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 EQUITY TRUST
EVERGREEN FOUNDATION 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.
Keystone Investment Management Company
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- 37453); 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 March 31, 1998 will be filed with the Commission
on or about July 29, 1998.
It is proposed that this filing will become effective on June 1, 1998
pursuant to Rule 488 of the Securities Act of 1933.
<PAGE>
EVERGREEN EQUITY TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
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
Foundation Fund dated April 1,
1997, as amended July 1, 1997
and supplemented January 30,
1998
13. Additional Information Statement of Additional
about the Company Being Information of CoreFunds, Inc.
Acquired - Balanced Fund dated November
1, 1997
14. Financial Statements Financial Statements dated
March 31, 1998 of Evergreen
Foundation Fund; Financial
Statements of CoreFunds, Inc.
- Balanced Fund dated June 30,
1997 and December 31, 1997
(unaudited)
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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
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<PAGE>
COREFUNDS, INC.
BALANCED 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 Balanced 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 Foundation Fund in exchange for either Class A, Class B or Class Y
shares of Evergreen Foundation Fund and the assumption by Evergreen Foundation
Fund of the identified liabilities of the Fund. You will receive shares of
Evergreen Foundation Fund having an aggregate net asset value equal to the
aggregate net asset value of your Fund shares. Details about Evergreen
Foundation 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 complete the
proxy card or vote by telephone are included immediately after the Notice of
Special Meeting.
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<PAGE>
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 14, 1998 PRELIMINARY COPY]
COREFUNDS, INC.
BALANCED 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 Balanced 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 Foundation Fund, a series of Evergreen
Equity Trust, ("Evergreen Foundation") in exchange for shares of Evergreen
Foundation and the assumption by Evergreen Foundation of the identified
liabilities of the Fund. The Plan also provides for distribution of these shares
of Evergreen Foundation 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
BALANCED FUND
a series of
CoreFunds, Inc.
530 East Swedesford Road
Wayne, Pennsylvania 19087
By and in Exchange for Shares of
EVERGREEN FOUNDATION FUND
a series of
Evergreen Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Balanced Fund ("CoreFunds Balanced") in connection with a proposed Agreement and
Plan of Reorganization (the "Plan") to be submitted to shareholders of CoreFunds
Balanced 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 Balanced
to be acquired by Evergreen Foundation Fund ("Evergreen Foundation") in exchange
for shares of Evergreen Foundation and the assumption by Evergreen Foundation of
the identified liabilities of CoreFunds Balanced (hereinafter referred to as the
"Reorganization"). Evergreen Foundation and CoreFunds Balanced are sometimes
hereinafter referred to individually as the "Fund" and collectively as the
"Funds." Following the Reorganization, shares of Evergreen Foundation will be
distributed to shareholders of CoreFunds Balanced in liquidation of CoreFunds
Balanced and such Fund will be terminated. Holders of Class A shares of
CoreFunds Balanced will receive Class A shares of Evergreen Foundation, holders
of Class B shares of CoreFunds Balanced will receive shares of Class B shares of
Evergreen Foundation, and holders of Class Y shares of CoreFunds Balanced will
receive Class Y shares of Evergreen Foundation. Each such class of shares of
Evergreen Foundation has the same Rule 12b-1 distribution- related fees, if any,
as the shares of the respective class of CoreFunds Balanced held by them prior
to the Reorganization. No sales charge will be imposed in connection with Class
A shares of Evergreen Foundation received by holders of Class A shares of
CoreFunds Balanced. In addition, no contingent deferred sales charge ("CDSC")
will be deducted at the time of the Reorganization in connection with Class B
shares of Evergreen Foundation received by holders of CoreFunds Balanced.
Holders of Class B shares of Evergreen Foundation received in the Reorganization
will be subject to the schedule of CDSCs currently applicable to the Class B
shares
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<PAGE>
of CoreFunds Balanced and not the schedule of CDSCs applicable to Class B shares
of Evergreen Foundation. As a result of the proposed Reorganization,
shareholders of CoreFunds Balanced will receive that number of full and
fractional shares of Evergreen Foundation having an aggregate net asset value
equal to the aggregate net asset value of such shareholder's shares of CoreFunds
Balanced. The Reorganization is being structured as a tax-free reorganization
for federal income tax purposes.
Evergreen Foundation is a separate series of Evergreen Equity Trust, an
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The investment objectives of Evergreen
Foundation, in order of priority, are reasonable income, conservation of capital
and capital appreciation. The investment objective of CoreFunds Balanced is to
provide total return while preserving capital. Each Fund invests primarily in
the same types of securities. See "Investment Objectives and Policies of the
Funds" under the Summary and "Comparison of Investment Objectives and Policies"
for a discussion of the similarities and differences between the Funds'
investment policies.
Shareholders of CoreFunds Balanced 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 Balanced 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 Foundation that
shareholders of CoreFunds Balanced 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 Foundation dated March 31, 1998
and of CoreFunds Balanced 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 Foundation
at 200 Berkeley Street, Boston, Massachusetts 02116 or by calling toll-free
1-800-343-2898.
The two Prospectuses of Evergreen Foundation dated July 1, 1997, as
supplemented January 23,1998, and its Annual Report for the
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<PAGE>
fiscal year ended March 31, 1998 are incorporated herein by reference in their
entirety, insofar as they relate to Evergreen Foundation only, and not to any
other fund described therein. The Prospectuses, which pertain (i) to Class A,
Class B and Class C shares and (ii) to Class Y shares, differ only insofar as
they describe the separate distribution and shareholder servicing arrangements
applicable to the classes. Shareholders of CoreFunds Balanced will receive, with
this Prospectus/Proxy Statement, copies of the Prospectus pertaining to the
class of shares of Evergreen Foundation that they will receive as a result of
the consummation of the Reorganization. Additional information about Evergreen
Foundation is contained in its Statement of Additional Information dated April
1, 1997, as amended July 1, 1997 and supplemented January 30, 1998, which has
been filed with the SEC and which is available upon request and without charge
by writing to or calling Evergreen Foundation at the address or telephone number
listed in the preceding paragraph.
The two Prospectuses of CoreFunds Balanced which pertain (i) as
applicable, to Class A, Class B and Class C shares (Individual shares) and (ii)
to Class Y shares (Institutional shares) dated November 1, 1997, insofar as they
relate to CoreFunds Balanced 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 SemiAnnual
Report for the six month period ended December 31, 1997, are available upon
request without charge by writing to CoreFunds Balanced 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.
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<PAGE>
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
Administrator ...........16
Portfolio Management ...........16
Distribution of Shares ...........17
Purchase and Redemption Procedures ...........19
Exchange Privileges ...........19
Dividend Policy ...........19
Risks ...........20
REASONS FOR THE REORGANIZATION..........................................23
Agreement and Plan of Reorganization ...........26
Federal Income Tax Consequences ...........28
Pro-forma Capitalization ...........30
Shareholder Information ...........31
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES........................32
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS.........................34
Forms of Organization ...........34
Capitalization ...........35
Shareholder Liability ...........36
Shareholder Meetings and Voting Rights ...........36
Liquidation or Dissolution ...........37
Liability and Indemnification of Trustees ...........37
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT....................39
Introduction ...........39
Comparison of the Interim Advisory Agreement and
the Previous Advisory Agreement ...........40
Information About CoreFunds Balanced's Investment
Adviser ...........41
ADDITIONAL INFORMATION..................................................41
VOTING INFORMATION CONCERNING THE MEETING...............................42
FINANCIAL STATEMENTS AND EXPERTS........................................45
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<PAGE>
LEGAL MATTERS...........................................................46
OTHER BUSINESS..........................................................46
APPENDIX A..............................................................48
EXHIBIT A
EXHIBIT B
EXHIBIT C
-8-
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COMPARISON OF FEES AND EXPENSES
The amounts for Class Y, Class A and Class B shares of Evergreen
Foundation set forth in the following tables and in the examples are based on
the expenses of Evergreen Foundation for the period ended March 31, 1998. The
amounts for Class Y and Class A shares of CoreFunds Balanced set forth in the
following tables and in the examples are based on the expenses for CoreFunds
Balanced for the fiscal year ended June 30, 1997 and the amounts for Class B
shares are based on the estimated expenses for the fiscal year ending June 30,
1998. The pro forma amounts for Class Y, Class A and Class B shares of Evergreen
Foundation are based on what the combined expenses would have been for Evergreen
Foundation for the fiscal year ending March 31, 1998. All amounts are adjusted
for voluntary expense waivers.
The following tables show for Evergreen Foundation, CoreFunds Balanced
and Evergreen Foundation pro forma, assuming consummation of the Reorganization,
the shareholder transaction expenses and annual fund operating expenses
associated with an investment in the Class Y, Class A and Class B shares of each
Fund.
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<PAGE>
Comparison of Class Y, Class A and Class B Shares
of Evergreen Foundation With Class Y,
Class A and Class B Shares of CoreFunds Balanced
<TABLE>
<CAPTION>
Evergreen CoreFunds
Foundation Balanced
<S> <C> <C> <C> <C> <C> <C>
Class Y Class A Class B Class Y Class A Class B
Shareholder
Transaction
Expenses
Maximum Sales None 4.75% None None 5.50% None
Load Imposed
on Purchases
(as a
percentage of
offering
price)
Maximum Sales None None None None None None
Load Imposed
on Reinvested
Dividends (as
a percentage
of offering
price)
Contingent None None 5.00% in None None 5.00% in
Deferred Sales the first the first
Charge (as a year, year,
percentage of declining declining
original to 1.00% to 1.00%
purchase price in the in the
or redemption sixth fifth
proceeds, year and year and
whichever is 0.00% 0.00%
lower) there- there-
after after
Exchange Fee None None None None None None
Annual
Operating
Expenses (as a
percentage of
average daily
net assets)
Management Fee 0.77% 0.77% 0.77% 0.58% 0.58% 0.58%
(After Waiver)
(1)
12b-1 Fees(2) None 0.25% 1.00% None 0.25% 1.00%
Other Expenses 0.26% 0.26% 0.26% 0.20% 0.20% 0.20%
(After
Waiver)(3)
Annual Fund 1.03% 1.28% 2.03% 0.78% 1.03% 1.78%
Operating
Expenses(4)
(3)
(4(( (
</TABLE>
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<PAGE>
Evergreen Foundation Pro Forma
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shareholder Transaction
Expenses Class Y Class A Class B
Maximum Sales Load Imposed None 4.75% None
on Purchases (as a
percentage of offering
price)
Maximum Sales Load Imposed None None None
on Reinvested Dividends (as
a percentage of offering
price)
Contingent Deferred Sales None None 5.00% in
Charge (as a percentage of the first
original purchase price or year,
redemption proceeds, declining
whichever is lower) to 1.00%
in the
sixth year
and 0.00%
thereafter
Exchange Fee None None None
Annual Fund Operating
Expenses (as a percentage
of average daily net
assets)
Management Fee After Waiver 0.74% 0.74% 0.74%
12b-1 Fees(2) None 0.25% 1.00%
Other Expenses After Waiver 0.26% 0.26% 0.26%
-------- ---------- --------
Annual Fund Operating
Expenses (4) 1.00% 1.25% 2.00%
====== ======= =======
</TABLE>
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(1) The management fee for CoreFunds Balanced has been reduced from 0.70%
of average daily net assets to reflect the voluntary waiver by the
investment adviser. This voluntary waiver can be terminated at any
time.
(2) Class A shares of Evergreen Foundation can pay up to 0.75% of average
daily net assets as a 12b-1 fee. For the foreseeable future, the Class
A 12b-1 fees will be limited to 0.25% of average daily net assets.
(3) Absent voluntary waivers by CoreFunds Balanced's administrator, Other
Expenses would have been 0.30% of average daily net assets.
(4) The investment adviser of Evergreen Foundation has undertaken
to limit the Fund's Annual Fund Operating Expenses for a period
of at least two years to 1.00%, 1.25% and 2.00% for Class Y,
Class A and Class B shares, respectively. Absent the
management fee waiver and the limitation on Annual Fund
Operating Expenses, such expenses for the fiscal period ending
March 31, 1998 would have been 1.02%, 1.27% and 2.02%,
respectively of the average daily net assets of the Fund's
Class Y, Class A and Class B shares, respectively. Annual Fund
Operating Expenses for the Class Y and Class A shares of
CoreFunds Balanced would have been 1.00% and 1.25% for the
year ended June 30, 1997, absent expense waivers.
Examples. The following tables show for Evergreen Foundation and
CoreFunds Balanced, and for Evergreen Foundation 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 of each Fund, no redemption at the end of
each period. In the case of Evergreen Foundation pro forma, the examples do not
reflect the imposition of the 4.75% maximum sales load on purchases since
CoreFunds Balanced shareholders who receive Class A shares of Evergreen
Foundation in the Reorganization will not incur any sales load.
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<PAGE>
Evergreen Foundation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Year Three Five Ten Years
Years Years
Class Y $11 $33 $57 $126
Class A $60 $86 $114 $195
Class B (Assuming $71 $94 $129 $207
redemption at end
of period)
Class B (Assuming $21 $64 $109 $207
no redemption at
end of period)
</TABLE>
CoreFunds Balanced
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Five
One Year Years Years Ten Years
Class Y $8 $25 $43 $97
Class A $65 $86 $109 $174
Class B (Assuming $18 $56 $96 $171
no redemption at
end of period)
Class B (Assuming $68 $86 $106 $171
redemption at end
of period)
</TABLE>
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<PAGE>
Evergreen Foundation Pro Forma
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Five
One Year Years Years Ten Years
Class Y $10 $32 $55 $122
Class A $13 $40 $69 $151
Class B $70 $93 $128 $195
(assuming
redemption at
end of period)
Class B $20 $63 $108 $195
(assuming no
redemption at
end of period)
</TABLE>
The purpose of the foregoing examples is to assist CoreFunds Balanced
shareholders in understanding the various costs and expenses that an investor in
Evergreen Foundation 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 Balanced. 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 Foundation dated January 23, 1998 and the
Prospectuses of CoreFunds Balanced 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.
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<PAGE>
Proposed Plan of Reorganization
The Plan provides for the transfer of all of the assets of CoreFunds
Balanced in exchange for shares of Evergreen Foundation and the assumption by
Evergreen Foundation of the identified liabilities of CoreFunds Balanced. 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
Foundation to CoreFunds Balanced shareholders in liquidation of CoreFunds
Balanced as part of the Reorganization. As a result of the Reorganization, the
holders of Class A, Class B and Class Y shares of CoreFunds Balanced will become
the owners of that number of full and fractional Class A, Class B and Class Y
shares, respectively, of Evergreen Foundation having an aggregate net asset
value equal to the aggregate net asset value of the shareholders' shares of
CoreFunds Balanced, as of the close of business immediately prior to the date
that CoreFunds Balanced's assets are exchanged for shares of Evergreen
Foundation. 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 Balanced, and that the interests of the
shareholders of CoreFunds Balanced 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 Balanced's shareholders.
THE BOARD OF DIRECTORS OF COREFUNDS, INC.
