the Fund and such other account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or sold by the Fund. To
the extent permitted by law, the Advisers may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for other
accounts in order to obtain the best execution.
As provided by their respective Agreements, in making investment
recommendations for a Fund, the Advisers will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale by
a Fund is another commercial customer of any of the Advisers and, in dealing
with their other commercial customers, the Advisers will not inquire or take
into consideration whether securities of those customers are held by a Fund.
It is expected that the Funds may execute brokerage or other agency
transactions through the Distributor, a registered broker-dealer, or an
affiliate of the Adviser for a commission in conformity with the Investment
B-38
<PAGE>
Company Act, the Securities Exchange Act of 1934 and rules promulgated by the
Securities and Exchange Commission. Under these provisions, the Distributor is
permitted to receive and retain compensation for effecting portfolio
transactions for the Funds on an exchange if a written contract is in effect
between the Distributor and the Company expressly permitting the Distributor to
receive and retain such compensation. These rules further require that
commissions paid to the Distributor by the Company for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Company may direct commission business to one
or more designated broker/dealers in connection with such broker/dealer's
provision of services to the Company or payment of certain Company expenses
(i.e., custody, pricing and professional fees). The Directors, including those
who are not "interested persons" of the Company, have adopted procedures for
evaluating the reasonableness of commissions paid to the Distributor and will
review these procedures periodically.
In addition, the Tax-Exempt Funds and Intermediate Municipal Bond Fund
may participate, if and when practicable, in bidding for the purchase of
municipal securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Funds will
engage in this practice, however, only when CoreStates Advisers, in its sole
discretion, believes such practice to be in the best interests of these Funds.
The Company is required to identify any securities of its "regular
brokers or dealers" (as that term is defined in the Investment Company Act)
which the Company has acquired during its most recent fiscal year. As of June
30, 1997, the Equity Index Fund held equity securities issued by Merrill Lynch
worth $668,000 and Morgan Stanley worth $832,000; the Cash Reserve Fund held
debt securities issued by Goldman Sachs worth $24,825, Merrill Lynch worth
$29,500, Morgan Stanley worth $34,375, and Sumitome Bank worth $40,000; and the
Elite Cash Reserve Fund held debt securities issued by Merrill Lynch worth
$10,000, Morgan Stanley worth $10,000, Goldman Sachs worth $5,000, Sumitome Bank
worth $5,000, and SBCI Swiss Bank worth $5,000.
BROKERAGE COMMISSIONS
For the fiscal year ended June 30, 1997, the Funds paid the following brokerage
commissions:
FUND BROKERAGE COMMISSIONS
Growth Equity Fund $202,703
Core Equity Fund 1,026,435
Special Equity Fund 138,761
Equity Index Fund 89,787
International Growth Fund 502,826
Balanced Fund 82,805
Short-Intermediate Fund 12,388
Bond Fund 14,615
B-39
<PAGE>
PORTFOLIO TURNOVER
It is not a policy of the Funds to purchase or sell securities for
trading purposes. However, the Advisers manage the Funds without regard
generally to restrictions on portfolio turnover, except those imposed by
provisions of the federal tax laws regarding short-term trading. Generally, the
Funds will not trade for short-term profits, but when circumstances warrant,
investments may be sold without regard to the length of time held. It is
expected that the Equity Funds' annual portfolio turnover rates will not exceed
100%. A 100% turnover rate would occur, for example, if all of a portfolio's
securities are replaced within a one year period. With respect to the Fixed
Income Funds, the annual portfolio turnover rate may exceed 100% due to changes
in portfolio duration, yield curve strategy or commitments to forward delivery
mortgage-backed securities. The portfolio turnover rate for the Global Bond Fund
during its first year of operation could be as high as 400%. With the exception
of Global Bond, however, it is expected that the annual turnover rate for the
Fixed Income Funds will not exceed 250%.
High rates of portfolio turnover necessarily result in correspondingly
heavier brokerage and portfolio trading costs which are paid by a Fund. Trading
in fixed income securities does not generally involve the payment of brokerage
commissions, but does involve indirect transaction costs. In addition to
portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains.
The portfolio turnover rates for each of the Funds for the fiscal years
ending June 30, 1996 and 1997 were as follows:
FUND TURNOVER RATE
1996 1997
Growth Equity Fund 81% 74%
Core Equity Fund 114 79
Special Equity Fund 72 74
Equity Index Fund 13 11
International Growth 41 59
Balanced Fund 74 54
Short-Intermediate Bond Fund 257 158
Bond Fund 190 210
Short Term Income Fund 102 99
Intermediate Municipal Bond Fund 10 22
Government Income Fund 131 120
Pennsylvania Municipal Bond Fund 92 39
New Jersey Municipal Bond Fund 21 19
Global Bond Fund 67 90
ADMINISTRATOR
- ALL FUNDS -
SEI Fund Resources ("SFR" or "Administrator") generally assists in
supervising the operation of the Funds pursuant to an Administration Agreement.
The respective fees payable to the Administrator are described in the Funds'
Prospectuses.
B-40
<PAGE>
THE ADMINISTRATION AGREEMENT
Under the terms of the Administration Agreement, the Administrator
provides the Company with administrative services (other than investment
advisory services) including all regulatory reporting, necessary office space,
equipment, personnel, and facilities.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Company in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Administrator in the performance of its
duties or from reckless disregard by it of its duties and obligations
thereunder.
The Administrator, a Delaware business trust, has its principal
business offices at Oaks, Pennsylvania 19456. SEI Investments Management
Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments Company
("SEI"), is the owner of all beneficial interest in the Administrator. SEI and
its subsidiaries and affiliates, including the Administrator, are leading
providers of funds evaluation services, trust accounting systems, and brokerage
and information services to financial institutions, institutional investors and
money managers. The Administrator and its affiliates also serve as administrator
to the following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, Boston 1784
Funds(R), CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds,
Inc., First American Investment Funds, Inc., First American Strategy Funds,
Inc., FMB Funds, Inc., HighMark Funds, Marquis Funds(R), Monitor Funds, Morgan
Grenfell Investment Trust, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, Profit Funds Investment Trust, Rembrandt Funds(R), Santa
Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, and TIP
Funds.
ADMINISTRATION FEES
<TABLE>
<CAPTION>
FUND ADMINISTRATIVE FEES PAID ADMINISTRATIVE FEES WAIVED
- ----------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund $123,731 $173,479 $225,396 $ 69,600 $97,589 $115,794
Core Equity Fund 53,535 424,851 909,068 30,067 100,744 259,547
Special Equity Fund * 70,780 118,416 * 7,265 49,294
Equity Index Fund 137,868 219,368 333,148 77,861 123,395 166,809
International Growth
Fund 183,805 196,933 227,442 103,392 110,774 127,898
Balanced Fund 85,636 130,685 184,781 48,169 64,801 96,912
Short-Intermediate
Bond Fund 92,840 128,526 283,761 52,211 73,722 137,610
Bond Fund * 217,319 312,028 * 34,028 174,767
- ---------------------------------------------------- -----------------------------------------------------------
Short Term Income
Fund * 36,257 52,310 * 5,897 29,391
Government Income
Fund 18,024 23,175 33,748 10,139 13,035 16,805
Intermediate Municipal
Bond Fund 2,937 2,058 2,806 1,652 1,158 1,579
B-41
<PAGE>
FUND ADMINISTRATIVE FEES PAID ADMINISTRATIVE FEES WAIVED
- --------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
----------------------------- -----------------------------------------------------------
Pennsylvania
Municipal Bond Fund 0 0 0 5,478 11,150 27,981
New Jersey Municipal
Bond Fund 0 0 0 4,023 3,944 4,036
Global Bond Fund 41,460 51,101 55,309 23,318 28,488 31,077
Treasury Reserve 755,724 966,980 1,471,701 425,121 536,353 783,035
Cash Reserve 869,998 1,035,263 1,445,391 489,371 582,385 768,169
Tax Free Reserve 125,548 110,075 201,784 70,639 76,537 107,032
Elite Treasury Reserve 24,029 22,923 25,838 30,578 28,626 38,795
Elite Cash Reserve 442,499 457,125 366,755 563,185 532,139 521,130
Elite Tax-Free Reserve 93,316 100,007 109,090 118,767 118,626 168,849
======================================================== ===========================================================
* Not in operation during period.
** The Elite Government Reserve was not in operation during this period.
</TABLE>
DISTRIBUTOR
- ALL FUNDS -
SEI Investments Distribution Co. (the "Distributor") acts as
Distributor of the Company's Shares pursuant to a Distribution Agreement. Shares
of each Fund are sold on a continuous basis by the Distributor as agent,
although the Distributor is not obliged to sell any particular amount of Shares.