RECOMMENDS APPROVAL BY SHAREHOLDERS OF COREFUNDS BALANCED
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Equity Trust have also approved the Plan and,
accordingly, Evergreen Foundation's participation in the Reorganization.
Approval of the Reorganization on the part of CoreFunds Balanced will
require the affirmative vote of a majority of CoreFunds Balanced'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, represented in person or by proxy, is required to constitute a
quorum at the Meeting. See "Voting Information Concerning the Meeting."
-15-
<PAGE>
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
Balanced. Prior to consummation of the Merger, CoreFunds Balanced received an
order from the SEC which permitted the implementation, without formal
shareholder approval, of a new interim 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 Balanced 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 Balanced present in person or
by proxy at the Meeting, if holders of more than 50% of the shares of CoreFunds
Balanced outstanding on the record date are present, in person or by proxy, or
(ii) more than 50% of the outstanding shares of CoreFunds Balanced, whichever is
less. See "Voting Information Concerning the Meeting."
If the shareholders of CoreFunds Balanced 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 Balanced
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 Foundation in the Reorganization. The holding
period and aggregate tax basis of shares of Evergreen Foundation that are
received by the Fund'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 Balanced in the hands of
Evergreen Foundation 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 Foundation upon the receipt of the assets
of the Fund in exchange for shares of Evergreen Foundation and the assumption by
Evergreen Foundation of the identified liabilities.
-16-
<PAGE>
Investment Objectives and Policies of the Funds
The investment objectives and policies of Evergreen Foundation and
CoreFunds Balanced are similar. Evergreen Foundation is classified as a balanced
fund in the Lipper rankings of mutual funds.
The investment objectives of Evergreen Foundation, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
The investment objective of CoreFunds Balanced is to provide total
return while preserving capital. The Fund invests in a combination of common
stocks, convertible securities, fixed income securities and short-term
obligations.
Under normal conditions, the Fund will invest a minimum of 25% of its
assets in senior fixed income securities and between 30% and 75% of its assets
in common stocks. CoreFunds Balanced may also invest in U.S. dollar denominated
securities of foreign issuers (including ADRs).
In managing CoreFunds Balanced, CSIA combines separate equity, fixed
income and asset allocation strategies. Long-term growth is pursued through
equity holdings, and current income through fixed income securities and common
stock dividends. The asset allocation strategy shifts the stock/fixed
income/money market instrument mix based on its judgment of the relative
attractiveness of these markets and securities.
-17-
<PAGE>
CoreFunds Balanced strives to provide a return greater than indices
such as the Lipper Balanced Fund Average.
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 table sets forth, as applicable, the total return of the
Class Y, Class A and Class B shares of Evergreen Foundation for the one and five
year periods ended March 31, 1998 for CoreFunds Balanced for the one year period
ended March 31, 1998 and 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.
Average Annual Total Return (1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 5 Years From
Ended Ended Inception
March 31, March 31, To March Inception
1998 1998 31, 1998 Date
------- ------- --------- ---------
Evergreen
Foundation
Class A 27.52% N/A 20.64% 1/3/95
shares
Class B 27.81% N/A 20.92% 1/3/95
shares
Class Y 34.12% 15.72 17.83% 1/2/90
shares
CoreFunds
Balanced
Class A 23.11% 12.03% 12.06% 3/16/93
shares
Class B N/A N/A 12.55% 11/6/97
shares
Class Y 30.64% 13.59% 13.69% 1/4/93
shares
- --------------
</TABLE>
-18-
<PAGE>
(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.
Important information about Evergreen Foundation is also contained in
management's discussion of Evergreen Foundation's performance, attached hereto
as Exhibit C. This information also appears in Evergreen Foundation's most
recent Annual Report.
Management of the Funds
The overall management of Evergreen Foundation and of CoreFunds
Balanced is the responsibility of, and is supervised by, the Board of Trustees
of Evergreen Equity Trust and the Board of Directors of CoreFunds, Inc.,
respectively.
Investment Advisers
The investment adviser to Evergreen Foundation Fund is
Evergreen Asset Management Corp. ("Evergreen Asset"). Evergreen
Asset is located at 2500 Westchester Avenue, Purchase, New York
10577 and is a subsidiary of First Union Corporation ("First
Union").
First Union is located at 201 South College Street, Charlotte, North
Carolina 28288-0630. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses throughout the United States.
As investment adviser to Evergreen Foundation Fund, Evergreen Asset
manages the Fund's investments, provides various administrative services and
supervises the Fund's daily business affairs, subject to the authority of the
Trustees. Evergreen Asset is entitled to receive from Evergreen Foundation a fee
equal to 0.875 of 1% of average daily net assets on an annual basis on the first
$750 million in assets, 0.75 of 1% of average daily net assets on an annual
basis on the next $250 million in assets, and 0.70 of 1% of average daily net
assets on an annual basis on assets over $1 billion.
CSIA serves as the investment adviser for CoreFunds Balanced. 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 0.70% 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
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<PAGE>
order to reduce its expense ratios. Each investment adviser may reduce or cease
these voluntary waivers and reimbursements at any time.
Sub-Adviser
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolio of
Evergreen Foundation. Lieber & Company will be reimbursed by Evergreen Asset in
connection with the rendering of services on the basis of the direct and
indirect costs of performing such services. There is no additional charge to
Evergreen Foundation for the services provided by Lieber & Company. The address
of Lieber & Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber
& Company is an indirect, wholly-owned, subsidiary of First Union.
Administrator
SEI Fund Resources ("SEI") acts as the administrator for CoreFunds
Balanced 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
Stephen A. Lieber is the portfolio manager for Evergreen
Foundation. Mr. Lieber is Chairman and Co-Chief Executive Officer
of Lieber & Co. and Evergreen Asset Management Corp. He was the
founding Partner of Lieber & Co. in 1969 and served as Senior
Partner until June, 1994. He is Portfolio Manager of Evergreen Fund,
Evergreen Foundation Fund and Evergreen Tax Strategic Foundation
Fund. He was a founding General Partner of Vanden Broeck, Lieber &
Co. from 1956 to 1969.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund
Services, acts as underwriter of Evergreen Foundation's shares. EDI distributes
the Fund's shares directly or through broker-dealers, banks (including FUNB), or
other financial intermediaries. Evergreen Foundation offers four classes of
shares: Class A, Class B, Class C and Class Y. 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.
-20-
<PAGE>
In the proposed Reorganization, Class Y shareholders of CoreFunds
Balanced will receive Class Y shares of Evergreen Foundation, Class A
shareholders of CoreFunds Balanced will receive Class A shares of Evergreen
Foundation and Class B shares of CoreFunds Balanced Fund will receive Class B
shares of Evergreen Foundation Fund. The Class Y, Class A and Class B shares of
Evergreen Foundation have substantially similar 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 Balanced. Because the Reorganization will be
effected at net asset value without the imposition of a sales charge, Evergreen
Foundation shares acquired by shareholders of CoreFunds Balanced pursuant to the
proposed Reorganization would not be subject to any initial sales charge or CDSC
as a result of the Reorganization. However, Class B shares acquired as a result
of the Reorganization could continue to be subject to a CDSC upon subsequent
redemption to the same extent as if shareholders had continued to hold their
shares of CoreFunds Balanced. The CDSC applicable to Class B shares of Evergreen
Foundation received in the Reorganization will be the CDSC schedule of CoreFunds
Balanced in effect at the time Class B shares of CoreFunds Balanced were
originally purchased.
The following is a summary description of charges and fees for the
Class Y, Class A and Class B shares of Evergreen Foundation which will be
received by CoreFunds Balanced shareholders in the Reorganization. More detailed
descriptions of the distribution arrangements applicable to the classes of
shares are contained in the respective Evergreen Foundation Prospectuses and the
CoreFunds Balanced Prospectuses and in each Fund's Statement of Additional
Information.
Class Y Shares. Class Y shares are sold at net asset value without any
initial or deferred sales charge and are not subject to distribution-related
fees. Class Y shares are only available to (i) all shareholders of record in one
or more of the Evergreen family of funds for which Evergreen Asset serves as
investment adviser as of December 30, 1994, (ii) certain institutional investors
and (iii) investment advisory clients of FUNB, Evergreen Asset or their
affiliates. CoreFunds Balanced shareholders who receive Evergreen Foundation
Class Y shares in the Reorganization who wish to make subsequent purchases of
Evergreen Foundation shares will be able to purchase Class Y shares.
Class A Shares. Class A shares are sold at net asset value plus an
initial sales charge and, as indicated below, are subject to
distribution-related fees. For a description of the initial sales charges
applicable to purchases of Class A shares, see "Purchase and Redemption of
Shares - How to Buy Shares" in the applicable
-21-
<PAGE>
Prospectus for Evergreen Foundation. No sales charge will be imposed on Class A
shares of Evergreen Foundation received by CoreFunds Balanced's shareholders in
the Reorganization.
Class B Shares. Class B shares are sold without an initial sales charge
but are subject to a CDSC, which ranges from 5% to 1%, if shares are redeemed
during the first six years after the month of purchase. In addition, Class B
shares are subject to distribution- related fees and shareholder
servicing-related fees as described below. Class B shares issued in the
Reorganization will automatically convert to Class A shares after six years in
accordance with the terms of conversion applicable to Class B shares of
CoreFunds Balanced rather than in seven years after the month of purchase in
accordance with the conversion terms applicable to Class B shares of Evergreen
Foundation. For purposes of determining when Class B shares issued in the
Reorganization to shareholders of CoreFunds Balanced will convert to Class A
shares, such shares will be deemed to have been purchased as of the date Class B
shares of CoreFunds Balanced were originally purchased.
Class B shares are subject to higher distribution-related fees that the
corresponding Class A shares on which a front-end sales charge is imposed (until
they convert to Class A shares). The higher fees mean a higher expense ratio, so
Class B shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares of the Fund.
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectuses and Statement of Additional Information.
Distribution-Related and Shareholder Servicing-Related Expenses.
Evergreen Foundation has adopted a Rule 12b-1 plan with respect to its Class A
shares under which the Class may pay for distribution-related expenses at an
annual rate which may not exceed 0.75% of average daily net assets attributable
to the Class. Payments with respect to Class A shares are currently limited to
0.25% of average daily net assets attributable to the Class. This amount may be
increased to the full plan rate for the Fund by the Trustees without shareholder
approval.
CoreFunds Balanced has adopted a Rule 12b-1 plan with respect to its
Class A shares under which the Class may pay for distribution-related expenses
at an annual rate of 0.25% of average daily net assets attributable to the
Class.
CoreFunds Balanced has adopted a Rule 12b-1 plan with respect to its
Class Y shares.
-22-
<PAGE>
Each of CoreFunds Balanced and Evergreen Foundation have also adopted a
Rule 12b-1 plan with respect to Class B shares under which the Class may pay for
distribution-related and shareholder servicing-related expenses at an annual
rate which may not exceed 1.00% of average daily net assets attributable to the
Class.
The Class B Rule 12b-1 plans of each Fund provide that, of the total
1.00% 12b-1 fees, up to 0.25% may be for payment in respect of "shareholder
services." [Consistent with the requirements of Rule 12b-1 and the applicable
rules of the National Association of Securities Dealers, Inc. ("NASD"),
following the Reorganization Evergreen Foundation may make distribution-related
and shareholder servicing-related payments with respect to CoreFunds Balanced
shares sold prior to the Reorganization including payments to CoreFunds Equity's
former underwriter.]
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 Foundation is
$1,000. The minimum initial purchase requirement for Class A, Class B and Class
Y shares of CoreFunds Balanced 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. Each
Fund may involuntarily redeem shareholders' accounts: less than $1,000 for
Evergreen Foundation and $500 for CoreFunds Balanced of invested funds. All
funds invested in each Fund are invested in full and fractional shares. The
Funds reserve the right to reject any purchase order.
-23-
<PAGE>
Exchange Privileges
CoreFunds Balanced currently permits holders of Class A and Class B
shares to exchange such shares for the same Class of another CoreFunds, Inc.
portfolio. Exchanges of Class Y shares are generally not permitted. Holders of
shares of a class of Evergreen Foundation generally may exchange their shares
for shares of the same class of any other Evergreen fund. CoreFunds Balanced
shareholders will be receiving Class Y, Class A and Class B shares of Evergreen
Foundation in the Reorganization and, accordingly, with respect to shares of
Evergreen Foundation received by CoreFunds Balanced shareholders in the
Reorganization, the exchange privilege is limited to the Class Y, Class A and
Class B shares, as applicable, of other Evergreen funds. Evergreen Foundation
limits exchanges to five per calendar year and three per calendar quarter. No
sales charge is imposed on an exchange. An exchange which represents an initial
investment in another Evergreen fund must amount to at least $1,000. 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
Each Fund declares dividends and distributes its income dividends
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 Balanced who have
elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Evergreen Foundation reinvested in
shares of Evergreen Foundation. Shareholders of CoreFunds Balanced who have
elected to receive dividends and/or distributions in cash will receive dividends
and/or distributions from Evergreen Foundation 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 Foundation.
Each of Evergreen Foundation and CoreFunds Balanced has qualified and
intends to continue to qualify to be treated as a regulated investment company
under the Internal Revenue Code of
-24-
<PAGE>
1986, as amended (the "Code"). While so qualified, so long as each Fund
distributes all of its net investment company taxable 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."
Because CoreFunds Balanced invests in both stocks and fixed income
securities, it is subject to five primary types of risk:
Market Risk - The possibility that stock prices in general will decline
over short, or even extended periods of time. This is because stock markets tend
to be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a
specific period may not meet or exceed that of the stock market as a whole.
Interest Rate Risk - The potential for a decline in the price of fixed
income securities due to rising interest rates. This risks will be greater for
long-term securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make
timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates
will be prepaid (or 'called') by the issuer prior to maturity during periods of
falling interest rates. This would require the Fund to invest the resulting
proceeds elsewhere, at generally lower interest rates. It is also known as
Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities may
suffer substantial declines in credit quality and
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<PAGE>
market value due to corporate restructurings. While event risk may be high for
certain corporate securities held by the Fund, event risk in the aggregate
should be low because of the Fund's diversified holdings.
Special Risk Factors - The risk that mortgage-backed and asset- backed
securities may be retired substantially earlier that their stated maturities or
final distribution dates, resulting in a loss of all or part of any premium
paid.
Evergreen Foundation's portfolio securities may at times emphasize the
generation of interest income by investing in high-yielding debt securities,
with short, medium or long-term maturities. While fixed income investments will
generally be made for the purpose of generating interest income, investments in
medium to long-term debt securities (i.e., those with maturities from five to
ten years and those with maturities over ten years, respectively) may be made
with a view to realizing capital appreciation when the Fund's investment adviser
believes changes in interest rates will lead to an increase in the values of
such securities.
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 Balanced
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 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 present Directors including the non-interested
Directors considered and approved the Reorganization as in the best interests of
shareholders of CoreFunds Balanced and determined that the interests of existing
shareholders of CoreFunds Balanced 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 Balanced.
-26-
<PAGE>
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.
CoreFunds, Inc. has received an order from the SEC which permits CSIA to
continue to act as CoreFunds Balanced'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.
In approving the Plan, the Directors reviewed various factors about the
Funds and the proposed Reorganization. There are substantial similarities
between Evergreen Foundation and CoreFunds Balanced. Specifically, Evergreen
Foundation and CoreFunds Balanced 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 Balanced with Evergreen Foundation. As of December
31, 1997, Evergreen Foundation's net assets were approximately $2,299 million
and CoreFunds Balanced's net assets were approximately $127 million.
In addition, assuming that an alternative to the Reorganization would
be to propose that CoreFunds Balanced continue its existence and be separately
managed by FUNB or one of its affiliates, CoreFunds Balanced would be offered
through common distribution channels with the similar Evergreen Foundation.
CoreFunds Balanced 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 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 Foundation and CoreFunds
Balanced; (iv) the comparative performance records of each of the Funds; (v)
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<PAGE>
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 Balanced in
connection with the Reorganization; (x) the fact that Evergreen Foundation will
assume the identified liabilities of CoreFunds Balanced; and (xi) the expected
federal income tax consequences of the Reorganization.
The Directors also considered the benefits to be derived by
shareholders of CoreFunds Balanced from the sale of its assets to Evergreen
Foundation. 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
Balanced.
In addition, the Directors considered that there are alternatives
available to shareholders of CoreFunds Balanced, 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 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
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<PAGE>
Trustees of Evergreen 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 Foundation and that the interests of the shareholders
of Evergreen Foundation 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 Balanced's shareholders.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF COREFUNDS BALANCED 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 Foundation will acquire all of the
assets of CoreFunds Balanced in exchange for shares of Evergreen Foundation and
the assumption by Evergreen Foundation of the identified liabilities of
CoreFunds Balanced 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
Balanced will endeavor to discharge all of its known liabilities and
obligations. Evergreen Foundation will not assume any liabilities or obligations
of CoreFunds Balanced other than those reflected in an unaudited statement of
assets and liabilities of CoreFunds Balanced 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 Foundation to be received by the shareholders of
CoreFunds Balanced will be determined by multiplying the respective outstanding
class of shares of CoreFunds Balanced by a factor which shall be computed by
dividing the net asset value per share of the respective class of shares of
CoreFunds Balanced by the net asset value per share of the respective class of
shares of Evergreen Foundation. 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.
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<PAGE>
State Street Bank and Trust Company, the custodian for Evergreen
Foundation, 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 Foundation, 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 Balanced 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
Balanced 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 Foundation received by CoreFunds Balanced. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of the Fund's shareholders on Evergreen Foundation's share records of its
transfer agent. Each account will represent the respective pro rata number of
full and fractional shares of Evergreen Foundation due to the Fund's
shareholders. All issued and outstanding shares of CoreFunds Balanced, including
those represented by certificates, will be canceled. The shares of Evergreen
Foundation to be issued will have no preemptive or conversion rights. After
these distributions and the winding up of its affairs, CoreFunds Balanced will
be terminated. In connection with such termination, CoreFunds, Inc. will file
with the SEC an application for termination as a registered investment company.
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<PAGE>
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by CoreFunds Balanced'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
Balanced's shareholders, the Plan may be terminated (a) by the mutual agreement
of the parties; 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 Balanced 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 Balanced or its
shareholders.
If the Reorganization is not approved by shareholders of CoreFunds
Balanced, 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 Balanced 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 Balanced solely in
exchange for shares of Evergreen Foundation and the assumption by Evergreen
Foundation of the identified liabilities, followed by the distribution of
Evergreen Foundation's shares by CoreFunds Balanced in dissolution and
liquidation of CoreFunds Balanced, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and Evergreen Foundation and
CoreFunds Balanced will each be a "party to a reorganization" within the meaning
of section 368(b) of the Code;
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<PAGE>
(2) No gain or loss will be recognized by CoreFunds Balanced on the
transfer of all of its assets to Evergreen Foundation solely in exchange for
Evergreen Foundation's shares and the assumption by Evergreen Foundation of the
identified liabilities of CoreFunds Balanced or upon the distribution of
Evergreen Foundation's shares to CoreFunds Balanced's shareholders in exchange
for their shares of CoreFunds Balanced;
(3) The tax basis of the assets transferred will be the same to
Evergreen Foundation as the tax basis of such assets to CoreFunds Balanced
immediately prior to the Reorganization, and the holding period of such assets
in the hands of Evergreen Foundation will include the period during which the
assets were held by CoreFunds Balanced;
(4) No gain or loss will be recognized by Evergreen Foundation upon the
receipt of the assets from CoreFunds Balanced solely in exchange for the shares
of Evergreen Foundation and the assumption by Evergreen Foundation of the
identified liabilities of CoreFunds Balanced;
(5) No gain or loss will be recognized by CoreFunds Balanced's
shareholders upon the issuance of the shares of Evergreen Foundation to them,
provided they receive solely such shares (including fractional shares) in
exchange for their shares of CoreFunds Balanced; and
(6) The aggregate tax basis of the shares of Evergreen Foundation,
including any fractional shares, received by each of the shareholders of
CoreFunds Balanced pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares of CoreFunds Balanced held by such shareholder
immediately prior to the Reorganization, and the holding period of the shares of
Evergreen Foundation, including fractional shares, received by each such
shareholder will include the period during which the shares of CoreFunds
Balanced exchanged therefor were held by such shareholder (provided that the
shares of CoreFunds Balanced 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 Balanced
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
Foundation shares he or she received. Shareholders of CoreFunds Balanced 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
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<PAGE>
combined portfolio will be sold in significant amounts in order to comply with
the policies and investment practices of Evergreen Foundation. Since the
foregoing discussion relates only to the federal income tax consequences of the
Reorganization, shareholders of CoreFunds Balanced should also consult their tax
advisers as to the state and local tax consequences, if any, of the
Reorganization.
Capital loss carryforwards of CoreFunds Balanced will be available to
Evergreen Foundation 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 closing is an amount equal to the value of all of the
outstanding stock of CoreFunds Balanced 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 Balanced to Evergreen Foundation
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
Foundation and CoreFunds Balanced as of December 31, 1997, and the
capitalization of Evergreen Foundation 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 0.70539, 0.70576 and
0.70438 Class Y, Class A and Class B shares, respectively, of Evergreen
Foundation issued for each Class Y, Class A and Class B share, respectively, of
CoreFunds Balanced.
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<PAGE>
Capitalization of CoreFunds Balanced,
Evergreen Foundation and Evergreen
Foundation (Pro Forma)
<TABLE>
<CAPTION>
Evergreen
Foundation
(After
<S> <C> <C> <C>
CoreFunds Evergreen Reorgani-
Balanced Foundation zation)
---------- ---------- ----------
Net Assets
Class A $5,532,276 $304,984,012 $310,516,288
Class B $573,202 $936,617,892 $937,191,094
Class C N/A $40,905,109 $40,905,109
Class Y $121,301,461 $1,016,039,388 $1,137,340,849
------------ ----------- ------------
Total Net Assets $127,406,939 $2,298,546,401 $2,425,953,340
Net Asset Value
Per Share
Class A $13.60 $19.27 $19.27
Class B $13.51 $19.18 $19.18
Class C N/A $19.17 $19.17
Class Y $13.60 $19.28 $19.28
Shares
Outstanding
Class A 406,668 15,829,931 16,116,941
Class B 42,424 48,840,008 48,869,890
Class C N/A 2,133,479 2,133,479
Class Y 8,920,348 52,695,782 58,988,144
----------- --------- ----------
All Classes 9,369,440 119,499,200 126,108,454
</TABLE>
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<PAGE>
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 Balanced 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 Balanced. To CoreFunds, Inc.'s knowledge, the following persons owned
beneficially or of record more than 5% of CoreFunds Balanced's total outstanding
shares as of March 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percentage Percentage of
of Shares Shares of
of Class Class After
Before Reorgani-
No. of Reorgani- zation
Name and Address Class Shares zation ---------
- ---------------- ----- ------ ---------
Y 8,440,456 96.47% 10.07%
Patterson & Co.
PNB Personal
Trust Accounting
P.O. Box 7829
Philadelphia, PA
19101-7829
Percentage Percentage of
of Shares Shares of
of Class Class After
Before Reorgani-
No. of Reorgani- zation
Name and Address Class Shares zation ---------
- ---------------- ----- ------ ---------
Y 8,471,569 96.47% 10.11%
Patterson & Co.
PNB Personal
Trust Accounting
P.O. Box 7829
Philadelphia, PA
19101-7829
A 75,743 18.34% 0.31%
National
Financial
Services Corp.
200 Liberty St
4th Floor
1 World Financial
Center
New York, NY
10281-1003
A 21,913 5.31% 0.09%
Cherry L.
Woodburn POA
D. Dolores
Rininsland
3240 Hecktown
Road
Bethlehem, PA
18020-2008
B 6,863 12.22% 0.01%
Eugene J. Donegan
1367 Powell Rd.
Brookhaven, PA
19015-1928
B 3,464 6.17% 0.00%
CoreStates Bank
NA Cust for the
Rollover IRA of
Kathleen D.
Carberry
421 Sunset Ave.
Maple Shade, NJ
08052-2816
B 3,432 6.11% 0.00%
CoreStates Bank
NA Cust for the
IRA of Louise T.
Motozzo
625 Grove St.
Bridgeport, PA
19405-1305
B 3,011 5.36% 0.00%
Frederick W.
Achenback Jr.
Mary Ann
Achenbach JTTEN
211 Larchwood Rd.
Westchester, PA
19382-7325
</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.
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<PAGE>
The investment objective, policies and restrictions of Evergreen Foundation can
be found in the Prospectuses of Evergreen Foundation under the caption
"Investment Objectives and Policies." Evergreen Foundation'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
Balanced can be found in the respective Prospectuses of the Fund under the
caption "Balanced Fund - Summary Investment Objective and Portfolio
Investments." Unlike the investment objective of CoreFunds Balanced, which is
fundamental, the investment objective of Evergreen Foundation is non-fundamental
and can be changed by the Board of Trustees without shareholder approval.
The investment objectives of Evergreen Foundation Fund, in order of
priority, are reasonable income, conversation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The Fund may at times emphasize
the generation of interest income by investing in high-yielding debt securities,
with short, medium or long-term maturities. While fixed income investments will
generally be made for the purpose of generating interest income, investments in
medium to long-term debt securities (i.e., those with maturities from five to
ten years and those with maturities over ten years, respectively) may be made
with a view to realizing capital appreciation when the Fund's investment adviser
believes changes in
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<PAGE>
interest rates will lead to an increase in the values of such
securities.
The fixed income portfolio of the Fund's portfolio may include
marketable obligations of the U.S. government and its agencies and
instrumentalities. Corporate obligations rated no lower than A by Moody's
Investors Service ("Moody's") or A-2 by Standard & Poor's Ratings Service
("S&P"), obligations of banks with total assets of more than $2 billion which
are members of the Federal Deposit Insurance Corporation, commercial paper rated
no lower than A-2 by S&P or Prime-2 by Moody's or if not rated, issued by
companies which have an outstanding long-term debt issue rated AAA or AA by S&P,
or Aaa or Aa by Moody's.
The investment objective of CoreFunds Balanced is to seek to provide
total return while preserving capital by investing in a combination of common
stocks and fixed income securities.
CoreFunds Balanced invests in a combination of common stocks,
convertible securities, fixed income securities and short-term obligations.
Under normal conditions, the Fund will invest a minimum of 25% of its assets in
senior fixed income securities and between 30% and 75% of its assets in common
stocks. CoreFunds Balanced may also invest in U.S. dollar denominated securities
of foreign issuers.
In managing CoreFunds Balanced, CSIA combines separate equity, fixed
income and asset allocation strategies. Long-term growth is pursued through
equity holdings, and current income through fixed income securities and common
stock dividends. The asset allocation strategy shifts the stock/fixed
income/money market instrument mix based on its judgment of the relative
attractiveness of these markets and securities.
CoreFunds Balanced strives to provide a return greater than indices
such as the Lipper Balanced Fund Average.
CoreFunds Balanced may also purchase: ADRs, EDRs, and GDRs,
asset-backed securities, bank obligations, foreign securities, shares of other
investment companies, mortgage-backed securities, U.S. government obligations,
warrants and for temporary purpose may hold cash and long-term and short-term
debt instruments, rated A or higher.
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
-37-
<PAGE>
forth in the Prospectuses and Statements of Additional Information
of each Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen 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 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 Foundation is a series of Evergreen Equity Trust and
CoreFunds Balanced is a series of CoreFunds, Inc.
Capitalization
The beneficial interests in Evergreen Foundation 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 Balanced. Evergreen 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
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<PAGE>
other authority limiting business trust shareholder liability exists in any
other state. As a result, to the extent that Evergreen 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 Equity Trust to liability. To guard against this risk,
the Declaration of Trust of Evergreen 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 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 Equity Trust is remote.
Under Maryland law, shareholders of CoreFunds Balanced 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 Equity Trust on behalf of Evergreen Foundation nor
CoreFunds, Inc. on behalf of CoreFunds Balanced 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 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 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 Foundation, twenty-five
percent (25%) of the outstanding shares entitled to vote, and with respect to
CoreFunds Balanced, a majority of the outstanding shares entitled to vote
constitutes a quorum for consideration of such matter. For Evergreen Foundation,
a majority of the votes cast and entitled to vote, and for CoreFunds Balanced,
-39-
<PAGE>
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 Equity Trust, each share of
Evergreen Foundation will be entitled to one vote for each dollar of net asset
value applicable to each share. Under the voting provisions governing CoreFunds
Balanced, 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
Balanced'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
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 Foundation or CoreFunds
Balanced, 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 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 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
-40-
<PAGE>
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 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, 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 Balanced 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
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<PAGE>
Agreement is in effect. A description of the Interim Advisory Agreement pursuant
to which CSIA continues as investment adviser to CoreFunds Balanced, 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 Balanced 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
Balanced.
The Directors have authorized CoreFunds, Inc., on behalf of CoreFunds
Balanced, to enter into the Interim Advisory Agreement with CSIA. Such Agreement
became effective on April 30, 1998. If the Interim Advisory Agreement for
CoreFunds Balanced is not approved by shareholders, the Directors will consider
appropriate actions to be taken with respect to CoreFunds Balanced'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
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 Balanced, 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 Balanced. SEI
will continue during the term of the Interim Advisory Agreement as
CoreFunds Balanced's administrator for the same compensation as
currently received. See "Summary - Administrators."
Fees. The investment advisory fees for CoreFunds Balanced
under the Previous Advisory Agreement and the Interim Advisory
Agreement are identical. See "Summary - Investment Advisers."
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<PAGE>
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 Balanced (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.
Information About CoreFunds Balanced'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.
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During the fiscal years ended June 30, 1997, 1996 and 1995, CSIA
received from CoreFunds Balanced management fees of $642,244, $441,222 and
$240,853, respectively, and waived fees of $146,497, $106,546 and $133,801,
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 Balanced.