The Distributor is a broker-dealer registered with the SEC, and is a member of
the National Association of Securities Dealers, Inc. As Distributor, the
Distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of a Fund (excluding preparation and printing expenses
necessary for the continued registration of the Funds' Shares) and of preparing,
printing, and distributing all sales literature. No compensation is payable by
the Company to the Distributor for its distribution services pursuant to the
Distribution Agreement.
For the fiscal years ended June 30, 1995, 1996, and 1997, the aggregate
sales charges payable to the Distributor with respect to Individual Shares of
the Funds were as follows:
<TABLE>
<CAPTION>
FUND AGGREGATE SALES CHARGE PAYABLE TO
DISTRIBUTOR AMOUNT RETAINED BY DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund $1,620 $5,569 $47,416 $182 $700 $1,860
Core Equity Fund 616 12,612 96,837 68 1710 4,819
Special Equity Fund 0 1,933 39,047 0 286 1,529
Equity Index Fund 0 0 188,470 0 0 6,846
International Growth Fund 4,538 3,413 9,718 505 397 598
Balanced Fund 3,181 11,168 49,158 354 1,454 2,725
Short-Intermediate Bond Fund 85 4,334 2,684 9 526 167
Bond Fund 0 1,199 17,371 0 180 1,620
- --------------------------------------------------------------------------------------------------------------------
Short Term Income Fund 0 1 1,330 0 0 15
B-42
<PAGE>
FUND AGGREGATE SALES CHARGE PAYABLE TO
DISTRIBUTOR AMOUNT RETAINED BY DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
--------------------------------------------------------------------------------
Government Income Fund 1,995 3,581 14,989 222 420 603
Intermediate Municipal Bond
Fund 576 7,398 1,528 65 822 257
Pennsylvania Municipal Bond
Fund 0 96 46,474 0 11 1,852
New Jersey Municipal Bond
Fund 990 9,916 4,101 110 1,081 350
Global Bond Fund 0 0 48 0 0 0
====================================================================================================================
</TABLE>
The Company has adopted a Distribution Plan (the "Plan") for those
Funds offering Class A and Class C Shares. The Plan provides for the payment by
the Company to the Distributor of up to .25% of the average daily net assets of
each Class A and Class C Shares to which the Plan is applicable. The Company
also has a Distribution Plan (the "Class B Plan") for those Funds offering Class
B Shares. The Class B Plan provides for the payment by the Company to the
Distributor of up to 1.00% of the average daily net assets of each of the Class
B Shares to which the Class B Plan is applicable. The Distributor is authorized
to use up to .75% of these fees as compensation for its distribution-related
services and up to .25% of these fees as service payments to certain securities
broker/dealers and financial institutions which enter into shareholder servicing
agreements or broker agreements (collectively, the "Service Agreements") with
the Distributor. Pursuant to the Service Agreements, the securities
broker/dealers and financial institutions will provide shareholder servicing
administrative services, including such services as: (i) establishing and
maintaining customer accounts and records; (ii) aggregating and processing
purchase and redemption requests from customers and placing net purchase and
redemption orders with the Distributor; (iii) automatically investing customer
account cash balances; (iv) providing periodic statements to their customers;
(v) arranging for bank wires; (vi) answering routine customer inquiries
concerning their investments in the Shares offered in connection with this 12b-1
Plan and related distribution agreement; (vii) assisting customers in changing
dividend options, account designations and addresses; (viii) performing
sub-accounting functions; (ix) processing dividend payments from the Funds on
behalf of customers; (x) forwarding certain shareholder communications from the
Funds (such as proxies, Shareholder reports and dividend, distribution and tax
notices) to customers; and (xi) providing such other similar services as may be
reasonably requested to the extent they are permitted to do so under applicable
statutes, rules or regulations. The actual fee paid to a securities
broker/dealer or financial institution will be based upon the extent and quality
of the services provided.
Continuance of the Plan must be approved annually by shareholders or by
a majority of the Directors of the Company and by a majority of the Directors
who are not interested persons (as defined in the Investment Company Act) and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreement relating to the Plan (the "Qualified Directors"). The Plan
requires that quarterly reports of such expenditures be furnished to and
reviewed by the Directors. The Plan may not be amended to materially increase
the amount which may be spent thereunder without approval by a majority of the
outstanding Shares of the affected Fund series. All material amendments of the
Plan require approval by a majority of the Directors of the Company and the
Qualified Directors. The Company has entered into a shareholder servicing
agreement with CoreStates Bank, N.A.
B-43
<PAGE>
The following chart lists the distribution fees that the Distributor
received for the following Funds for the fiscal year ended June 30, 1997. As of
June 30, 1997, Class B Shares of the Funds, Class C Shares of the Elite Funds,
and the Elite Government Reserve had not commenced operations.
<TABLE>
<CAPTION>
FUND AMOUNT FEE AMOUNT PAID TO SALES PRINTING OTHER
RECEIVED 3RD PARTIES BY EXPENSES COSTS
THE DISTRIBUTOR
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund Class A $9,677 0.25% $9,677 $0 $0 $0
Core Equity Fund Class A 32,372 0.25 32,372 0 0 0
Special Equity Fund Class A 3,986 0.25 3,986 0 0 0
International Growth Fund Class
A 5,307 0.25 5,307 0 0 0
Balanced Fund Class A 8,822 0.25 8,822 0 0 0
Short-Intermediate Bond Fund
Class A 7,481 0.25 7,481 0 0 0
Bond Fund Class A 3,492 0.25 3,492 0 0 0
Short Term Income Fund Class
A 423 0.25 423 0 0 0
Government Income Fund Class
A 3,639 0.25 3,639 0 0 0
Intermediate Municipal Bond
Fund Class A 2,374 0.25 2,374 0 0 0
Pennsylvania Municipal Bond
Fund Class A 3,126 0.25 3,126 0 0 0
New Jersey Municipal Bond
Fund Class A 809 0.25 809 0 0 0
Global Bond Fund Class A 421 0.25 421 0 0 0
Cash Reserve Class C 57,215 0.25 57,215 0 0 0
Treasury Reserve Class C 37,217 0.25 37,217 0 0 0
Tax-Free Reserve Class C 7,656 0.25 7,656 0 0 0
==================================== ============= ========== ==================== ============= ============ ===========
</TABLE>
EXPENSES
- ALL FUNDS -
Except as noted herein and in the Funds' Prospectuses, each Fund's
service contractors bear all expenses incurred in connection with the
performance of their services. Similarly, the Funds bear the expenses incurred
in their own operations. Expenses borne by the Funds include taxes (including
preparation of returns), interest, brokerage fees and commissions, if any, fees
of the Company's Board of Directors, SEC fees, state securities qualification
fees (including preparation of filings), costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current Fund
shareholders, charges of the Custodian and the Transfer Agent, outside auditing
and legal expenses, investment advisory and administrative fees, certain
insurance premiums, costs of maintenance of the Funds' existence, costs of
shareholder reports and shareholder meetings, and any extraordinary expenses
incurred in the Funds' operations.
The aggregate rates of the investment advisory, sub-advisory, and
administrative fees payable to the Advisers and the Distributor are not subject
to reduction as the Funds' net assets increase. However, if total expenses borne
by a Fund in any fiscal year exceed expense limitations imposed by applicable
state securities
B-44
<PAGE>
regulations, the Adviser(s) and the Distributor will reimburse the Fund by the
amount of such excess in proportion to their respective fees. Any future expense
reimbursements required to be paid by the Advisers and the Distributor would be
estimated daily and reconciled and paid on a monthly basis.
LEGAL COUNSEL
- ALL FUNDS -
Morgan, Lewis & Bockius LLP (of which Mr. Jennings, Secretary of the
Company, is a partner), 2000 One Logan Square, Philadelphia, Pennsylvania 19103,
is counsel to the Company and has passed upon certain matters in connection with
these offerings. From time to time, Morgan, Lewis & Bockius LLP has rendered
legal services to the Administrator, Distributor and CoreStates Corp.
MISCELLANEOUS
- ALL FUNDS -
The Company is registered with the SEC as a management investment
company. Such registration does not involve supervision by the Commission of the
management or policies of any Fund.
The Funds' Prospectuses and this Statement of Additional Information
omit certain of the information contained in the Company's Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Commission upon payment of the prescribed
fee.
The Funds' Prospectuses and this Statement of Additional Information do
not constitute an offering of the securities herein described in any state in
which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses and this Statement of Additional
Information.
PRINCIPAL HOLDERS OF SECURITIES
As of October 3, 1997, the following persons were the only persons who
were record owners (or to the knowledge of the Company, beneficial owners) or 5%
and 25% or more of the Shares of the Funds. Persons who owned of record or
beneficially more than 25% of a Fund's outstanding Shares may be deemed to
control the Fund within the meaning of the Investment Company Act. The Company
believes that most of the Class Y Shares of the Funds were held for the record
owner's fiduciary, agency, or custodial customers.