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 BALANCED
APPROVE THE INTERIM ADVISORY AGREEMENT
ADDITIONAL INFORMATION
Evergreen Foundation. Information concerning the operation and
management of Evergreen Foundation is incorporated herein by reference from the
Prospectuses dated July 1, 1997, as supplemented January 23, 1998, copies of
which are enclosed, and Statement of Additional Information dated April 1, 1997,
as amended July 1, 1997, and supplemented January 30, 1998. A copy of such
Statement of Additional Information is available upon request and without charge
by writing to Evergreen Foundation at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free 1-800-343-2898.
CoreFunds Balanced. 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 Balanced at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-355-2673.
Evergreen Foundation and CoreFunds Balanced 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 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
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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 Foundation and
CoreFunds Balanced.
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 24, 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 Balanced 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, FOR approval of the Plan and the Reorganization
contemplated thereby and FOR approval of the Interim Advisory Agreement.
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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 CoreStates, their affiliates or
other representatives of CoreFunds Balanced (who will not be paid for their
soliciting activities). Shareholder Communications Corporation ("SCC") and its
agents have been engaged by CoreFunds Balanced 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 Inc. 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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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 Foundation which they receive in
the transaction at their then-current net asset value. Shares of CoreFunds
Balanced may be redeemed at any time prior to the consummation of the
Reorganization. Shareholders of CoreFunds Balanced 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 Balanced 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 Foundation 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 Balanced 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
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The Annual Report of Evergreen Foundation as of March 31, 1998, and the
financial statements and financial highlights for the periods indicated therein,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements and financial highlights of CoreFunds Balanced
incorporated in this Prospectus/Proxy Statement by reference 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
Foundation 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:
OFFICERS:
Name Address
- ---- -------
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
- ---- -------
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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
William D. Munn First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
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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 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
Foundation 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 Balanced 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 Class A, Class B and Class
Y 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
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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;
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.
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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 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.
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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
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
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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.
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,
Class B and Class Y shares of the Selling Fund will receive Class A, Class B and
Class Y shares, respectively, 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
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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.
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.
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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.
(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
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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 has distributed in each such year all net
investment income and realized capital gains.
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(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) The financial statements of the Acquiring Fund at March 31, 1998 are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been or will be furnished to the
Selling Fund) fairly reflect the financial condition of the Acquiring Fund as of
such
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date, and there are no known contingent liabilities of the Acquiring Fund as of
such date not disclosed therein.
(g) Since March 31, 1998 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 (g), a decline in the
net asset value of the Acquiring Fund shall not constitute a material adverse
change.
(h) 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.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
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(m) 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.
(n) 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 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.
(o) 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.
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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.
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.
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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 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.
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(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
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Proxy Statement and not to any exhibits or attachments thereto or to any
documents incorporated by reference therein.
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
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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 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
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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 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.
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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 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
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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).
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
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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.
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), 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; and
(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 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 accepted accounting practices
and the portfolio valuation practices of the Acquiring Fund.
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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), 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
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(c) 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 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.
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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 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
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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 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 EQUITY TRUST
ON BEHALF OF EVERGREEN
FOUNDATION FUND
By:
Name:
Title:
COREFUNDS, INC.
ON BEHALF OF BALANCED 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");
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c. resolutions of the Company's Board of Directors
authorizing the appointment of the Investment Adviser and approving
this Agreement;
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;
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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 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
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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.
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
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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 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
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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 the
benefit of the parties hereto and their respective successors and shall be
governed by Pennsylvania law.
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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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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%
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STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
BALANCED FUND
a Series of
COREFUNDS, INC.
530 East Swedesford Road
Wayne, Pennsylvania 19087
(800) 355-2673
By and In Exchange For Shares of
EVERGREEN FOUNDATION FUND
a Series of
EVERGREEN 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 Balanced Fund ("CoreFunds
Balanced"), a series of CoreFunds, Inc., to Evergreen Foundation Fund
("Evergreen Foundation"), a series of Evergreen Equity Trust, in exchange for
Class A shares (to be issued to holders of Class A shares of CoreFunds
Balanced), Class B shares (to be issued to holders of Class B shares of
CoreFunds Balanced) and Class Y shares (to be issued to holders of Class Y
shares of CoreFunds Balanced) of beneficial interest, $.001 par value per share,
of Evergreen Foundation, 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
Foundation dated April 1, 1997, as amended July 1, 1997 and
supplemented January 30, 1998;
(2) The Statement of Additional Information of CoreFunds Balanced
dated November 1, 1997;
(3) Annual Report of CoreFunds Balanced for the year ended June
30, 1997;
(4) Semi-Annual Report of CoreFunds Balanced for the six month
period ended December 31, 1997; and
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(5) Annual Report of Evergreen Foundation for the year ended March 31,
1998. (to be filed by amendment)
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Evergreen Foundation and CoreFunds Balanced dated June 1, 1998. A
copy of the Prospectus/Proxy Statement may be obtained without charge by calling
or writing to Evergreen Foundation or CoreFunds Balanced at the telephone
numbers or addresses set forth above.
The date of this Statement of Additional Information is June 1, 1998.
EVERGREEN KEYSTONE GROWTH AND INCOME AND BALANCED FUNDS
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1997
AS AMENDED JULY 1, 1997
Growth and Income Funds
Evergreen Growth and Income Fund ("Growth and Income")
Evergreen Income and Growth Fund (formerly Evergreen Total Return Fund)
("Income and Growth")
Evergreen Small Cap Equity Income Fund ("Small Cap")
Evergreen Utility Fund ("Utility")
Evergreen Value Fund ("Value")
Keystone Fund for Total Return ("Total Return")
Balanced Funds
Evergreen Foundation Fund ("Foundation")
Evergreen Tax Strategic Foundation Fund ("Tax Strategic")
Evergreen American Retirement Fund ("American Retirement")
Evergreen Balanced Fund ("Balanced")
This Statement of Additional Information pertains to all classes of
shares of the Funds listed above. It is not a prospectus and should be read in
conjunction with the Prospectus dated April 1, 1997 for the Growth and Income
Funds and July 1, 1997 for the Balanced Funds, for the specific Fund in which
you are making orcontemplating an investment. The Evergreen Keystone Growth and
Income and Balanced Funds are offered through four separate prospectuses: one
offering Class A, Class B and Class C shares and a separate prospectus offering
Class Y shares of Growth and Income, Income and Growth, Small Cap, Utility,
Value and Total Return; and one offering Class A, Class B and Class C shares and
a separate prospectus offering Class Y shares of Foundation, Tax Strategic,
American Retirement and Balanced.
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TABLE OF CONTENTS
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Investment Objectives and Policies.......................................3
Investment Restrictions..................................................7
Non-Fundamental Operating Policies......................................15
Certain Risk Considerations.............................................15
Management..............................................................16
Trustees ...............................................................16
Investment Advisers.....................................................28
Distribution Plans......................................................35
Allocation of Brokerage.................................................37
Additional Tax Information..............................................40
Net Asset Value.........................................................43
Purchase of Shares......................................................44
General Information about the Funds.....................................55
Performance Information.................................................56
General ...............................................................62
Financial Statements....................................................62
Appendix "A"............................................................64
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INVESTMENT OBJECTIVES AND POLICIES
(SEE ALSO "DESCRIPTION OF THE FUNDS - INVESTMENT OBJECTIVES
AND POLICIES" IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
The investment objective(s) of each Fund and a description of the
securities in which each Fund may invest is set forth under "Description of the
Funds-Investment Objectives and Policies" in the relevant Prospectus. The
investment objectives are fundamental and cannot be changed without the approval
of shareholders. The following expands upon the discussion in the Prospectus
regarding certain investments of each Fund.
U.S. Government Securities (All Funds)
The types of U.S. government securities in which the Funds may invest
generally include direct obligations of the U.S. Treasury such as U. S. Treasury
bills, notes and bonds and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
(i) the full faith and credit of the U.S. Treasury;
(ii) the issuer's right to borrow from the U.S. Treasury;
(iii) the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
(iv) the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities that may not always receive
financial support from the U.S. government are:
(i) Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Restricted and Illiquid Securities (All Funds)
Each Fund may invest in restricted and illiquid securities. The ability of
the Board of Trustees ("Trustees") to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange Commission
("SEC") Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for sale under the
Rule. The Funds which invest in Rule 144A securities believe that the Staff of
the SEC has left the question of determining the liquidity of all restricted
securities (eligible for resale under the Rule) for determination by the
Trustees. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
(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.
Restricted securities would generally be acquired either from institutional
investors who originally acquired the securities in private placements or
directly from the issuers of the securities in private placements. Restricted
securities and securities that are not readily marketable may sell at a discount
from the price they would bring if freely marketable.
When-Issued and Delayed Delivery Securities (Balanced, Tax Strategic,
Utility, Value and Total Return)
Securities purchased on a when-issued or delayed delivery basis are made to
secure what is considered to be an advantageous price or yield for a Fund. No
fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of a Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the transaction has
been settled. Balanced, Utility and Value do not intend to engage in when-
issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of their assets and Tax
Strategic's commitment to purchase when-issued securities will not exceed 25% of
the Fund's total assets. Total Return does not intend to invest more than 5% of
its net assets in when-issued or delayed delivery transactions.
Lending of Portfolio Securities (All Funds)
Each Fund may lend its portfolio securities to generate income and to
offset expenses. The collateral received when a Fund lends portfolio securities
must be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the lending Fund.
During the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
at the option of the Fund or the borrower. A Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to the borrower or placing broker. A Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote if
that were considered important with respect to the investment.
Reverse Repurchase Agreements (Small Cap, Utility, Value, Tax Strategic,
Balanced and Total Return)
Reverse repurchase agreements are similar to borrowing cash. In a
reverse repurchase agreement, a Fund transfers possession of a portfolio
instrument to another person, such as a financial institution, broker, or
dealer, in return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest at an
agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Options and Futures Transactions (All Funds except Balanced, American
Retirement and Tax Strategic)
Options which Balanced, Utility and Value trade must be listed on
national securities exchanges.
Purchasing Put and Call Options on Financial Futures Contracts
Balanced, Utility, Value and Total Return may purchase put and call
options on financial futures contracts (in the case of Utility and Value limited
to options on financial futures contracts for U.S. government securities).
Unlike entering directly into a futures contract, which requires the purchaser
to buy a financial instrument on a set date at an undetermined price, the
purchase of a put option on a futures contract entitles (but does not obligate)
its purchaser to decide on or before a future date whether to assume a short
position at the specified price.
A Fund may purchase put and call options on futures to protect
portfolio securities against decreases in value resulting from an anticipated
increase in market interest rates. Generally, if the hedged portfolio securities
decrease in value during the term of an option, the related futures contracts
will also decrease in value and the put option will increase in value. In such
an event, a Fund will normally close out its option by selling an identical put
option. If the hedge is successful, the proceeds received by the Fund upon the
sale of the put option plus the realized gain offsets the decrease in value of
the hedged securities.
Alternately, a Fund may exercise its put option to close out the
position. To do so, it would enter into a futures contract of the type
underlying the option. If the Fund neither closes out nor exercises an option,
the option will expire on the date provided in the option contract, and only the
premium paid for the contract will be lost.
Purchasing Options
Balanced, Utility, Value and Total Return may purchase both put and
call options on their portfolio securities. These options will be used as a
hedge to attempt to protect securities which a Fund holds or will be purchasing
against decreases or increases in value. A Fund may purchase put and call
options for the purpose of offsetting previously written put and call options of
the same series. If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not be able to
sell the underlying securities or dispose of assets held in a segregated account
until the options expire or are exercised.
Balanced, Utility, Value and Total Return intend to purchase put and
call options on currency and other financial futures contracts for hedging
purposes. A put option purchased by a Fund would give it the right to assume a
position as the seller of a futures contract. A call option purchased by the
Fund would give it the right to assume a position as the purchaser of a futures
contract. The purchase of an option on a futures contract requires the Fund to
pay a premium. In exchange for the premium, the Fund becomes entitled to
exercise the benefits, if any, provided by the futures contract, but is not
required to take any action under the contract. If the option cannot be
exercised profitably before it expires, the Fund's loss will be limited to the
amount of the premium and any transaction costs.
Utility and Value currently do not intend to invest more than 5% of
their net assets in options transactions. Total Return will not purchase a put
option if, as a result of such purchase, more than 10% of its total assets would
be invested in premiums for such option.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Balanced will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, the Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
Income and Growth and Growth and Income may write covered call options
to a limited extent on their portfolio securities ("covered options") in an
attempt to earn additional income. A Fund will write only covered call option
contracts and will receive premium income from the writing of such contracts.
Income and Growth and Growth and Income may purchase call options to close out a
previously written call option. In order to do so, the Fund will make a "closing
purchase transaction" -- the purchase of a call option on the same security with
the same exercise price and expiration date as the call option which it has
previously written. A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. If an option is exercised, a Fund
realizes a long-term or short-term gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
Junk Bonds (Growth and Income and Total Return)
Consistent with its strategy of investing in "undervalued" securities,
Growth and Income and Total Return may invest in lower medium and low-quality
bonds also known as "junk bonds" and may also purchase bonds in default if, in
the opinion of the Fund's investment adviser, there is significant potential for
capital appreciation. Total Return may invest without limit in debt securities
which are rated below investment grade. Growth and Income, however, will not
invest more than 5% of its total assets in debt securities which are rated below
investment grade. These bonds are regarded as speculative with respect to the
issuer's continuing ability to meet principal and interest payments. High yield
bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than investment grade bonds. A projection of an
economic downturn, or higher interest rates, for example, could cause a decline
in high yield bond prices because such events could lessen the ability of highly
leveraged companies to make principal and interest payments on their debt
securities. In addition, the secondary trading market for high yield bonds may
be less liquid than the market for higher grade bonds, which can adversely
affect the ability to dispose of such securities.
Variable and Floating Rate Securities (Foundation and Tax Strategic)
The terms of variable and floating rate instruments provide for the
interest rate to be adjusted according to a formula on certain predetermined
dates. Variable and floating rate instruments that are repayable on demand at a
future date are deemed to have a maturity equal to the time remaining until the
principal will be received on the assumption that the demand feature is
exercised on the earliest possible date. For the purposes of evaluating the
interest-rate sensitivity of a Fund, variable and floating rate instruments are
deemed to have a maturity equal to the period remaining until the next
interest-rate readjustment. For the purposes of evaluating the credit risks of
variable and floating rate instruments, these instruments are deemed to have a
maturity equal to the time remaining until the earliest date the Fund is
entitled to demand repayment of principal. Foundation may invest no more than 5%
of its total assets, at the time of the investment in question, in variable and
floating rate securities. Tax Strategic will limit the value of its investments
in any floating or variable rate securities which are not readily marketable and
in all other not readily marketable securities to 5% or less of its net assets.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
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FUNDAMENTAL INVESTMENT RESTRICTIONS
Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1. CONCENTRATION OF ASSETS IN ANY ONE ISSUER
Neither Growth and Income nor Income and Growth may invest more than 5% of
their net assets, at the time of the investment in question, in the securities
of any one issuer other than the U.S. government and its agencies or
instrumentalities.
American Retirement may not invest more than 5% of its total assets, at the
time of the investment in question, in the securities of any one issuer other
than the U.S. government and its agencies or instrumentalities.
None of Balanced, Foundation, Small Cap, Utility, Value or Total Return may
invest more than 5% of its total assets, at the time of the investment in
question, in the securities of any one issuer other than the U.S. government and
its agencies or instrumentalities, except that up to 25% of the value of a
Fund's total assets may be invested without regard to such 5% limitation.
Tax Strategic may not invest more than 5% of its total assets, at the
time of the investment in question, in the securities of any one issuer other
than the U.S. government and its agencies or instrumentalities, except that up
to 25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of the Fund's portfolio.
2. TEN PERCENT LIMITATION ON SECURITIES OF ANY ONE ISSUER
None of American Retirement, Foundation, Small Cap, Growth and Income
or Income and Growth may purchase more than 10% of any class of securities of
any one issuer other than the U.S.
government and its agencies or instrumentalities.
Neither Value nor Utility may purchase more than 10% of the outstanding
voting securities of any one issuer.
Neither Tax Strategic nor Total Return may purchase more than 10% of
the voting securities of any one issuer other than the U.S. government and its
agencies or instrumentalities.
3. INVESTMENT FOR PURPOSES OF CONTROL OR MANAGEMENT
None of American Retirement, Foundation, Growth and Income, Small Cap*,
Tax Strategic*, Income and Growth, Utility*, Value or Total Return may invest in
companies for the purpose of exercising control or management.
4. PURCHASE OF SECURITIES ON MARGIN
None of American Retirement, Balanced, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Income and Growth, Utility, Value or Total Return
may purchase securities on margin, except that each Fund may obtain such
short-term credits as may be necessary for the clearance of transactions. A
deposit or payment by a Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not considered
the purchase of a security on margin.
5. UNSEASONED ISSUERS
Neither American Retirement nor Foundation may invest in the securities
of unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of their predecessors.
None of Income and Growth, Value*, Utility* or Total Return may invest
more than 5% of its total assets in securities of unseasoned issuers that have
been in continuous operation for less than three years, including operating
periods of their predecessors.
None of Growth and Income, Small Cap* and Tax Strategic* may invest
more than 15% of its total assets (10% of total net assets in the case of Growth
and Income) in securities of unseasoned issuers that have been in continuous
operation for less than three years, including operating periods of their
predecessors.
6. UNDERWRITING
American Retirement, Foundation, Growth and Income, Small Cap, Tax
Strategic, Income and Growth, Balanced, Utility, Value and Total Return will not
underwrite any issue of securities except as they may be deemed an underwriter
under the Securities Act of 1933 in connection with the sale of securities in
accordance with their investment objectives, policies and limitations.
7. INTERESTS IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT
PROGRAMS.
None of American Retirement, Foundation, Growth and Income, Small Cap, Tax
Strategic or Income and Growth may purchase, sell or invest in interests in oil,
gas or other mineral exploration or development programs.
Neither Balanced* nor Utility* will purchase interests in oil, gas or
other mineral exploration or development programs or leases, although each Fund
may purchase the securities of other issuers which invest in or sponsor such
programs.
Value will not purchase interests in oil, gas or other mineral
exploration or development programs or leases, although it may purchase the
publicly traded securities of companies engaged in such activities.
8. CONCENTRATION IN ANY ONE INDUSTRY
Neither Growth and Income nor Income and Growth may concentrate its
investments in any one industry, except that each Fund may invest up to 25% of
its total net assets in any one industry.
None of American Retirement, Foundation, Small Cap and Tax Strategic
may invest 25% or more of its total assets in the securities of issuers
conducting their principal business activities in any one industry; provided,
that this limitation shall not apply (i) with respect to each Fund, to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or (ii) with respect to Tax Strategic, to municipal
securities. For purposes of this restriction, utility companies, gas, electric,
water and telephone companies will be considered separate industries.
Balanced and Value will not invest 25% or more of the value of their
total assets in any one industry except Balanced may invest more than 25% and
Value may invest 25% or more of its total assets in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
Utility will not invest more than 25% of its total assets (valued at
the time of investment) in securities of companies engaged principally in any
one industry other than the utilities industry, except that this restriction
does not apply to cash or cash items and securities issued or guaranteed by the
U.S.
government, its agencies or instrumentalities.
Total Return will not purchase any security (other than U.S. government
securities) of any issuer if as a result more than 25% of its total assets would
be invested in a single industry; except that (i) there is no restriction with
respect to obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities; (ii) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily related
to financing the activities of the parents; (iii) the industry classification of
utilities will be determined according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (iv) the industry classification of medically related industries
will be determined according to their services (for example, management,
hospital supply, medical equipment and pharmaceuticals will each be considered a
separate industry).
9. WARRANTS
None of American Retirement, Growth and Income, Income and Growth, Small
Cap*, Foundation or Tax Strategic* may invest more than 5% of its net assets in
warrants and, of this amount, no more than 2% of each Fund's net assets may be
invested in warrants that are listed on neither the New York nor the American
Stock Exchange.
Utility* and Value* will not invest more than 5% of their net assets in
warrants, including those acquired in units or attached to other securities. For
purposes of this restriction, warrants acquired by the Funds in units or
attached to securities may be deemed to be without value.
10. OWNERSHIP BY TRUSTEES/OFFICERS
None of American Retirement, Balanced*, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Income and Growth, Utility* or Value* may purchase
or retain the securities of any issuer if (i) one or more officers or Trustees
of a Fund or its investment adviser individually owns or would own, directly or
beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in
the aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.
Portfolio securities of any Fund may not be purchased from or sold or
loaned to its adviser or any affiliate thereof, or any of their directors,
officers or employees.
11. SHORT SALES
Neither American Retirement nor Foundation may make short sales of
securities unless, at the time of each such sale and thereafter while a short
position exists, each Fund owns the securities sold or securities convertible
into or carrying rights to acquire such securities.
None of Growth and Income, Tax Strategic* and Income and Growth may
make short sales of securities unless, at the time of each such sale and
thereafter while a short position exists, each Fund owns an equal amount of
securities of the same issue or owns securities which, without payment by the
Fund of any consideration, are convertible into, or are exchangeable for, an
equal amount of securities of the same issue.
Small Cap,* may not make short sales of securities unless, at the time
of each such sale and thereafter while a short position exists, each Fund owns
an equal amount of securities of the same issue or owns securities which,
without payment by the Fund of any consideration, are convertible into, or are
exchangeable for, an equal amount of securities of the same issue (and provided
that transactions in futures contracts and options are not deemed to constitute
selling securities short).
Neither Balanced nor Total Return will make short sales of securities
or maintain a short position, unless at all times when a short position is open
it owns an equal amount of such securities or of securities which, without
payment of any further consideration are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the securities sold
short. With respect to Balanced, the use of short sales will allow the Fund to
retain certain bonds in its portfolio longer than it would without such sales.
To the extent that the Fund receives the current income produced by such bonds
for a longer period than it might otherwise, the Fund's investment objective is
furthered.
Utility and Value will not sell any securities short.
12. LENDING OF FUNDS AND SECURITIES
Neither Small Cap nor Tax Strategic may lend its funds to other
persons, except through the purchase of a portion of an issue of debt securities
publicly distributed or the entering into of repurchase agreements.
None of American Retirement, Foundation, Growth and Income and Income and
Growth may lend its funds to other persons, except through the purchase of a
portion of an issue of debt securities publicly distributed.
None of Foundation, Small Cap or Tax Strategic, may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the current market value of the loaned securities,
including accrued interest, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's total assets.
Neither American Retirement or Growth and Income may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the value of the loaned securities (100% of the
current market value for American Retirement), provided that the aggregate
amount of such loans shall not exceed 30% of the Fund's net assets.
Income and Growth may not lend its portfolio securities, unless the
borrower is a broker, dealer or financial institution that pledges and maintains
collateral with the Fund consisting of cash, letters of credit or securities
issued or guaranteed by the U.S. government having a value at all times not less
than 100% of the current market value of the loaned securities (100% of the
value of the loaned securities for Income and Growth), including accrued
interest, provided that the aggregate amount of such loans shall not exceed 30%
of the Fund's net assets.
Balanced will not lend any of its assets except portfolio securities
in accordance with its investment objective, policies and limitations.
Utility will not lend any of its assets, except portfolio securities up
to 15% of the value of its total assets. This does not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's investment
objectives and policies or the Declaration of Trust governing the Fund.
Value will not lend any of its assets except that it may purchase or
hold corporate or government bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, repurchase agreements or
other transactions which are permitted by the Fund's investment objectives and
policies or the Declaration of Trust by which the Fund is governed or lend
portfolio securities valued at not more than 5% of its total assets to
broker-dealers.
Total Return will not make loans, except that the Fund may purchase or
hold debt securities consistent with its investment objective, lend portfolio
securities valued at not more than 15% of its total assets to broker-dealers and
enter into repurchase agreements.
13. COMMODITIES
Tax Strategic may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.
Small Cap may not purchase, sell or invest in physical commodities unless
acquired as a result of ownership of securities or other instruments (but this
shall not prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities).
None of American Retirement, Foundation, Growth and Income, Income and
Growth may purchase, sell or invest in commodities or commodity contracts.
None of Balanced, Utility, Value or Total Return will purchase or sell
commodities or commodity contracts; however, each Fund may enter into futures
contracts on financial instruments or currency and sell or buy options on such
contracts.
14. REAL ESTATE
Small Cap may not purchase or invest in real estate or interests in
real estate (but this shall not prevent the Fund from investing in marketable
securities issued by companies such as real estate investment trusts which deal
in real estate or interests therein).
None of American Retirement, Foundation, Growth and Income, Tax
Strategic or Income and Growth may purchase, sell or invest in real estate or
interests in real estate, except that (i) each Fund may purchase, sell or invest
in marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts, and (ii) Tax Strategic may
purchase, sell or invest in municipal securities or other debt securities
secured by real estate or interests therein.
None of Balanced, Utility or Value will buy or sell real estate
although each Fund may invest in securities of companies whose business involves
the purchase or sale of real estate or in securities which are secured by real
estate or interests in real estate. Neither Utility nor Value will invest in
limited partnership interests in real estate.
Total Return will not purchase or sell real estate, except that it may
purchase and sell securities secured by real estate and securities of companies
which invest in real estate.
15. BORROWING, SENIOR SECURITIES, REPURCHASE AGREEMENTS AND REVERSE
REPURCHASE AGREEMENTS
None of American Retirement, Foundation or Income and Growth may borrow
money except from banks as a temporary measure to facilitate redemption requests
which might otherwise require the untimely disposition of portfolio investments
and for extraordinary or emergency purposes (and, with respect to American
Retirement only, for leverage), provided that the aggregate amount of such
borrowings shall not exceed 5% of the value of the Fund's total net assets (5%
of total assets for American Retirement and Foundation) at the time of any such
borrowing, or mortgage, pledge or hypothecate its assets, except in an amount
sufficient to secure any such borrowing. Neither American Retirement nor
Foundation may issue senior securities, except as permitted by the Investment
Company Act of 1940. Neither Foundation nor American Retirement may enter into
repurchase agreements or reverse repurchase agreements.
Neither Small Cap nor Tax Strategic may borrow money, issue senior
securities or enter into reverse repurchase agreements, except for temporary or
emergency purposes, and not for leveraging, and then in amounts not in excess of
10% of the value of each Fund's total assets at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of each Fund's total assets at the time of such
borrowing, provided that each of Small Cap, Tax Strategic will not purchase any
securities at any time when borrowings, including reverse repurchase agreements,
exceed 5% of the value of its total assets. Neither Fund will enter into reverse
repurchase agreements exceeding 5% of the value of its total assets.
Growth and Income may not borrow money except from banks as a temporary
measure for extraordinary or emergency purposes, provided that the aggregate
amount of such borrowings shall not exceed 5% of the value of the Fund's total
assets at the time of such borrowing; or mortgage, pledge or hypothecate its
assets, except in an amount not exceeding 15% of its assets taken at cost to
secure such borrowing. Growth and Income may not issue senior securities, as
defined in the Investment Company Act of 1940, except that this restriction
shall not be deemed to prohibit the Fund from (i) making any permitted
borrowings, mortgages or pledges, (ii) lending its portfolio securities, or
(iii) entering into permitted repurchase transactions.
Balanced and Utility will not issue senior securities except that each
Fund may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts borrowed
and except to the extent a Fund may enter into futures contracts. The Funds will
not borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary or emergency measure to
facilitate management of their portfolios by enabling them to, for example, meet
redemption requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. Balanced will not purchase any securities while
any borrowings are outstanding. Utility will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. Neither Balanced
nor Utility will mortgage, pledge or hypothecate any assets except to secure
permitted borrowings. In these cases, Balanced and Utility may pledge assets
having a market value not exceeding the lesser of the dollar amounts borrowed or
15% of the value of total assets at the time of borrowing. Margin deposits for
the purchase and sale of financial futures contracts and related options and
segregation or collateral arrangements made in connection with options
activities are not deemed to be a pledge.
Value will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary measure
for extraordinary or emergency purposes and then only in amounts not in excess
of 10% of the value of its total assets; provided that while borrowings exceed
5% of the Fund's total assets, any such borrowings will be repaid before
additional investments are made. The Fund will not purchase any securities while
borrowings in excess of 5% of the value of its total assets are outstanding. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes. The Fund will not mortgage, pledge or hypothecate
any assets except to secure permitted borrowings. In these cases, the Fund may
pledge assets having a market value not exceeding the lesser of the dollar
amounts borrowed or 10% of the value of total assets at the time of borrowing.
Margin deposits for the purchase and sale of financial futures contracts and
related options and segregation or collateral arrangements made in connection
with options activities are not deemed to be a pledge.
Total Return will not borrow money or enter into reverse repurchase
agreements, except that the Fund may enter into reverse repurchase agreements or
borrow money from banks for temporary or emergency purposes in aggregate amounts
up to one-third of the value of the Fund's net assets; provided that while
borrowings from banks (not including reverse repurchase agreements) exceed 5% of
the Fund's net assets, any such borrowings will be repaid before additional
investments are made. The Fund will not pledge more than 15% of its net assets
to secure indebtedness; the purchase or sale of securities on a "when issued"
basis or collateral arrangement with respect to the writing of options on
securities are not deemed to be a pledge of assets. The Fund will not issue
senior securities; the purchase or sale of securities on a "when issued" basis
or collateral arrangement with respect to the writing of options on securities
are not deemed to be the issuance of a senior security.
16. JOINT TRADING
None of American Retirement, Foundation, Growth and Income, Small Cap,*
Tax Strategic,* or Income and Growth may participate on a joint or joint and
several basis in any trading account in any securities. (The "bunching of orders
or the purchase or sale of portfolio securities with its investment adviser or
accounts under its management to reduce brokerage commissions, to average prices
among them or to facilitate such transactions is not considered a trading
account in securities for purposes of this restriction).
17. OPTIONS
Foundation and Tax Strategic* may not write, purchase or sell put or
call options, or combinations thereof.