<TABLE>
<CAPTION>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
<S> <C> <C> <C>
Growth Equity Fund - Patterson & Co. 504,832.565 5.32%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-45
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
Growth Equity Fund - Patterson & Co. 8,044,860.946 84.82%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Growth Equity Fund - Patterson & Co. 758,373.077 8.00%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Growth Equity Fund - National Financial Services Corp. 28,449.337 8.98%
Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Growth Equity Fund - Patterson & Co. 29,034.792 9.17%
Class A PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - Patterson & Co. 9,227,968.739 38.11%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - Patterson & Co. 11,866,191.454 49.01%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - Patterson & Co. 1,399,492.820 5.78%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - National Financial Services Corp. 193,650.684 23.73%
Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Special Equity Fund - Patterson & Co. 3,644,134.831 59.95%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-46
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
Special Equity Fund - Patterson & Co. 1,664,612.908 27.39%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Special Equity Fund - Patterson & Co. 354,964.393 5.84%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Special Equity Fund - National Financial Services Corp 40,972.156 18.26%
Class A For the Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church St. Station
New York, NY 10008-3908
Equity Index Fund - Patterson & Co. 2,496,923.628 38.73%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Equity Index Fund - Patterson & Co. 2,705,782.195 41.96%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Equity Index Fund - Patterson & Co. 444,034.750 6.89%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
International Growth Patterson & Co. 1,076,811.542 9.33%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
International Growth Patterson & Co. 5,630,987.620 48.77%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
International Growth Patterson & Co. 4,422,554.468 38.31%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-47
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
International Growth National Financial Services Corp. 13,969.813 8.14%
Fund - Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
International Growth Mark E. Stalnecker & 15,251.000 8.88%
Fund - Class A Susan M. Stalnecker JTTEN
9 Briarcrest Dr.
Wallingford, PA 19086-6710
Balanced Fund - Class Y Patterson & Co. 6,497,090.091 76.26%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Balanced Fund - Class Y Patterson & Co. 1,710,443.358 20.08%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short-Intermediate Bond Patterson & Co. 3,655,691.381 21.94%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short-Intermediate Bond Patterson & Co. 10,637,468.138 63.83%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short-Intermediate Bond National Financial Services Corp. 25,644.790 9.29%
Fund - Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Bond Fund - Class Y Patterson & Co. 7,397,727.601 42.77%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Bond Fund - Class Y Patterson & Co. 1,177,970.772 6.81%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-48
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
Bond Fund - Class Y Patterson & Co. 7,892,308.742 45.63%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Bond Fund - Class A National Financial Services Corp 21,798.984 12.35%
For the Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church St. Station
New York, NY 10008-3908
Bond Fund - Class A Meridian Trust Company Cust 9,697.315 5.49%
For the IRA Rollover of
Shiras E. Holmes
8761 W. Barkhurst Dr.
Pittsburgh, PA 15237-4183
Intermediate Municipal Patterson & Co. 32,570.529 33.64%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Intermediate Municipal Patterson & Co. 62,578.030 64.63%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Intermediate Municipal National Financial Services Corp. 5,115.519 5.31%
Bond Fund - Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Intermediate Municipal Joseph T. Oprocha & 5,227.908 5.43%
Bond Fund - Class A Theresa E. Oprocha JTTEN
107 Snyder Avenue
Philadelphia, PA 19148-2617
Intermediate Municipal Irene Sungaila 5,352.438 5.56%
Bond Fund - Class A 5214 Burton Street
Philadelphia, PA 19124-1502
Intermediate Municipal Thomas Glenn 5,838.185 6.06%
Bond Fund - Class A 827 North 63rd Street
Philadelphia, PA 19151-3411
B-49
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
Intermediate Municipal Frank B. Holst & 6,141.450 6.37%
Bond Fund - Class A E. Joan Holst JTTEN
2218 Oak Terrace
Lansdale, PA 19446-6005
Intermediate Municipal Lowell S. Hunter 4,917.838 5.10%
Bond Fund - Class A 25 Hunter Road
Lambertville, NJ 08530-2704
Short Term Income Patterson & Co. 1,694,373.697 46.14%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short Term Income Patterson & Co. 1,491,849.754 40.62%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short Term Income Patterson & Co. 453,111.342 12.34%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short Term Income CoreStates Bank, N.A. 10,256.108 20.25%
Fund - Class A Custodian for the Rollover IRA of
John M. Ennis
206 Emerald Ave.
Reading, PA 19606-1450
Short Term Income CoreStates Bank, N.A. 33,556.911 66.25%
Fund - Class A Custodian for the Rollover IRA of
Frank L. Caiola
321 Evergreen Dr.
North Wales, PA 19454-2701
Short Term Income Philip W. Schwehm, Trustee 3,055.261 6.03%
Fund - Class A Philip W. Schwehm Living Trust
23 Joyner St.
Lawrenceville, NJ 08648-2612
Government Income Patterson & Co. 1,106,712.096 55.11%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Government Income Patterson & Co. 772,508.480 38.47%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-50
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
Government Income Patterson & Co. 110,734.490 5.51%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Government Income Jean Taxin 8,976.415 5.43%
Fund - Class A 5005 Woodbine Ave.
Philadelphia, PA 19131-2403
Government Income Margaret Murray 11,494.218 6.95%
Fund - Class A P.O. Box 5566
Philadelphia, PA 19143-0566
Pennsylvania Municipal Patterson & Co. 558,836.041 51.75%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Pennsylvania Municipal Patterson & Co. 277,670.385 25.71%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Pennsylvania Municipal Dr. Vernon F. Alibert & 191,108.701 17.70%
Bond Fund - Class Y Dolores V. Alibert JTWROS
1420 Conchester Highway
Boothwyn, PA 19061-2103
Pennsylvania Municipal National Financial Services Corp 25,533.476 9.82%
Bond Fund - Class A For the Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church St. Station
New York, NY 10008-3908
Pennsylvania Municipal Charles Genuardi & 18,604.330 7.15%
Bond Fund - Class A Anne S. Genuardi JTTEN
1687 Christopher Lane
Norristown, PA 19403-3301
New Jersey Municipal Patterson & Co. 99,676.762 64.37%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
New Jersey Municipal Patterson & Co. 54,003.874 34.88%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-51
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
New Jersey Municipal Deborah L. Brett & 2,218.534 5.21%
Bond Fund - Class A Randall P. Brett JTTEN
7 Sherman Ct.
Plainsboro, NJ 08536-2332
New Jersey Municipal Almira E. Brinser & 2,381.563 5.59%
Bond Fund - Class A Everett L. Brinser JTTEN
802 Chestnut Ave.
Laurel Springs, NJ 08021-2019
New Jersey Municipal Nathan J. Bershanoff 8,561.478 20.09%
Bond Fund - Class A 5251 Garden Ave.
Pennsauken, NJ 08109-1013
New Jersey Municipal Mary Manchur & 2,550.249 5.98%
Bond Fund - Class A Jean Kent JTTEN
19 Thatchers Rd.
Frenchtown, NJ 08825-3603
New Jersey Municipal Charles K. Cunard 5,397.142 12.66%
Bond Fund - Class A 714 N. Evergreen Ave.
Woodbury, NJ 08096-3552
New Jersey Municipal Josephine Grimshaw 2,424.836 5.69%
Bond Fund - Class A 409 Pointsett Ave.
Pitman, NJ 08071-1800
New Jersey Municipal Dalila V. McCrink & 3,085.016 7.24%
Bond Fund - Class A William J. McCrink JTTEN
3 Brookview Dr.
Atco, NJ 08004-2931
New Jersey Municipal Joseph Gizelbach & 2,921.422 6.85%
Bond Fund - Class A Adelaide C. Gizelbach JTTEN
14 Winding Way Rd.
Stratford, NJ 08084-1914
New Jersey Municipal Michael Appignani & 2,459.002 5.77%
Bond Fund - Class A Michellna Appignani JTTEN
147 Bernard St.
Highland Park, NJ 08904-3554
Global Bond Fund - Patterson & Co. 551,075.694 14.68%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-52
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
Global Bond Fund - Patterson & Co. 3,030,770.264 80.74%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Global Bond Fund - James W. Jennings 5,029.720 21.48%
Class A 2000 One Logan Square
Philadelphia, PA 19103-6993
Global Bond Fund - CoreStates Bank, N.A. C/F IRA of 6,762.412 28.88%
Class A Allen Luke
17 Bennett Court
East Brunswick, NJ 08816-3686
Global Bond Fund - CoreStates Bank, N.A. C/F IRA of 6,373.815 27.22%
Class A A. Gilbert Heebner
2 Etienne Arbordeau
Berwyn Baptist Road
Devon, PA 19333-1067
Cash Reserve - Class Y Patterson & Co. 779,941,462.520 92.50%
Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Treasury Reserve - The Bank of New York 65,656,208.720 7.19%
Class Y One Wall Street
5th Floor/STIF
New York, NY 10005-2501
Treasury Reserve - Patterson & Co. 733,087,643.010 80.26%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Treasury Reserve - First Union National Bank 54,758,542.340 6.00%
Class Y 401 S. Tryon St.
Floor 3
Charlotte, NC 28202-1911
Treasury Reserve - Patterson & Co. 6,762,380.960 37.52%
Class C Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Treasury Reserve - Philadelphia Health Management 941,983.280 5.23%
Class C Corp.
260 S. Broad Street
20th Floor
Philadelphia, PA 19102-5021
B-53
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
Treasury Reserve - Frank E. Acierno 1,504,827.130 8.35%
Class C 4001 Springfield Lane
Greenville, DE 19807-2251
Tax-Free Reserve - Patterson & Co. 123,360,101.270 95.46%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Tax-Free Reserve - Dennis J. Fiore 667,639.870 6.95%
Class C 38 Zachary Dr.
Chalfont, PA 18914-4014
Elite Cash Reserve - Patterson & Co. 230,547,479.170 99.99%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Elite Treasury Reserve - Patterson & Co. 28,453,714.660 100.00%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Elite Tax-Free Reserve - Patterson & Co. 178,979,169.830 100.00%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
</TABLE>
FINANCIAL STATEMENTS
- ALL FUNDS -
The Company's Financial Statements for the fiscal year ended June 30,
1997, including notes thereto and the report of Ernst & Young LLP thereon, are
herein incorporated by reference. Copies of the 1997 Annual Report must
accompany the delivery of this Statement of Additional Information.
B-54
<PAGE>
APPENDIX
RATED INVESTMENTS
Bonds
DESCRIPTION OF MOODY'S LONG-TERM RATINGS
AAA: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
BAA: Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
CA: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's bond ratings, where specified, are applied to senior bank
obligations and insurance company senior policyholder and claims obligations
with an original maturity in excess of one year. Obligations relying upon
support mechanisms such as letters-of-credit and bonds of indemnity are excluded
unless explicitly rated.
B-55
<PAGE>
Obligations of a branch of a bank are considered to be domiciled in the
country in which the branch is located. Unless noted as an exception, Moody's
rating on a bank's ability to repay senior obligations extends only to branches
located in countries which carry a Moody's sovereign rating. Such branch
obligations are rated at the lower of the bank's rating or Moody's sovereign
rating for the bank deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same
as the currency of the country in which the obligation is domiciled, Moody's
ratings do not incorporate an opinion as to whether payment of the obligation
will be affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or
insurance company obligations are exempt from registration under the U.S.
Securities Act of 1933 or issued in conformity with any other applicable law or
regulation. Nor does Moody's represent that any specific bank or insurance
company obligation is legally enforceable or is a valid senior obligation of a
rated issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and
their accuracy is not guaranteed. A rating should be weighed solely as one
factor in an investment decision and you should make your own study and
evaluation of any issuer whose securities or debt obligations you consider
buying or selling.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S LONG-TERM RATINGS
INVESTMENT GRADE
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small
degree.
A Debt rated 'A' has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'C' the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
B-56
<PAGE>
BB Debt rated 'BB' has less near-term vulnerability to default than
other speculative grade debt. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions that could lead to inadequate capacity to meet timely
interest and principal payments. The 'BB' rating category is also
used for debt subordinated to senior debt that is assigned an actual
or implied 'BBB-' rating.
B Debt rate 'B' has greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions would likely
impair capacity or willingness to pay interest and repay principal.
The 'B' rating category also is used for debt subordinated to senior
debt that is assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a current identifiable vulnerability to default,
and is dependent on favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The 'CCC' rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied 'B'
or 'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The
'C' rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
CI Debt rated 'CI' is reserved for income bonds on which no interest is being
paid.
D Debt is rated 'D' when the issue is in payment default, or the
obligor has filed for bankruptcy. The 'D' rating is used when
interest or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF DUFF & PHELPS' LONG-TERM DEBT RATINGS
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from AA- time to time because of economic
conditions.
A+ Protection factors are average but adequate. However, risk factors
are more variable and A- greater in periods of economic stress.
BBB+ Below average protection factors but still considered sufficient for
prudent investment. BBB- Considerable variability in risk during
economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
due. Present or
BB prospective financial protection factors fluctuate according to
industry conditions or company fortunes.
B-57
<PAGE>
BB- Overall quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met when due.
B Financial protection factors will fluctuate widely according
to economic cycles, industry B- conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
DESCRIPTION OF FITCH'S LONG-TERM RATINGS
INVESTMENT GRADE BOND
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'.
Because bonds rated in the 'AAA' and 'AA' categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated 'F-1+'.
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds, and therefore impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
SPECULATIVE GRADE BOND
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
B-58
<PAGE>
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and DD, should be valued on the basis
of their ultimate recovery value in liquidation or reorganization of
the & D obligor. 'DDD' represents the highest potential for recovery
on these bonds, and 'D' represents the lowest potential for recovery.
(+) & Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the (-) rating category. Plus and minus
signs, however, are not used in the 'AAA', 'DDD', 'DD', or 'D' categories.
DESCRIPTION OF IBCA'S LONG-TERM RATINGS
AAA Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
substantially.
AA Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very
significantly.
A Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic
or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.
BB Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest
exists, but is susceptible over time to adverse changes in business,
economic or financial conditions.
B Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse
changes in business, economic or financial conditions.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic or financial conditions.
CC Obligations which are highly speculative or which have a high risk of
default.
C Obligations which are currently in default.
Notes: "+" or "-" may be appended to a rating to denote relative status within
major rating categories. Ratings of BB and below are assigned where it is
considered that speculative characteristics are present.
B-59
<PAGE>
DESCRIPTION OF THOMSON BANKWATCH'S LONG-TERM DEBT RATINGS
INVESTMENT GRADE
AAA The highest category; indicates that the ability to repay principal
and interest on a timely basis is very high.
AA The second-highest category; indicates a superior ability to repay
principal and interest on a timely basis, with limited incremental
risk compared to issues rated in the highest category.
A The third-highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations
with higher ratings.
BBB The lowest investment-grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are,
however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
NON-INVESTMENT GRADE
(Issues regarded as having speculative characteristics in the likelihood of
timely repayment of principal and interest.)
BB While not investment grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated
issues. However, there are significant uncertainties that could
affect the ability to adequately service debt obligations.
B Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse
developments could well negatively affect the payment of interest and
principal on a timely basis.
CCC Issues rated "CCC" clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial
circumstances.
CC "CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of
bankruptcy or reorganization.
D Default
Ratings in the Long-Term Debt categories may include a plus (+) or minus (-)
designation, which indicates where within the respective category the issue is
placed.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by Standard & Poor's Corporation ("S&P") is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1, 1 +, and 2 to indicate the relative
degree of safety. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1, the highest rating category, reflect a "very
strong" degree of safety regarding timely payment. Those rated A-2, the second
highest rating category, reflect a satisfactory degree of safety regarding
timely payment but not as high as A-1.
B-60
<PAGE>
Commercial paper issues rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") are judged by Moody's to be of "superior" quality and "strong"
quality respectively on the basis of relative repayment capacity.