Neither Growth and Income nor Income and Growth may write, purchase or
sell put or call options, or combinations thereof, except that each Fund is
authorized to write covered call options on portfolio securities and to purchase
call options in closing purchase transactions, provided that (i) such options
are listed on a national securities exchange, (ii) the aggregate market value of
the underlying securities does not exceed 25% of the Fund's net assets, taken at
current market value on the date of any such writing, and (iii) the Fund retains
the underlying securities for so long as call options written against them make
the shares subject to transfer upon the exercise of any options.
American Retirement may not write, purchase or sell put or call
options, or combinations thereof, except that the Fund is authorized (i) to
write call options traded on a national securities exchange against no more than
15% of the value of the equity securities (including securities convertible into
equity securities) held in its portfolio, provided that the Fund owns the
optioned securities or securities convertible into or carrying rights to acquire
the optioned securities and (ii) to purchase call options in closing purchase
transactions.
Utility* will not purchase put options on securities unless the
securities are held in the Fund's portfolio and not more than 5% of the Fund's
total assets would be invested in premiums on open put options. Utility* will
not write call options on securities unless securities are held in the Fund's
portfolio or unless the Fund is entitled to them in deliverable form without
further payment or after segregating cash in the amount of any further payment.
18. INVESTMENT IN EQUITY SECURITIES
American Retirement may not invest more than 75% of the value of its
total assets in equity securities (including securities convertible into equity
securities).
19. INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Balanced*, Utility and Value will purchase securities of investment
companies only in open-market transactions involving customary broker's
commissions. However, these limitations are not applicable if the securities are
acquired in a merger, consolidation or acquisition of assets. It should be noted
that investment companies incur certain expenses such as management fees, and,
therefore, any investment by a Fund in shares of another investment company
would be subject to such duplicate expenses.
Total Return may not purchase securities of other investment companies,
except as part of a merger, consolidation, purchase or assets or similar
transaction.
Each other Fund may purchase the securities of other investment
companies, except to the extent such purchases are not permitted by applicable
law.
20. RESTRICTED SECURITIES
Balanced and Value will not invest more than 10% of their net assets in
securities subject to restrictions on resale under the Securities Act of 1933
(except for, in the case of Balanced, certain restricted securities which meet
criteria for liquidity established by the Trustees).
Utility* will not invest more than 10% of the value of its net assets
in securities subject to restrictions on resale under the Securities Act of
1933, except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees.
- --------------------------------------------------------------------------------
NON-FUNDAMENTAL OPERATING POLICIES
- --------------------------------------------------------------------------------
Certain Funds have adopted additional non-fundamental operating
policies. Operating policies may be changed by the Board of Trustees without a
shareholder vote.
1. FUTURES AND OPTIONS TRANSACTIONS
Small Cap will not: (i) sell futures contracts, purchase put options or
write call options if, as a result, more than 30% of the Fund's total assets
would be hedged with futures and options under normal conditions; (ii) purchase
futures contracts or write put options if, as a result, the Fund's total
obligations upon settlement or exercise of purchased futures contracts and
written put options would exceed 30% of its total assets; or (iii) purchase call
options if, as a result, the current value of option premiums for options
purchased by the Fund would exceed 5% of the Fund's total assets. These
limitations do not apply to options attached to, or acquired or traded together
with their underlying securities, and do not apply to securities that
incorporate features similar to options.
2. ILLIQUID SECURITIES
None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Income and Growth may invest more than 15% of its net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements which have a maturity of longer than seven days,
but excluding securities eligible for resale under Rule 144A of the Securities
Act of 1933, as amended, which the Trustees have determined to be liquid.
Balanced and Utility will not invest more than 10% (in the case of
Balanced) or 15% (in the case of Utility) of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain securities determined by the Trustees
not to be liquid and, in the case of Utility, in non-negotiable time deposits.
Except with respect to borrowing money (and with respect to Total
Return, including borrowing money), if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
- --------------------------------------------------------------------------------
CERTAIN RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
There can be no assurance that a Fund will achieve its investment
objective(s) and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objectives and Policies"
in each Fund's Prospectus.
In addition, the ability of Tax Strategic to achieve its investment
objective is dependent on the continuing ability of the issuers of Municipal
Securities in which the Fund invests -- and of banks issuing letters of credit
backing such securities -- to meet their obligations with respect to the payment
of interest and principal when due. The ratings of Moody's Investors Service,
Standard & Poor's Ratings Service, a division of McGraw Hill Companies, Inc.,
and other nationally recognized rating organizations represent their opinions as
to the quality of Municipal Securities which they undertake to rate. Ratings are
not absolute standards of quality; consequently, Municipal Securities with the
same maturity, coupon, and rating may have different yields. There are
variations in Municipal Securities, both within a particular classification and
between classifications, resulting from numerous factors.
Unlike other types of investments, Municipal Securities have
traditionally not been subject to regulation by, or registration with, the SEC,
although there have been proposals which would provide for regulation in the
future.
The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in the rights of
holders of their obligations. In addition, there have been lawsuits challenging
the issuance of pollution control revenue bonds or the validity of their
issuance under state or federal law which could ultimately affect the validity
of those Municipal Securities or the tax-free nature of the interest thereon.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Evergreen Keystone Funds consist of seventy-three mutual funds. Each
mutual fund is, or is a series of, a registered, open-end management company.
The Trustees and executive officers of each mutual fund, their ages,
addresses and principal occupations during the past five years are set forth
below:
- --------------------------------------------------------------------------------
TRUSTEES
- --------------------------------------------------------------------------------
JAMES S. HOWELL (72), 4124 Crossgate Road, Charlotte, NC-Chairman of the
Evergreen Keystone group of mutual funds and Trustee. Retired Vice President of
Lance Inc. (food manufacturing); Chairman of the Distribution Comm. Foundation
for the Carolinas from 1989 to 1993.
RUSSELL A. SALTON, III, M.D. (49), 205 Regency Executive Park, Charlotte,
NC -Trustee. Medical Director, U.S. Healthcare of Charlotte, North Carolina
since 1996; President, Primary Physician Care from 1990 to 1996.
MICHAEL S. SCOFIELD (53), 212 S. Tryon Street Suite 980, Charlotte,
NC-Trustee. Attorney, Law Offices of Michael S. Scofield since 1969.
Messrs. Howell, Salton and Scofield are Trustees of all seventy-three
investment companies.
GERALD M. MCDONNELL (57), 821 Regency Drive, Charlotte, NC -Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
THOMAS L. McVERRY (58), 4419 Parkview Drive, Charlotte, NC-Trustee.
Director of Carolina Cooperative Federal Credit Union since 1990 and Rexham
Corporation from 1988 to 1990; Vice President of Rexham Industries, Inc.
(diversified manufacturer) from 1989 to 1990; Vice President-Finance and
Resources, Rexham Corporation from 1979 to 1990.
WILLIAM WALT PETTIT (41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NCTrustee. Partner in the law firm Holcomb and Pettit, P.A.
since
1990.
Messrs. McDonnell, McVerry and Pettit are Trustees of forty-three of the
investment companies (excluded are those established within the Evergreen
Variable Trust).
LAURENCE B. ASHKIN (68), 180 East Pearson Street, Chicago, IL- Trustee.
Real estate developer and construction consultant since 1980; President of
Centrum Equities since 1987 and Centrum Properties, Inc. since 1980.
FOSTER BAM (70), Greenwich Plaza, Greenwich, CT- Trustee. Partner in the
law firm of Cummings and Lockwood since 1968.
Messrs. Ashkin and Bam are Trustees of forty-two of the investment
companies (excluded are those established within the Evergreen Variable Trust
and Evergreen Investment Trust).
FREDERICK AMLING (69) Trustee. Professor, Finance Department, George
Washington University; President, Amling & Company (investment advice); Member,
Board of Advisers, Credito Emilano (banking); and former Economics and Financial
Consultant, Riggs National Bank.
CHARLES A. AUSTIN III (61) Trustee. Investment Counselor to Appleton
Partners, Inc.; former Managing Director, Seaward Management Corporation
(investment advice); and former Director, Executive Vice President and
Treasurer, State Street Research & Management Company (investment advice).
GEORGE S. BISSELL* (67) Chairman of the Keystone group of mutual funds, and
Trustee. Chairman of the Board and Trustee of Anatolia College; Trustee of
University Hospital (and Chairman of its Investment Committee); former Director
and Chairman of the Board of Hartwell Keystone; and former Chairman of the Board
and Chief Executive Officer of Keystone Investments, Inc..
EDWIN D. CAMPBELL (69) Trustee. Director and former Executive Vice President,
National Alliance of Business; former Vice President, Educational Testing
Services; former Dean, School of Business, Adelphi University; and former
Executive Director, Coalition of Essential Schools, Brown University.
CHARLES F. CHAPIN (67) Trustee. Former Group Vice President, Textron Corp.;
and former Director, Peoples Bank (Charlotte, NC).
K. DUN GIFFORD (57) Trustee. Chairman of the Board, Director, and Executive
Vice President, The London Harness Company; Managing Partner, Roscommon Capital
Corp.; Trustee, Cambridge College; Chairman Emeritus and Director, American
Institute of Food and Wine; Chief Executive Officer, Gifford Gifts of Fine
Foods; Chairman, Gifford, Drescher & Associates (environmental consulting);
President, Oldways Preservation and Exchange Trust (education); and former
Director, Keystone Investments, Inc. and Keystone Investment Management Company.
LEROY KEITH, JR. (57) Trustee. 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.
F. RAY KEYSER, JR. (69) Trustee and Advisor to the Boards of Trustees of
the Evergreen group of mutual funds. Counsel, Keyser, Crowley & Meub, P.C.;
Member, Governor's (VT) Council of Economic Advisers; Chairman of the Board and
Director, Central Vermont Public Service Corporation and Hitchcock Clinic;
Director, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power
Company, Inc., Grand Trunk Corporation, Central Vermont Railway, Inc., S.K.I.
Ltd., Sherburne Corporation, Union Mutual Fire Insurance Company, New England
Guaranty Insurance Company, Inc., and the Investment Company Institute; former
Governor of Vermont.
DAVID M. RICHARDSON (55) Trustee. Executive Vice President, 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.
RICHARD J. SHIMA (57) Trustee and Advisor to the Boards of Trustees of the
Evergreen group of mutual funds. Chairman, Environmental Warranty, Inc., and
Consultant, Drake Beam Morin, Inc. (executive outplacement); Director of
Connecticut Natural Gas Corporation, Trust Company of Connecticut, Hartford
Hospital, Old State House Association, and Enhance Financial Services, Inc.;
Chairman, Board of Trustees, Hartford Graduate Center; Trustee, Kingswood-
Oxford School and Greater Hartford YMCA; former Director, Executive Vice
President, and Vice Chairman of The Travelers Corporation.
ANDREW J. SIMONS (57) Trustee. Partner, Farrell, Fritz, Caemmerer, Cleary,
Barnosky & Armentano, P.C.; former President, Nassau County Bar Association;
former Associate Dean and Professor of Law, St. John's University School of Law.
Messrs. Amling, Austin, Bissell, Campbell, Chapin, Gifford, Keith, Keyser,
Richardson, Shima and Simons are Trustees or Directors of the thirty-one funds
in the Keystone group of mutual funds. Their addresses are 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
ROBERT J. JEFFRIES (74), 2118 New Bedford Drive, Sun City Center, Fl
Trustee Emeritus. Corporate consultant since 1967.
Mr. Jeffries has been serving as a Trustee Emeritus of eleven of the investment
companies since January 1, 1996 (excluded are Evergreen Variable Trust,
Evergreen Investment Trust, as well as the Keystone group of mutual funds).
EXECUTIVE OFFICERS
JOHN J. PILEGGI (37), 230 Park Avenue, Suite 910, New York, NY- President
and Treasurer. Consultant to BISYS Fund Services since 1996. Senior Managing
Director, Furman Selz LLC since 1992, Managing Director from 1984 to 1992.
GEORGE O. MARTINEZ (37), 3435 Stelzer Road, Columbus, OH-Secretary. Senior
Vice President/Director of Administration and Regulatory Services, BISYS Fund
Services since April 1995. Vice President/Assistant General Counsel, Alliance
Capital Management from 1988 to 1995. -------- * Messrs. Pettit and Bissell may
each be deemed to be an "interested person" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act").
The officers of the Trusts are all officers and/or employees of The BISYS Group,
Inc. ("BISYS"), except for Mr. Pileggi, who is a consultant to BISYS. BISYS is
an affiliate of Evergreen Keystone Distributor, Inc., the distributor of each
Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee who
is an "affiliated person" of either First Union National Bank, Evergreen Asset
Management Corp., Keystone Investment Management Company or their affiliates.
See "Investment Advisers". Currently, none of the Trustees is an "affiliated
person" as defined in the 1940 Act. The Trusts pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses, as follows:
NAME OF TRUST/FUND ANNUAL RETAINER MEETING FEE
Income and Growth $ 5,500 $ 300
Growth and Income 500 100
The Evergreen American
Retirement Trust 1,000 100
American Retirement
Small Cap
Evergreen Foundation Trust
Foundation 500 100
Tax Strategic 100
Evergreen Investment Trust* 15,500 2,000
Balanced
Utility
Value
Keystone Total Return**
* The annual retainer and meeting fee paid by Evergreen Investment Trust to each
Trustee are allocated among its fourteen series based on assets.
** See Item No. 7 below.
In addition:
(1) The Chairman of the Board of the Evergreen group of mutual funds is paid an
annual retainer of $5,000, and the Chairman of the Audit Committee is paid an
annual retainer of $2,000. These retainers are allocated among all the funds in
the Evergreen group of mutual funds, based upon assets.
(2) Each member of the Audit Committee of the Evergreen group of mutual funds is
paid an annual retainer of $500.
(3) Each non-affiliated Trustee of the Evergreen group of mutual funds is paid a
fee of $500 for each special telephonic meeting in which he participates,
regardless of the number of Funds for which the meeting is called.
(4) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $300 for each special telephonic meeting in which he participates,
regardless of the number of Funds for which the meeting is called.
(5) Each non-affiliated Trustee of the Evergreen group of mutual funds is paid a
fee of $250 for each special Committee of the Board telephone conference call
meeting of one or more Funds in which he participates.
(6) The members of the Advisory Committee to the Boards of Trustees of the
Evergreen group of mutual funds are paid an annual retainer of $17,500 and a fee
of $2,200 for each meeting of the Boards of Directors or Trustees of the
Evergreen group of mutual funds attended.