F-1+ (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1+ is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues rated F-1+ or
F-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by good fundamental protection
factors. Risk factors are minor. Duff has incorporated gradations of 1+ and 1-
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1+ has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1, the highest rating by IBCA, indicates that the obligation is
supported by a strong capacity for timely repayment. Those obligations rated A1+
are supported by the highest capacity for timely repayment. Obligations rated
A2, the second highest rating, are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
B-61
<PAGE>
PROFORMA COMBINED FINANCIAL STATEMENT FOR
EVERGREEN SELECT STRATEGIC GROWTH FUND AND
COREFUNDS GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS (000'S OMITTED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
EVERGREEN SELECT COREFUND
STRATEGIC GROWTH FUND GROWTH EQUITY FUND PROFORMA COMBINED
----------------------- -------------------- -------------------
SHARES VALUE SHARES VALUE SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK 96.3%
AEROSPACE & DEFENSE 1.9%
THIOKOL CORP. 55 $ 4,490 55 $ 4,490
UNITED TECHNOLOGIES CORP. 56 4,045 56 4,045
- ----------------------------------------------------------------------------------------------------------------
8,535 8,535
- ----------------------------------------------------------------------------------------------------------------
AUTOMOTIVE EQUIPMENT &
MANUFACTURING - 1.1%
FORD MOTOR CO. 99 4,806 99 4,806
- ----------------------------------------------------------------------------------------------------------------
BANKS 3.1%
BANKAMERICA CORP. 24 1,752 24 1,752
BARNETT BANKS, INC. 50 3,594 50 3,594
CITICORP 14 1,725 14 1,725
CRESTAR FINANCIAL CORPORATION 73 4,161 73 4,161
NORWEST CORPORATION 70 2,704 70 2,704
- ----------------------------------------------------------------------------------------------------------------
13,936 13,936
- ----------------------------------------------------------------------------------------------------------------
BUILDING, CONSTRUCTION &
FURNISHINGS - 3.5%
CENTEX CORP. 66 4,174 66 4,174
HOME DEPOT, INC. 75 4,393 61 3,591 136 7,984
SOUTHDOWN, INC. 57 3,345 57 3,345
- ----------------------------------------------------------------------------------------------------------------
11,912 3,591 15,503
- ----------------------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT &
SERVICES - 2.1%
ACCUSTAFF, INC. 143 3,289 143 3,289
CORESTAFF, INC. 54 1,431 54 1,431
ROBERT HALF INTERNATIONAL, IN 110 4,383 110 4,383
- ----------------------------------------------------------------------------------------------------------------
7,672 1,431 9,103
- ----------------------------------------------------------------------------------------------------------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 0%
SOLUTIA INCORPORATED 7 182 7 182
- ----------------------------------------------------------------------------------------------------------------
COMMUNICATION SYSTEMS
& SERVICES - 5.5%
BROOKS FIBER PROPERTIES 60 3,325 60 3,325
CISCO SYSTEMS, INC. 14 797 66 3,671 80 4,468
ICG COMMUNICATIONS, INC. 68 1,856 68 1,856
MCLEODUSA, INC. 82 2,624 82 2,624
QUALCOMM, INC. 53 2,677 53 2,677
QWEST COMMUNICATIONS INTERNAT 7 391 7 391
TELEPORT COMMUNICATIONS GROUP 58 3,194 58 3,194
TELLABS, INC. 51 2,685 51 2,685
WORLDCOM, INC. 100 3,034 100 3,034
- ----------------------------------------------------------------------------------------------------------------
3,482 20,772 24,254
- ----------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS SERVICES 4.7%
CENDANT CORP. 161 5,525 161 5,525
FOODMAKER, INC. 267 4,022 267 4,022
PROCTER & GAMBLE CO. 89 7,083 89 7,083
UNIVERSAL CORP. 106 4,349 106 4,349
- ----------------------------------------------------------------------------------------------------------------
20,979 20,979
- ----------------------------------------------------------------------------------------------------------------
DIVERSIFIED COMPANIES 1.4%
TYCO INTERNATIONAL LTD. 141 6,373 141 6,373
- ----------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
& SERVICES - 1.5%
GENERAL ELECTRIC CO. 11 822 47 3,462 58 4,284
ILLINOIS TOOL WORKS, INC. 40 2,405 40 2,405
- ----------------------------------------------------------------------------------------------------------------
822 5,867 6,689
- ----------------------------------------------------------------------------------------------------------------
FINANCE & INSURANCE 11.0%
ALLSTATE CORP. 47 4,308 47 4,308
AMERICAN EXPRESS CO. 52 4,661 52 4,661
AMERICAN INTERNATIONAL GROUP, 28 3,002 28 3,002
EXEL LTD. 68 4,294 68 4,294
</TABLE>
<PAGE>
PROFORMA COMBINED FINANCIAL STATEMENT FOR
EVERGREEN SELECT STRATEGIC GROWTH FUND AND
COREFUNDS GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS (000'S OMITTED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
EVERGREEN SELECT COREFUND
STRATEGIC GROWTH FUND GROWTH EQUITY FUND PROFORMA COMBINED
----------------------- -------------------- -------------------
SHARES VALUE SHARES VALUE SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FANNIE MAE 75 4,260 75 4,260
FREDDIE MAC 85 3,565 85 3,565
MERRILL LYNCH & CO., INC. 59 4,283 59 4,283
MGIC INVESTMENT CORP. 82 5,427 82 5,427
MORGAN STANLEY, DEAN WITTER,
DISCOVER & CO. 79 4,665 79 4,665
PRICE (T.) ROWE &
ASSOCIATES, INC. 84 5,267 84 5,267
SUNAMERICA, INC. 117 5,014 117 5,014
- ----------------------------------------------------------------------------------------------------------------
33,611 15,135 48,746
- ----------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE PRODUCTS 7.9%
COCA COLA CO. 153 10,207 153 10,207
CONAGRA, INC. 89 2,920 89 2,920
CPC INTERNATIONAL, INC. 16 1,760 16 1,760
HERSHEY FOODS CORP. 57 3,524 57 3,524
INTERSTATE BAKERIES CORP. 132 4,925 132 4,925
PHILIP MORRIS COMPANIES, INC. 164 7,449 164 7,449
SAFEWAY, INC. 69 4,373 69 4,373
- ----------------------------------------------------------------------------------------------------------------
26,954 8,204 35,158
- ----------------------------------------------------------------------------------------------------------------
HEALTHCARE PRODUCTS
& SERVICES 17.5%
ABBOTT LABORATORIES 12 803 12 803
BRISTOLMYERS SQUIBB CO. 80 7,586 80 7,586
CARDINAL HEALTH, INC. 52 3,876 52 3,876
GUIDANT CORP. 27 1,681 27 1,681
HBO & CO. 96 4,628 77 3,696 173 8,324
HEALTH CARE & RETIREMENT CORP. 110 4,441 110 4,441
HEALTH MANAGEMENT
ASSOCIATES, INC. 202 5,095 186 4,697 388 9,792
JOHNSON & JOHNSON 13 826 49 3,228 62 4,054
LINCARE HOLDINGS, INC. 74 4,218 74 4,218
MEDTRONIC, INC. 33 1,725 33 1,725
MERCK & CO., INC. 9 903 16 1,700 25 2,603
PATTERSON DENTAL CO. 105 4,751 105 4,751
PFIZER, INC. 11 822 11 822
QUINTILES TRANSNATIONAL CORP. 123 4,709 123 4,709
SCHERINGPLOUGH CORP. 94 5,839 56 3,479 150 9,318
SMITHKLINE BEECHAM PLC 77 3,966 77 3,966
UNIVERSAL HEALTH SERVICES, INC. 100 5,043 100 5,043
- -----------------------------------------------------------------------------------------------------------------
49,664 28,048 77,712
- -----------------------------------------------------------------------------------------------------------------
HOTEL/LODGING 1.1%
PRIME HOSPITALITY CORP. 236 4,812 236 4,812
- -----------------------------------------------------------------------------------------------------------------
INDUSTRIAL SPECIALTY
PRODUCTS & SERVICES 1.7%
HONEYWELL, INC. 48 3,254 48 3,254
PARKER HANNIFIN CORP. 91 4,165 91 4,165
- -----------------------------------------------------------------------------------------------------------------
4,165 3,254 7,419
- -----------------------------------------------------------------------------------------------------------------
INFORMATION SERVICES
& TECHNOLOGY 16.0%
AMERICA ONLINE, INC. 46 4,085 46 4,085
AUTOMATIC DATA
PROCESSING, INC. 60 3,707 60 3,707
BMC SOFTWARE, INC. 58 3,822 68 4,463 126 8,285
CADENCE DESIGN
SYSTEMS, INC. 86 2,096 86 2,096
COMPAQ COMPUTER CORP. 61 3,437 54 3,053 115 6,490
COMPUTER ASSOCIATES
INTERNATIONAL, INC. 66 3,484 66 3,484
COMPUTER HORIZONS CORP. 129 5,866 129 5,866
DELL COMPUTER CORP. 40 3,322 40 3,322
INTEL CORP. 11 740 11 740
IOMEGA CORP. 297 3,700 297 3,700
MICROSOFT CORP. 58 7,456 12 1,542 70 8,998
PMC SIERRA, INC. 183 5,659 183 5,659
PAYCHEX, INC. 69 3,493 69 3,493
PEOPLESOFT, INC. 100 3,900 100 3,900
SANMINA CORP. 71 4,815 71 4,815
SUN MICROSYSTEMS, INC. 61 2,414 61 2,414
- -----------------------------------------------------------------------------------------------------------------
43,327 27,727 71,054
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROFORMA COMBINED FINANCIAL STATEMENT FOR
EVERGREEN SELECT STRATEGIC GROWTH FUND AN
COREFUNDS GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS (000'S OMITTED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