(7) Each non-affiliated Trustee of the Keystone group of mutual funds is paid an
annual retainer of $30,000, and a fee of $1,200 for each meeting attended, which
fees are charged to the Funds as follows:
Annual Meeting
Retainer Fee
Keystone Global Opportunities Fund $ 500 $ 20
Keystone Global Resources and Development Fund $ 2,000 $ 80
Keystone Omega Fund $ 2,000 $ 80
Keystone Small Company Growth Fund II $ 500 $ 20
Keystone Strategic Income Fund $ 2,000 $ 80
Keystone Tax Free Income Fund $ 500 $ 20
Keystone Quality Bond Fund (B-1) $ 2,000 $ 80
Keystone Diversified Bond Fund (B-2) $ 2,500 $ 100
Keystone High Income Bond Fund (B-4) $ 2,500 $ 100
Keystone Balanced Fund (K-1) $ 3,000 $ 120
Keystone Strategic Growth Fund (K-2) $ 2,000 $ 80
Keystone Growth and Income Fund (S-1) $ 500 $ 20
Keystone Mid-Cap Growth Fund (S-3) $ 500 $ 20
Keystone Small Company Growth Fund (S-4) $ 3,000 $ 120
Keystone International Fund Inc. $ 500 $ 20
Keystone Precious Metals Holdings, Inc. $ 500 $ 20
Keystone Tax Free Fund $ 5,500 $ 220
(8) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $600 for attendance at each Committee meeting held on the same day as a
regular meeting.
(9) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $1,200 for attendance at each Committee meeting held on a non-meeting
day.
(10) Any individual who has been appointed as a Trustee Emeritus of one or more
funds in the Evergreen group of mutual funds is paid one-half of the annual
retainer fees that are payable to regular Trustees, and one-half of the meeting
fees for each meeting attended.
Set forth below for each of the Trustees is the aggregate compensation
(and expenses) paid to such Trustees by each Trust for the fiscal year ended
March 31, 1997 (fiscal year ended November 30, 1996 for Total Return and January
31, 1997 for Income and Growth).
Aggregate Compensation From Each Trust
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name of Evergreen Evergreen Evergreen Evergreen Evergreen Keystone
Trustee Income Growth American Foundation Investment Fund for
and and Retirement Trust Trust Total
Growth Income Trust Return
Fund Fund
L.B.Ashkin $7,249 $1,108 $2,016 $1,764 $ 0 $ 0
F. Bam 6,949 1,021 1,816 1,564 0 0
R.J. Jeffries 3,239 409 800 550 0 0
J.S. Howell 7,410 1,187 2,032 2,034 26,007 0
G.M. 6,834 966 1,809 1,446 22,355 0
McDonnell
T.L. McVerry 7,238 1,111 2,017 1,790 24,902 0
W.W. Pettit 7,071 1,029 2,003 1,548 23,504 0
R.A. Salton 7,071 1,029 2,003 1,548 23,504 0
M.S. Scofield 7,071 1,029 2,003 1,548 23,504 0
F. Amling 0 0 0 0 0 0
C.A. Austin 0 0 0 0 0 0
G.S. Bissell 0 0 0 0 0 0
E.D. Campbell 0 0 0 0 0 0
C.F. Chapin 0 0 0 0 0 0
K.D. Gifford 0 0 0 0 0 0
L. Keith 0 0 0 0 0 0
F.R. Keyser 0 0 47 0 0 0
D.M. 0 0 0 0 0 0
Richardson
R.J. Shima 0 0 47 0 0 0
A.J. Simons 0 0 0 0 0 0
-------------------------------------
</TABLE>
Total Compensation From Trusts
and Fund Complex Paid To Trustees
J.S. Howell $77,400
R.A. Salton 71,200
M.S. Scofield 71,200
As of the date of this Statement of Additional Information, the officers
and Trustees of the Trusts owned as a group less than 1% of the outstanding
Class A, Class B, Class C or Class Y shares of any of the Funds.
Set forth below is information with respect to each person, who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of
each Fund's total outstanding shares and their aggregate ownership of the Fund's
total outstanding shares as of June 1, 1997.
<TABLE>
<CAPTION>
Name of % of
Name and Address Fund/Class No. of Shares Class
- ---------------- ---------- ------------- ------------
<S> <C> <C> <C>
MLPF&S for the sole benefit Balanced/C 7,441 24.29%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
A.G. Edwards & Sons Inc C/F Balanced/C 3,982 13.00%
Lottie Helen O'Leary
IRA Account
1139 Via Doble
Concord, CA 94521-4713
Fubs & Co. Febo Balanced/C 3,273 10.68%
FUNB NC F B O Goldston S. Bldg.
Supply Loan Acct.
Attn: Frank Pierce Loan Ofcr
PO Box 3008, 6th Floor
Raleigh, NC 27602-3008
Fubs & Co. Febo Balanced/C 2,194 7.16%
First Union National Bank-FL F/B/O
Leroy Selby, Jr. Loan Account
Attn: Carol Moening
Hwy 50 Orrice
Titusville, FL 32780
First Union National Bank Balanced/Y 30,977,338 54.21%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank Balanced/Y 26,083,390 45.64%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union Natl. Bank-FL C/F Income and 2,381 6.12%
Fred W. Cookson IRA Growth/C
6704 Willow Lane Braden Woods
Bradenton, FL 34202-9632
Fubs & Co. Febo Income and 2,570 6.61%
Last Stop Inc. Growth/C
8661 Colesville Rd #D149
Silver Spring, MD 20910-3933
MLPF&S for the sole benefit Growth and 172,906 22.97%
of its customers Income/C
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
First Union National Bank/EB/INT Growth and 4,296,089 19.69%
Cash Account Income/Y
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 29202-1911
First Union National Bank/EB/INT Growth and 11,712,074 53.69%
Reinvest Account Income/Y
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 29202-1911
First Union Natl Bank-VA C/F American Retirement/C 7,467 6.11%
Vincent A. Megna IRA
7017 Capitol View Dr.
McLean, VA 22101-2616
Charles Schwab & Co. Inc. American Retirement/Y 487,073 18.44%
Special Custody Account for the
Exclusive Benefit of Customers
Reinvest Account Mut Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
First Union National Bank/EB/INT American Retirement/Y 224,830 8.51%
Reinvest Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 29202-1911
MLPF&S for the sole benefit Small Cap/A 10,025 9.06%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Small Cap/A 6,037 5.46%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Small Cap/B 17,778 7.95%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Small Cap/C 11,918 5.33%
of its customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484
Nola Maddox Falcone Small Cap/Y 133,937 5.68%
70 Drake Road
Scarsdale, NY 10583-6447
Stephen A. Lieber Small Cap/Y 123,357 5.23%
1210 Greacen Point Rd.
Mamaroneck, NY 10543-4693
First Union National Bank/EB/INT Small Cap/Y 990,500 42.00%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT Small Cap/Y 406,529 17.24%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 28202-1911
Citibank NA Small Cap/Y 375,596 15.93%
Delta Airlines Master Trust
308235
Joe Villella Citicorp Services
1410 N. Westshore Blvd. F15
Tampa, FL 33607-4519
Charles Schwab & Co. Inc. Foundation/A 1,065,330 7.71%
Special Custody Account For the
Exclusive Benefit of Customers
Reinvest Account Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
MLPF&S for the sole benefit Foundation/C 389,470 22.97%
of its customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484
Charles Schwab & Co. Inc. Foundation/Y 3,409,898 6.86%
Special Custody Account for
the Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
First Union National Bank/EB/INT Foundation/Y 4,589,976 9.23%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 29202-1911
First Union National Bank/EB/INT Foundation/Y 16,323,890 32.84%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 29202-1911
Mac & Co. Foundation/Y 6,561,937 13.20%
Aetna Retirement Services
Central Valuation Unit
Attn: Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Fubs & Co. Febo Tax Strategic /A 78,331 5.35%
Ray D. Russenberger
PO Box 12063
Pensacola, FL 32590-2063
MLPF&S for the sole benefit Tax Strategic /C 150,045 40.70%
of its customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484
Fubs & Co. Febo Tax Strategic /C 21,749 5.90%
Hossein Golabachi and
Margot R. Golabachi
4848 Old Belair Lane
Grovetown, GA 30813-9729
Fubs & Co. Febo Tax Strategic /C 46,040 12.49%
Brenda Dykgraaf
9710 Wildoak Drive
Windermere, FL 34786-8335
Nola Maddox Falcone Tax Strategic /Y 102,130 9.01%
70 Drake Rd.
Scarsdale, NY 10583-6447
Constance E. Lieber Tax Strategic /Y 59,814 5.28%
1210 Greacen Point Rd
Mamaroneck, NY 10543-4613
Stephen A. Lieber Tax Strategic/Y 518,329 45.72%
1210 Greacen Point Rd
Mamaroneck, NY 10543-4613
Fubs & Co. Febo Utility/C 6,315 19.31%
Elsie B. Strom
Lewis F. Strom
906 Wells Street
Bennettsville, SC 29512-3240
Fubs & Co. Febo Utility/C 3,816 11.67%
Laura Alyce Hulbert
Ronald F. Hulbert
7900 Latchington Court
Charlotte, NC 28227-3190
Fubs & Co. Febo Utility/C 1,772 5.42%
Evelyn L. Smith
Creg Smith
3294 Myrtle Street
Hapeville, GA 30354-1418
Fubs & Co. Febo Utility/C 2,056 6.29%
Max Ray and
Jeralyne Ray
Route 2 Box 111
Greenmountain, NC 28740-9618
Fubs & Co. Febo Utility/C 2,156 6.59%
Thomas McKinney and
Lottie McKinney
170 Scott Blvd.
Tyrone, GA 30290-9767
Khalid Iqbal C/F Utility/Y 7,156 5.31%
Fatima Khalid Iqbal
Unif Gift Min Act KY
401 Bogle St.
Somerset, KY 42503-2870
First Union National Bank Utility/Y 47,610 35.33%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank Utility/Y 72,869 54.08%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank-FL C/F Value/C 16,393 16.87%
Irving Decter IRA
418 Mariner Dr.
Jupiter, FL 33447
FUBS & Co. FEBO Value/C 6,253 6.44%
Clara Caudill
812 N. Ocean Blvd. #402
Pompano Beach, FL 33062-4014
First Union National Bank Value/Y 786,882 33.24%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank Value/Y 112,241 65.51%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
MLPF&S for the sole benefit Key Tot Return/A 136,080 5.91%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Key Tot Return/B 438,214 10.14%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
SSN/TIN: 866168037 Key Tot Return/C 134,649 12.89%
Lavedna Ellingson
Douglas Ellingson TTEES
Lavedna Ellingson Marital Trust
U/A DTD 5-1-86
8510 McClintock
Tempe, AZ 85284-2527
MLPF&S for the sole benefit Key Tot Return/C 129,186 12.36%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Key Tot Return/C 132,989 5.31%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
- - ---------------------------------
</TABLE>
First Union National Bank ("FUNB") and its affiliates act in various
capacities for numerous accounts. As a result of its ownership on June 1, 1997
of 50.11% the shares of Small Cap, 35.17% of Growth and Income, 83.15% of
Balanced and 63.10% of Value, FUNB may be deemed to "control" these Funds as
that term is defined in the 1940 Act.
- --------------------------------------------------------------------------------
INVESTMENT ADVISERS
(SEE ALSO "MANAGEMENT OF THE FUND" IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
The investment adviser of Income and Growth, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York ("Evergreen Asset" or the "Adviser"). Evergreen Asset
is owned by FUNB (the"Adviser") which, in turn, is a subsidiary of First Union
Corporation ("First Union"), a bank holding company headquartered in Charlotte,
North Carolina.
The investment adviser of Balanced, Utility and Value is FUNB which
provides investment advisory services through its Capital Management Group.
The investment adviser of Total Return is Keystone Investment Management
Company ("Keystone" or the "Adviser"), a Delaware corporation, with offices at
200 Berkeley Street, Boston, Massachusetts. Keystone is an indirectly owned
subsidiary of FUNB.
The Directors of Evergreen Asset are Richard K. Wagoner and Barbara I.
Colvin. The executive officers of Evergreen Asset are Stephen A. Lieber,
Chairman and Co-Chief Executive Officer, Nola Maddox Falcone, President and
Co-Chief Executive Officer, and Theodore J. Israel, Jr., Executive Vice
President. The Directors of Keystone are Donald McMullen, William M. Ennis, II
and Barbara I. Colvin. The executive officers of Keystone are Edward F. Godfrey,
Senior Vice President, Chief Financial Officer and Treasurer, and Rosemary D.
Van Antwerp, Senior Vice President, General
Counsel and Secretary.
On June 30, 1994, Evergreen Asset and Lieber & Company ("Lieber"), were
acquired by First Union through certain of its subsidiaries. Contemporaneously
with the acquisition, Income and Growth, Growth and Income, American Retirement,
Small Cap, Foundation and Tax Strategic entered into new investment advisory
agreements with Evergreen Asset and into distribution agreements with Evergreen
Keystone Distributor, Inc. (formerly known as Evergreen Funds Distributor, Inc.
(the "Distributor")), an affiliate of BISYS Fund Services. At that time,
Evergreen Asset also entered into new sub-advisory agreements with Lieber
pursuant to which Lieber provides certain services to Evergreen Asset in
connection with its duties as investment adviser. The new advisory and
sub-advisory agreements were approved by the shareholders of Income and Growth,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
at their meetings held on June 23, 1994, and became effective on June 30, 1994.
On September 6, 1996, First Union and FUNB entered into an Agreement
and Plan of Acquisition and Merger (the "Merger") with Keystone Investments,
Inc. ("Keystone Investments"), the corporate parent of Keystone, which provided,
among other things, for the merger of Keystone Investments with and into a
wholly-owned subsidiary of FUNB. The Merger was consummated on December 11,
1996. Keystone continues to provide investment advisory services to the Keystone
Family of Funds. Contemporaneously with the Merger, Total Return entered into a
new investment advisory agreement with Keystone and into a principal
underwriting agreement with the Distributor.