EVERGREEN SELECT COREFUND
STRATEGIC GROWTH FUND GROWTH EQUITY FUND PROFORMA COMBINED
----------------------- -------------------- -------------------
SHARES VALUE SHARES VALUE SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
METAL PRODUCTS & SERVICES 0.5%
USX UNITED STATES STEEL GROUP 66 2,060 66 2,060
- ----------------------------------------------------------------------------------------------------------------
OIL FIELD SERVICES 3.2%
BJ SERVICES CO. 59 4,264 59 4,264
ENSCO INTERNATIONAL, INC. 124 4,156 124 4,156
HALLIBURTON CO. 65 3,376 65 3,376
SCHLUMBERGER LTD. 30 2,431 30 2,431
- ----------------------------------------------------------------------------------------------------------------
8,420 5,807 14,227
- ----------------------------------------------------------------------------------------------------------------
PUBLISHING, BROADCASTING
& ENTERTAINMENT 3.5%
CBS CORP. 70 2,072 70 2,072
GANNETT, INC. 59 3,616 59 3,616
MCGRAW HILL COMPANIES, INC. 64 4,710 64 4,710
VALASSIS COMMUNICATIONS, INC. 141 5,205 141 5,205
- ----------------------------------------------------------------------------------------------------------------
9,915 5,688 15,603
- ----------------------------------------------------------------------------------------------------------------
RETAILING & WHOLESALE 9.1%
COLGATE PALMOLIVE CO. 24 1,793 24 1,793
COMPUSA, INC. 148 4,587 148 4,587
COSTCO COMPANIES, INC. 109 4,869 82 3,659 191 8,528
DAYTON HUDSON CORP. 77 5,164 77 5,164
GAP, INC. 135 4,784 135 4,784
GILLETTE CO. 19 1,868 19 1,868
NORDSTROM, INC. 55 3,321 55 3,321
SUNBEAM CORP. 62 2,616 62 2,616
TJX CO., INC. 114 3,911 114 3,911
WALGREEN CO. 122 3,828 122 3,828
- ----------------------------------------------------------------------------------------------------------------
13,367 27,033 40,400
- ----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $225,579, $111,339
AND $336,918, RESPECTIVELY) 260,876 166,675 427,551
- ----------------------------------------------------------------------------------------------------------------
SHORTTERM INVESTMENTS
1.7% (COST $7,781,
$0, and &7,781, RESPECTIVELY)
VALIANT GENERAL FUND 7,781 7,781 7,781
- ----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 1.4%
DRESDNER BANK AG, 6.25%, DATED
12/31/97, DUE 1/2/98,
MATURITY VALUE $1,550
(COST $1,550) (a) 1,550 1,550 1,550 1,550
MORGAN STANLEY REPURCHASE
AGREEMENT, 6.2%, DATED
12/31/97, MATURITY VALUE
$1,516 (COST $1,516) (b) 1,516 1,516 1,516 1,516
HSBC REPURCHASE AGREEMENT,
6.4%, DATED 12/31/97,
MATURITY VALUE $1,516
(COST $1,516) (c) 1,516 1,516 1,516 1,516
LANSTON REPURCHASE AGREEMENT,
6.5%, DATED 12/31/97,
MATURITY VALUE $1,516
(COST $1,516) (d) 1,516 1,516 1,516 1,516
- ----------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(COST $1,550, $4,548
AND $6,098, RESPECTIVELY) 1,550 4,548 6,098
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST
$234,910, $115,887 AND
$350,797, RESPECTIVELY) 99.4% 270,207 171,223 441,430
- ----------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES 0.6% 5,192 (2,725) 2,467
- ----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS 100.0% $ 275,399 $ 168,498 $ 443,897
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Fully collateralized by U.S. Government and/or agency obligations.
(b) Collateralized by U.S. Treasury Note, par value $1,550,000, 5.625%,
12/31/99; market value; $1,550,930.
(c) Collateralized by U.S. Treasury Note, par value $1,470,000, 6.625%,
7/31/01; market value, $1,554,819.
(d) Collateralized by U.S. Treasury Note, par value $1,555,000, 5.50%,
12/31/00; market value $1,549,247.
<PAGE>
EVERGREEN SELECT STRATEGIC GROWTH
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES (000'S)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
EVERGREEN COREFUND
SELECT STRATEGIC GROWTH EQUITY PRO FORMA
GROWTH FUND FUND ADJUSTMENTS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (cost $234,910, $115,887 and
$350,797, respectively) $270,207 $171,223 $441,430
Cash 0 11 11
Dividends and interest receivable 213 54 267
Receivable for Fund shares sold 327 21 348
Receivable for investment sold 9,096 635 9,731
Prepaid expenses and other assets 60 0 60
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets 279,903 171,944 451,847
LIABILITIES:
Payable for investments purchased 4,206 191 4,397
Payable for Fund shares repurchased 36 3,127 3,163
Distributions payable 78 0 78
Due to custodian bank 26 0 26
Accrued expenses and other liabilities 158 128 286
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,504 3,446 7,950
NET ASSETS $275,399 $168,498 $443,897
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ARE COMPRISED OF:
Paid-in capital $218,352 $107,465 $325,817
Undistributed net investment income (loss) 66 (136) (70)
Accumulated net realized gain (loss) on investments 21,684 5,833 27,517
Net unrealized appreciation on investments 35,297 55,336 90,633
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $275,399 $168,498 $443,897
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS IS (COREFUND CLASS A)
Net Assets - $5,699 $5,699
Shares of Beneficial Interest Outstanding - 350 (177)(a) 173
Net Asset Value - $16.27 $32.89
CLASS IS (COREFUND CLASS B)
Net Assets - $101 $101
Shares of Beneficial Interest Outstanding - 6 (3)(a) 3
Net Asset Value - $16.19 $32.89
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS IS TOTAL
Net Assets - $5,800 $5,800
Shares of Beneficial Interest Outstanding - 356 (180)(a) 176
Net Asset Value - - $32.89
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS I
Net Assets $275,399 $162,698 $438,097
Shares of Beneficial Interest Outstanding 8,373 9,963 (5,016)(a) 13,320
Net Asset Value $32.89 $16.33 $32.89
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects impact of converting shares of the target fund.
<PAGE>
EVERGREEN SELECT STRATEGIC GROWTH
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF OPERATIONS (000'S)
FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
EVERGREEN COREFUND
SELECT STRATEGIC GROWTH EQUITY PRO FORMA
GROWTH FUND* FUND(1) ADJUSTMENTS COMBINED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $122 $1,183 $1,305
Dividend income 229 335 564
- ----------------------------------------------------------------------------------------------------------------------------------
Total income 351 1,518 1,869
EXPENSES:
Management fee 196 1,162 (78)(b) 1,280
Distribution Plan expenses 0 13 0 13
Transfer agent fee 0 28 (22)(a) 6
Custodian fee 7 0 39 (b) 46
Printing 2 30 4 (d) 36
Registration fees 25 11 (11)(a) 25
Professional fees 3 6 11 (d) 20
Directors' fees and expenses 1 0 11 (d) 12
Administrative service fees 10 387 (341)(b) 56
Miscellaneous 1 2 1 (d) 4
- ----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 245 1,639 (386) 1,498
Less: Fee waivers and/or reimbursements (43) (136) (2) (181)
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 202 1,503 (388) 1,317
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 149 15 388 552
Net realized and unrealized gain (loss) on investments:
Net realized gain on investments 21,684 17,381 39,065
Net change in unrealized appreciation
(depreciation) on investments (18,054) 23,886 5,832
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3,630 41,267 0 44,897
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,779 $41,282 $388 $45,449
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects a decrease based on surviving Fund's fee schedule and pro forma
combined assets.
(b) Reflects adjustment to CoreFund's expense based on surviving Fund's
contractual rate.
(c) Reflects expected cost savings when the Funds are combined.
(d) Reflects an increase based on pro forma combined assets.
(1) For the year ended December 31, 1997.
* For the period from November 24, 1997 (inception of the Fund) to
December 31, 1997.
<PAGE>
Evergreen Select Strategic Growth Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
December 31, 1997
1. Basis of Combination The Pro Forma Combining Statement of Assets and
Liabilities, including the Pro Forma Schedule of Investments, and the
related Pro Forma Combining Statement of Operations ("Pro Forma Statements")
reflect the accounts of Evergreen Select Strategic Growth Fund ("Evergreen")
and CoreFund Growth Equity Fund ("CoreFund") at December 31, 1997 and for
the year ended December 31, 1997 for CoreFund and the period November 24,
1997 to December 31, 1997 for Evergreen.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
CoreFund. The Reorganization provides for the acquisition of all assets and
assumption of identified liabilities of CoreFund by Evergreen, in exchange
for Class IS and Class I shares of Evergreen. Thereafter, there will be a
distribution of Class IS and Class I shares of Evergreen to the respective
shareholders of CoreFund in liquidation and subsequent termination thereof.
As a result of the Reorganization, the shareholders of CoreFund will become
the owners of that number of full and fractional Class IS and Class I shares
of Evergreen having an aggregate net asset value equal to the aggregate net
asset value of their shares of CoreFund as of the close of business
immediately prior to the date that CoreFund assets are exchanged for Class
IS and Class I shares of Evergreen.
Under the Reorganization the Pro Forma Statements reflect the expenses of
each Fund in carrying out its obligations as though the merger occurred at
the beginning of the period presented.
The information contained herein is based on the experience of each Fund for
the period ended December 31, 1997 and is designed to permit shareholders of
the consolidating mutual funds to evaluate the financial effect of the
proposed Reorganization. The expenses of CoreFund in connection with the
Reorganization (including the cost of any proxy soliciting agents) will be
borne by First Union National Bank of North Carolina. It is not anticipated
that the securities of the combined portfolio will be sold in significant
amounts in order to comply with the policies and investment practices of
Evergreen.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the Statement
of Additional Information.
2. Shares of Beneficial Interest The Pro Forma net asset values per share
assume the issuance of Class IS and Class I shares of Evergreen which would
have been issued at December 31, 1997 in connection with the proposed
Reorganization. Shareholders of CoreFund would receive Class IS and Class I
shares of Evergreen based on assumed conversion ratios determined on
December 31, 1997. The conversion ratios are calculated by dividing the net
asset value of CoreFund by the net asset value per share of the respective
class of Evergreen.
3. Pro Forma Operations The Pro Forma Combining Statement of Operations assumes
similar rates of gross investment income for the investments of each Fund.
Accordingly, the combined gross investment income is equal to the sum of
each Fund's gross investment income. Pro Forma operating expenses include
the actual expenses of the Funds adjusted to reflect the expected expenses
of the combined entity. The investment advisory and distribution fees have
been charged to the combined Fund based on the fee schedule in effect for
Evergreen at the combined level of average net assets for the period ended
December 31, 1997.
6
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to "Liability
and Indemnification of Trustees" under the caption "Comparative Information on
Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1. Declaration of Trust. Incorporated by reference to
Evergreen Select Equity Trust's Registration Statement on Form N-1A
filed on November 17, 1997 - Registration No. 333-36047 ("Form N-1A
Registration Statement")
2. Bylaws. Incorporated by reference to the Form N-1A Registration Statement.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus contained in
Part A of this Registration Statement.
5. Declaration of Evergreen Select Equity Trust Articles II., III.6(c), IV.(3),
IV.(8), V., VI., VII., and VIII and By-Laws Articles II., III. and VIII.
6(a). Form of Investment Advisory Agreement between First Union National Bank
and Evergreen Select Equity Trust. Incorporated by reference to the Form N-1A
Registration Statement.
6(b). Form of Interim Investment Advisory Agreement. Exhibit B
to Prospectus contained in Part A of this Registration Statement.
7(a). Form of Distribution Agreement between Evergreen Distributor, Inc. and
Evergreen Select Equity Trust. Incorporated by reference to the Form N-1A
Registration Statement.
7(b). Form of Dealer Agreement for Institutional Service shares used by
Evergreen Distributor, Inc. Incorporated by reference to the Form N-1A
Registration Statement.
8. Form of Deferred Compensation Plan. Incorporated by reference to the Form
N-1A Registration Statement.
-78-
<PAGE>
9. Form of Custody Agreement between State Street Bank and Trust Company and
Evergreen Select Equity Trust. Incorporated by reference to Form N-1A
Registration Statement.
10. Form of Rule 12b-1 Distribution Plan. Incorporated by reference to the Form
N-1A Registration Statement.
11. Opinion and consent of Sullivan & Worcester LLP. Filed herewith.
12. Tax opinion and consent of Sullivan & Worcester LLP. Filed herewith.
13. Not applicable.
14. Consent of Ernst & Young LLP. Filed herewith.
15. Not applicable.
16. Powers of Attorney. Filed herewith.
17. Form of Proxy Card. Filed herewith.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus that is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) Not applicable.
-79-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of Columbus and State
of Ohio, on the 8th day of April, 1998.
EVERGREEN SELECT EQUITY TRUST
By: /s/ William J. Tomko
-----------------------
Name: William J. Tomko
Title: President
As required by the Securities Act of 1933, the following persons have
signed this Registration Statement in the capacities indicated on the 8th day of
April, 1998.
Signatures Title
- ---------- -----
/s/William J. Tomko President and
- ------------------- Treasurer
William J. Tomko
/s/Laurence B. Ashkin* Trustee
- ---------------------
Laurence B. Ashkin
/s/Charles A. Austin III* Trustee
- -------------------------
Charles A. Austin III
/s/K. Dun Gifford* Trustee
- -----------------
K. Dun Gifford
/s/James S. Howell* Trustee
- ------------------
James S. Howell
/s/Leroy Keith, Jr.* Trustee
- -------------------
Leroy Keith, Jr.
/s/Gerald M. McDonnell* Trustee
- ----------------------
Gerald M. McDonnell
/s/Thomas L. McVerry* Trustee
- --------------------
-80-
<PAGE>
Thomas L. McVerry
/s/William Walt Pettit* Trustee
- ---------------------
William Walt Pettit
/s/David M. Richardson* Trustee
- ----------------------
David M. Richardson
/s/Russell A. Salton III* Trustee
- -------------------------
Russell A. Salton III
/s/Michael S. Scofield* Trustee
- ----------------------
Michael S. Scofield
/s/Richard J. Shima* Trustee
- -------------------
Richard J. Shima
* By: /s/William J. Tomko
------------------
Attorney-in-Fact
William J. Tomko, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and included as Exhibit 16 to this
Registration Statement.
-81-
<PAGE>
INDEX TO EXHIBITS
N-14
EXHIBIT NO.
11 Opinion and Consent of Sullivan & Worcester LLP
12 Tax Opinion and Consent of Sullivan & Worcester LLP
14 Consent of Ernst & Young LLP
16 Powers of Attorney
17 Form of Proxy
- --------------------
-82-
<PAGE>
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
TELEPHONE: 202-775-8190
FACSIMILE: 202-293-2275
767 THIRD AVENUE ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109
TELEPHONE: 212-486-8200 TELEPHONE: 617-338-2800
FACSIMILE: 212-758-2151 FACSIMILE: 617-338-2880
April 9, 1998
Evergreen Select Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
We have been requested by the Evergreen Select Equity Trust, a Delaware
business trust with transferable shares (the "Trust") established under an
Agreement and Declaration of Trust dated September 18, 1997, as amended (the
"Declaration"), for our opinion with respect to certain matters relating to
Evergreen Select Strategic Growth Fund (the "Acquiring Fund"), a series of the
Trust. We understand that the Trust is about to file a Registration Statement on
Form N-14 for the purpose of registering shares of the Trust under the
Securities Act of 1933, as amended (the "1933 Act"), in connection with the
proposed acquisition by the Acquiring Fund of all of the assets of Growth Income
Fund (the "Acquired Fund"), a series of CoreFunds, Inc., a Maryland corporation
with transferable shares, in exchange solely for shares of the Acquiring Fund
and the assumption by the Acquiring Fund of the identified liabilities of the
Acquired Fund pursuant to an Agreement and Plan of Reorganization, the form of
which is included in the Form N-14 Registration Statement (the "Plan").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either certified or
otherwise proved to be genuine to our satisfaction, of the Trust's Declaration
and By-Laws, and other documents relating to its organization, operation, and
proposed operation, including the proposed Plan and we have made such other
investigations as, in our judgment, are necessary or appropriate to enable us to
render the opinion expressed below.
We are admitted to the Bars of The Commonwealth of Massachusetts and
the District of Columbia and generally do not purport to be familiar with the
laws of the State of Delaware. To the extent that the conclusions based on the
laws of the State
<PAGE>
of Delaware are involved in the opinion set forth herein below, we have relied,
in rendering such opinions, upon our examination of Chapter 38 of Title 12 of
the Delaware Code Annotated, as amended, entitled "Treatment of Delaware
Business Trusts" (the "Delaware business trust law") and on our knowledge of
interpretation of analogous common law of The Commonwealth of Massachusetts.
Based upon the foregoing, and assuming the approval by shareholders of
the Acquired Fund of certain matters scheduled for their consideration at a
meeting presently anticipated to be held on July 17, 1998, it is our opinion
that the shares of the Acquiring Fund currently being registered, when issued in
accordance with the Plan and the Trust's Declaration and By-Laws, will be
legally issued, fully paid and non-assessable by the Trust, subject to
compliance with the 1933 Act, the Investment Company Act of 1940, as amended and
applicable state laws regulating the offer and sale of securities.
We hereby consent to the filing of this opinion with and as a part of
the Registration Statement on Form N-14 and to the reference to our firm under
the caption "Legal Matters" in the Prospectus/Proxy Statement filed as part of
the Registration Statement. In giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under Section 7
of the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/SULLIVAN & WORCESTER LLP
---------------------------
SULLIVAN & WORCESTER LLP
<PAGE>
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
TELEPHONE: 202-775-8190
FACSIMILE: 202-293-2275
767 THIRD AVENUE ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109
TELEPHONE: 212-486-8200 TELEPHONE: 617-338-2800
FACSIMILE: 212-758-2151 FACSIMILE: 617-338-2880
April 9, 1998
Growth Equity Fund
Evergreen Select Strategic Growth Fund
200 Berkeley Street
Boston, Massachusetts 02116
Re: Acquisition of Assets of Growth Equity Fund by
Evergreen Select Strategic Growth Fund
Ladies and Gentlemen:
You have asked for our opinion as to certain Federal income tax
consequences of the transactions described below:
Parties to the Transaction. Growth Equity Fund ("Target Fund") is a
series of CoreFunds, Inc., a Maryland corporation.
Evergreen Select Strategic Growth Fund ("Acquiring Fund") is
a series of Evergreen Select Equity Trust, a Delaware business
trust.
Description of Proposed Transaction. Acquiring Fund will issue its
shares to Target Fund and assume certain stated liabilities of Target Fund, in
exchange for all of the assets of Target Fund. Target Fund will then immediately
dissolve and distribute all of the Acquiring Fund shares which it holds to its
shareholders pro rata in proportion to their shareholdings in Target Fund, in
complete redemption of all outstanding shares of Target Fund.
Scope of Review and Assumptions. In rendering our opinion, we have
reviewed and relied upon the form of Agreement and Plan of Reorganization (the
"Reorganization Agreement") between Acquiring Fund and Target Fund to be dated
as of April 15, 1998 which is enclosed in a draft preliminary prospectus/proxy
statement to be filed with the United States Securities and Exchange Commission
on or about April 9, 1998 which describes the proposed transaction, and on the
information provided in such prospectus/proxy statement. We have relied, without
independent verification, upon the factual statements made therein, and assume
that there will be no change in material facts disclosed
<PAGE>
therein between the date of this letter and the date of the closing of the
transaction. We further assume that the transaction will be carried out in
accordance with the Reorganization Agreement.
Representations. Written representations, copies of which are attached
hereto, have been made to us by the appropriate officers of Target Fund and of
Acquiring Fund, and we have without independent verification relied upon such
representations in rendering our opinions.
Opinions
Based on and subject to the foregoing, and our examination of the legal
authority we have deemed to be relevant, we have the following opinions:
1. The acquisition by Acquiring Fund of all of the assets of Target
Fund solely in exchange for voting shares of Acquiring Fund and assumption of
certain specified liabilities of Target Fund followed by the distribution by
Target Fund of said Acquiring Fund shares to the shareholders of Target Fund in
exchange for their Target Fund shares will constitute a reorganization within
the meaning of ss. 368(a)(1)(C) of the Code, and Acquiring Fund and Target Fund
will each be "a party to a reorganization" within the meaning of ss. 368(b) of
the Code.
2. No gain or loss will be recognized to Target Fund upon the transfer
of all of its assets to Acquiring Fund solely in exchange for Acquiring Fund
voting shares and assumption by Acquiring Fund of certain specified liabilities
of Target Fund, or upon the distribution of such Acquiring Fund voting shares to
the shareholders of Target Fund in exchange for all of their Target Fund shares.
3. No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Target Fund solely in exchange for Acquiring Fund
voting shares and assumption by Acquiring Fund of any liabilities of Target
Fund.
4. The basis of the assets of Target Fund acquired by Acquiring Fund
will be the same as the basis of those assets in the hands of Target Fund
immediately prior to the transfer, and the holding period of the assets of
Target Fund in the hands of Acquiring Fund will include the period during which
those assets were held by Target Fund.
5. The shareholders of Target Fund will recognize no gain or loss upon
the exchange of all of their Target Fund shares solely for Acquiring Fund voting
shares.
6. The basis of the Acquiring Fund voting shares to be received by the
Target Fund shareholders will be the same as the basis of the Target Fund shares
surrendered in exchange therefor.
7. The holding period of the Acquiring Fund voting shares to be
received by the Target Fund shareholders will include the
<PAGE>
period during which the Target Fund shares surrendered in exchange therefor were
held, provided the Target Fund shares were held as a capital asset on the date
of the exchange.
This opinion letter is delivered to you in satisfaction of the
requirements of Section 8.6 of the Reorganization Agreement. We hereby consent
to the filing of this opinion as an exhibit to the Registration Statement on
Form N-14 and to use of our name and any reference to our firm in such
Registration Statement or in the Prospectus/Proxy Statement constituting a part
thereof. In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/Sullivan & Worcester LLP
---------------------------
SULLIVAN & WORCESTER LLP
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Financial Statements
and Experts" in the Prospectus/Proxy Statement and to the incorporation by
reference to the Registration Statement on Form N-14AE and related
Prospectus/Proxy Statement of Evergreen Select Equity Trust (Evergreen Select
Strategic Growth Fund), of this reference and of our report dated August 12,
1997 on the CoreFunds, Inc. Growth Equity Fund.
/s/ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 6, 1998
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Charles A. Austin III Trustee
- ------------------------
Charles A. Austin III
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Russell A. Salton, III M.D. Trustee
- ------------------------------
Russell A. Salton, III M.D.
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/K. Dun Gifford Trustee
- -----------------
K. Dun Gifford
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Laurence B. Ashkin Trustee
- ---------------------
Laurence B. Ashkin
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/William Walt Pettit Trustee
- ----------------------
William Walt Pettit
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/James S. Howell Trustee
- ------------------
James S. Howell
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Leroy Keith, Jr. Trustee
- -------------------
Leroy Keith, Jr.
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Gerald M. McDonnell Trustee
- ----------------------
Gerald M. McDonnell
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Thomas L. McVerry Trustee
- --------------------
Thomas L. McVerry
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/David M. Richardson Trustee
- ----------------------
David M. Richardson
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Richard J. Shima Trustee
- -------------------
Richard J. Shima
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
27, 1998.
Signature Title
/s/Michael S. Scofield Trustee
- ----------------------
Michael S. Scofield
<PAGE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE TODAY!
Please detach at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
GROWTH EQUITY FUND, a series of
CoreFunds, Inc.
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 17, 1998
The undersigned, revoking all Proxies heretofore given, hereby appoints
Mark Stalnecker, Kevin Robins, Gordon Forrester, Michael E. Koonce and Maureen
E. Towle or any of them as Proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all shares of Growth Equity
Fund, a series of CoreFunds, Inc. ("CoreFunds Growth") that the undersigned is
entitled to vote at the special meeting of shareholders of CoreFunds Growth to
be held at 2:00 p.m. on Friday, July 17, 1998 at the offices of the Evergreen
Funds, 200 Berkeley Street, 26th Floor, Boston, Massachusetts 02116 and at any
adjournments thereof, as fully as the undersigned would be entitled to vote if
personally present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR ON THIS PROXY. If joint owners,
EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee,
guardian, or custodian for a minor, please
give your full title. When signing on behalf
of a corporation or as a partner for a
partnership, please give the full corporate
or partnership name and your title, if any.
Date , 1998
----------------------------------------
----------------------------------------
Signature(s) and Title(s), if applicable
-1-
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COREFUNDS,
INC. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO
BE TAKEN ON THE FOLLOWING PROPOSALS. THE SHARES REPRESENTED HEREBY WILL BE VOTED
AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE IS INDICATED. THE BOARD OF
DIRECTORS OF COREFUNDS, INC. RECOMMENDS A VOTE FOR THE PROPOSALS. PLEASE MARK
YOUR VOTE BELOW IN BLUE OR BLACK INK. DO NOT USE RED INK. EXAMPLE: X
1. To approve an Agreement and Plan of Reorganization whereby Evergreen
Select Strategic Growth Fund, a series of Evergreen Select Equity Trust, will
(i) acquire all of the assets of CoreFunds Growth in exchange for shares of
Evergreen Select Strategic Growth Fund; and (ii) assume the identified
liabilities of CoreFunds Growth, as substantially described in the accompanying
Prospectus/Proxy Statement.
- ---- FOR ---- AGAINST ---- ABSTAIN
2. To approve the proposed Interim Investment Advisory Agreement with
CoreStates Investment Advisers, Inc.
- ---- FOR ---- AGAINST ---- ABSTAIN
3. To consider and vote upon such other matters as may properly come
before said meeting or any adjournments thereof.
- ---- FOR ---- AGAINST ---- ABSTAIN
-2-
<PAGE>