Under the Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registrations under the Securities Act of
1933, as amended, and the 1940 Act, printing prospectuses (for existing
shareholders) as they are updated, state qualifications, mailings, brokerage,
custodian and stock transfer charges, printing, legal and auditing expenses,
expenses of shareholder meetings and reports to shareholders. Notwithstanding
the foregoing, each Adviser will pay the costs of printing and distributing
prospectuses used for prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
<TABLE>
<CAPTION>
BALANCED Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
Advisory Fee $1,170,691 $4,765,912 $4,870,748 $4,621,512
========== ========== ============ =========
INCOME Year Ended Year Ended Year Ended
AND GROWTH 1/31/97 1/31/96 1/31/95
Advisory Fee $8,823,541 $9,343,195 $8,542,289
=========== ========== ==========
INCOME Year Ended Year Ended Year Ended
AND GROWTH 1/31/97 1/31/96 1/31/95
Expense $ 0 $ 53,576
Reimbursement
Three Months Year Ended Year Ended Year Ended
FOUNDATION Ended 3/31/97 12/31/96 12/31/95 12/31/94
Advisory Fee $3,246,270 $11,140,780 $5,387,186 $2,551,768
========= ========= ========= =========
Expense
Reimbursement $ 0 $ 0 $ 11,064
========= ========= =========
SMALL CAP Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $ 63,333 $ 45,397 $29,075
Waiver ($ 63,333) ($ 45,397) ($29,075)
---------- ----------- ----------
Net Advisory Fee $ 0 $ 0 $ 0
========= ========= ==========
Expense
Reimbursement $133,406 $164,584 $63,704
----------- ----------- ----------
UTILITY Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $725,733 $456,021 $153,458
Waiver ($396,483) ($299,028) ($152,038)
----------- ----------- -----------
Net Advisory Fee $329,300 $156,993 $ 1,420
========= ========= =========
Expense
Reimbursement $ 0 $ 51,894 $ 106,957
----------- ----------- -----------
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $5,287,338 $1,332,685 $684,891
========= ========= =======
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Expense
Reimbursement $ 5,000 $ 38,106
------------ -----------
AMERICAN Three Months Year ended Year Ended Year Ended
RETIREMENT Ended 3/31/97 12/31/96 12/31/95 12/31/94
Advisory Fee $255,438 $549,949 $297,242 $292,628
Waiver $ 0 ($ 24,841)
------------- -----------
Net Advisory Fee $225,438 $525,108
========
Expense
Reimbursement $ 90,000 $ 3,400 $ 76,464
------------- ------------ ---------
TAX STRATEGIC Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/94
Advisory Fee $143,945 $354,958 $140,386 $65,915
Waiver $ 0 ($ 90,551) ($96,975) ($65,915)
------------- ------------- ------------ -------------
Net Advisory Fee $143,945 $264,407 $43,411 $ 0
========= = ======== ======== ============
Expense
Reimbursement $ 0 $ 11,339 $85,543 $ 3,777
------------ ----------- ------------
VALUE Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $6,950,730 $5,120,579 $3,850,673
TOTAL RETURN Year Ended Year Ended Year Ended
11/30/96 11/30/95 11/30/94
Advisory Fee $448,266 $300,290 $242,315
</TABLE>
Utility commenced operations on January 4, 1994 and, therefore, the
first year's figures set forth in the table above reflect for Utility investment
advisory fees paid for the period from commencement of operations through
December 31, 1994.
Expense Limitations
Evergreen Asset has voluntarily agreed to reimburse Small Cap to the
extent that any of the Fund's aggregate operating expenses (including the
Adviser's fee but excluding interest, taxes, brokerage commissions, Rule 12b-1
distribution fees and shareholder servicing fees and extraordinary expenses)
exceed 1.50% of its average net assets until such time as said Fund's net assets
reach $15 million.
Keystone has voluntarily agreed to limit Total Return's Class A expenses to
1.50% of the average daily net assets of Class A shares, such expense limitation
to be reevaluated on a calendar month basis and to be modified or eliminated in
the future at the discretion of Keystone.
The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignments. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder.
The Investment Advisory Agreements with respect to Income and Growth,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
were approved by each Fund's shareholders on June 23, 1994, became effective on
June 30, 1994, and were last approved by the Trustees of each Trust on June 17,
1997.
The Investment Advisory Agreement with respect to Balanced, Utility and
Value dated February 28, 1985, and amended from time to time thereafter, was
last approved by the Trustees of Evergreen Investment Trust on June 17, 1997.
The Investment Advisory Agreement with respect to Total Return was
approved by the Fund's shareholders on December 9, 1996, and became effective on
December 11, 1996.
Each Investment Advisory Agreement will continue in effect from year to
year provided that its continuance is approved annually by a vote of a majority
of the Trustees of each Trust including a majority of those Trustees who are not
parties thereto or "interested persons" (as defined in the 1940 Act) of any such
party (the "Independent Trustees"), cast in person at a meeting duly called for
the purpose of voting on such approval or a majority of the outstanding voting
shares of each Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.
Although the investment objectives of the Funds are not the same, and their
investmentdecisions are made independently of each other, they rely upon the
same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, each
Adviser attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sales transactions to be effected between each Fund and the
other registered investment companies for which Evergreen Asset, FUNB or
Keystone act as investment adviser or between the Fund and any advisory clients
of Evergreen Asset, FUNB, Keystone or Lieber. Each Fund may from time to time
engage in such transactions but only in accordance with these procedures and if
they are equitable to each participant and consistent with each participant's
investment objectives.
Prior to July 7, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the period ended July 7, 1995, and the fiscal years ended
December 31, 1994 and 1993 Balanced incurred $392,991, $779,584 and $597,752,
respectively, in administrative service costs. For the period ended July 7,
1995, and the period from January 4, 1994 (commencement of operations) to
December 31, 1994, Utility incurred $10,384 and $16,382, respectively, in
administrative service costs, all of which were voluntarily waived. For the
period ended July 7, 1995, and for the fiscal years ended December 31, 1994 and
1993, Value incurred $374,216, $649,487, and $526,836, respectively, in
administrative service costs.
Since July 8, 1995, Evergreen Asset provided administrative services to
each of the portfolios of Evergreen Investment Trust for a fee based on the
average daily net assets of each fund administered by Evergreen Asset for which
Evergreen Asset or FUNB also served as investment adviser, calculated daily and
payable monthly at the following annual rates: .050% on the first $7 billion;
.035% on the next $3 billion; .030% on the next $5 billion; .020% on the next
$10 billion; .015% on the next $5 billion; and .010% on assets in excess of $30
billion. For the period from July 8, 1995 through December 31, 1995, and the
fiscal year ended December 31, 1996 (and for the three month period ended March
31, 1997 for Balanced), Balanced, Utility and Value incurred the following
administration costs: Balanced $283,139, $459,486, and $91,488, respectively;
Utility $39,330 and $70,215, respectively; and Value $323,050 and $670,060,
respectively.
BISYS Fund Services, an affiliate of the Distributor, serves as
sub-administrator to each Fund and is entitled to receive a fee from each Fund
calculated daily and payable monthly at an annual rate based on the aggregate
average daily net assets of the mutual funds administered by EKIS for which
FUNB, Evergreen Asset, or any affiliate of First Union National Bank also serves
as investment adviser, calculated in accordance with the following schedule:
.0100% on the first $7 billion; .0075% on the next $3 billion; .0050% on the
next $15 billion; and .0040% on assets in excess of $25 billion. The total
assets of the mutual funds administered by EKIS for which Evergreen Asset, FUNB
or Keystone serve as investment adviser were approximately $29 billion as of
March 31, 1997. Effective March 11, 1997, Evergreen Keystone Investment
Services, Inc. ("EKIS") began providing administrative services to each of the
portfolios of Evergreen Investment Trust at the same rates as described above.
- --------------------------------------------------------------------------------
DISTRIBUTION PLANS AND AGREEMENTS
- --------------------------------------------------------------------------------
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, Class B Class and Class C shares and are charged as
class expenses, as accrued. The distribution fees attributable to the Class B
shares and Class C shares are designed to permit an investor to purchase such
shares through broker-dealers without the assessment of a front-end sales
charge, and, in the case of Class C shares, without the assessment of a
contingent deferred sales charge after the first year following the month of
purchase, while at the same time permitting the Distributor to compensate
broker-dealers in connection with the sale of such shares. In this regard, the
purpose and function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and the Class C shares are the
same as those of the front-end sales charge and distribution fee with respect to
the Class A shares in that in each case the sales charge and/or distribution fee
provide for the financing of the distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plans and the purposes for which such expenditures
were made to the Trustees of each Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of the disinterested
Trustees are committed to the discretion of such disinterested Trustees then in
office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the SEC make payments for distribution
services to the Distributor; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of each Trust or by vote
of the holders of a majority of the outstanding voting securities of that Class
and, in either case, by a majority of the Independent Trustees of the Trust who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
The Plans permit the payment of fees to brokers and others for distribution
and shareholder-related administrative services and to broker-dealers,
depository institutions, financial intermediaries and administrators for
administrative services as to Class A, Class B and Class C shares. The Plans are
designed to (i) stimulate brokers to provide distribution and administrative
support services to each Fund and holders of Class A, Class B and Class C shares
and (ii) stimulate administrators to render administrative support services to
the Fund and holders of Class A, Class B and Class C shares. The administrative
services are provided by a representative who has knowledge of the shareholder's
particular circumstances and goals, and include, but are not limited to
providing office space, equipment, telephone facilities, and various personnel
including clerical, supervisory, and computer, as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding Class A, Class B and
Class C shares; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests for its Class A, Class B and Class C shares.
In addition to the Plans, Balanced, Utility and Value have each adopted
a Shareholder Services Plan whereby shareholder servicing agents may receive
fees from the Fund for providing services which include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance, and communicating or facilitating purchases and redemptions of Class
B and Class C shares of the Fund.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. With respect to Balanced,
Utility, and Value, amendments to the Shareholder Services Plan require a
majority vote of the disinterested Trustees but do not require a shareholders
vote. Any Plan, Shareholder Services Plan or Distribution Agreement may be
terminated (i) by a Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
Class or by a majority vote of the disinterested Trustees, or (ii) by the
Distributor. To terminate any Distribution Agreement, any party must give the
other parties 60 days' written notice; to terminate a Plan only, the Fund need
give no notice to the Distributor. Any Distribution Agreement will terminate
automatically in the event of its assignment.
Income and Growth, Growth and Income, American Retirement, Small Cap,
Foundation, Tax Strategic and Total Return incurred the following Distribution
Plans and Shareholder Services Plan fees:
Distribution Fees:
INCOME AND GROWTH. For the fiscal period from January 3, 1995 (commencement
of class operations) through January 31, 1995, the fiscal years ended January
31, 1996 and 1997, $7, $4,915 and $18,106 on behalf of its Class A shares, $126,
$46,636 and $189,323, respectively on behalf of its Class B shares, and $7,
$1,516 and $6,382, respectively on behalf of its Class C shares.
GROWTH AND INCOME. For the fiscal period from January 3, 1995 (commencement
of class operations) through December 31, 1995 and the fiscal year ended
December 31, 1996, $22,055 and $122,222, respectively, on behalf of its Class A
shares, $159,114 and $934,314, respectively, on behalf of its Class B shares,
and $6,902 and $36,055, respectively, on behalf of its Class C shares.
AMERICAN RETIREMENT. For the fiscal period from January 3, 1995
(commencement of class operations) through December 31, 1995, the fiscal year
ended December 31, 1996 and the three month period ended March 31, 1997, $659,
$14,426 and $7,950, respectively, on behalf of its Class A shares; $9,137,
$199,829 and $124,370, respectively, on behalf of its Class B shares; and $187,
$5,713 and $2,995, respectively, on behalf of its Class C shares.
SMALL CAP. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, $340 and $618, respectively, on behalf of its Class A shares, $1,298
and $3,199, respectively, on behalf of its Class B shares, and $111 and $267,
respectively, on behalf of its Class C shares.
FOUNDATION. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997, $116,677, $414,289 and
$135,502, respectively on behalf of its Class A shares; $972,541, $3,487,899 and
$1,113,659, respectively, on behalf of its Class B shares; and $37,823, $152,488
and $51,839, respectively, on behalf of its Class C shares.
TAX STRATEGIC. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997, $2,582, $16,426 and
$8,004, respectively, on behalf of its Class A shares; $21,725, $131,282 and
$62,195, respectively, on behalf of its Class B shares; and $1,292, $16,493 and
$8,824, respectively, on behalf of its Class C shares.
TOTAL RETURN. For the fiscal years ended November 30, 1994, 1995 and 1996,
$44,889, $101,222 and $195,178, respectively, on behalf of its Class B shares,
and $36,580, $60,201 and $84,812, respectively, on behalf of its Class C shares.
Shareholder Services Fees:
INCOME AND GROWTH. For the fiscal period from January 3, 1995 (commencement
of class operations) through January 31, 1995, the fiscal years ended January
31, 1996 and 1997, shareholder services fees on behalf of $42, $15,546 and
$63,108, respectively, on behalf of its Class B shares, and $3, $505 and $2,127,
respectively, on behalf of its Class C shares.
GROWTH AND INCOME. For the fiscal period from January 3, 1995 (commencement
of class operations) through December 31, 1995 and the fiscal year ended
December 31, 1996, shareholder services fees of $53,139 and $311,235 on behalf
of its Class B shares, and $2,301 and $12,018, respectively, on behalf of its
Class C shares.
AMERICAN RETIREMENT. For the fiscal period from January 3, 1995
(commencement of class operations) through December 31, 1995, the fiscal year
ended December 31, 1996 and the three month period ended March 31, 1997, $3,045,
$66,610 and $41,457, respectively, on behalf of its Class B shares; and $62,
$1,904 and $998, respectively, on behalf of its Class C shares.
SMALL CAP. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, $433 and $1,066, respectively, on behalf of its Class B shares, and
$37 and $89, respectively, on behalf of its Class C shares.
FOUNDATION. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997, $324,180, $1,162,633 and
$371,220, respectively, on behalf of its Class B shares; and $12,608, $50,829
and $17,280, respectively, on behalf of its Class C shares.
TAX STRATEGIC. For the fiscal period from January 3, 1995 (commencement of
class operations)through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997 , $7,242, $43,761 and
$20,732, respectively, on behalf of its Class B shares, and $431, $5,498 and
$2,941, respectively, on behalf of its Class C shares.
TOTAL RETURN. For the fiscal years ended November 30, 1994, 1995 and 1996,
$61,955, $61,454 and $75,270, respectively, on behalf of its Class A shares,
$14,587, $33,741, and $65,059, respectively, on behalf of Class B shares; and
$20,893, $20,066, and $28,183, respectively, on behalf of its Class C shares.
Balanced, Value and Utility incurred the following Distribution Services
Plans and Shareholder Services Plans fees:
Distribution Fees:
BALANCED. For the fiscal years ended December 31, 1994, 1995 and 1996 and
the three month period ended March 31, 1997, $102,621, $102,400, $107,023 and
$26,750, respectively, on behalf of Class A shares; and $670,202, $784,084,
$810,803 and $205,485, respectively, on behalf of Class B shares; for the period
from September 2, 1994 (commencement of operations) to December 31, 1994, and
the fiscal years ended December 31, 1995 and 1996 and the three month period
ended March 31, 1997, $310, $1,811, $1,883 and $710, respectively, on behalf of
Class C shares.
VALUE. For the fiscal years ended December 31, 1994, 1995 and 1996, $473,347,
$603,896 and $767,254, respectively, on behalf of Class A shares, and $621,330,
$916,221 and $1,255,600, respectively, on behalf of Class B shares; for the
period from September 2, 1994 (commencement of operations) to December 31, 1994,
and the fiscal years ended December 31, 1995 and 1996, $716, $4,798 and $8,706,
respectively, on behalf of Class C shares.
UTILITY. For the fiscal years ended December 31, 1994, 1995 and 1996, $9,658,
$133,582 and $252,753, respectively, on behalf of Class A shares, and $169,007,
$234,357 and $283,875, respectively, on behalf of Class B shares; for the period
from September 2, 1994 (commencement of operations) to December 31, 1994, and
the fiscal years ended December 31, 1995 and 1996, $232, $1,271 and $2,843,
respectively, on behalf of Class C shares.
Shareholder Services Plans fees:
BALANCED. For the fiscal years ended December 31, 1994, 1995 and 1996 and the
three month period ended March 31, 1997, $83,641, $261,361, $270,267 and
$68,495, respectively, on behalf of Class B shares, and $103, $604, $628 and
$237, respectively, on behalf of Class C shares.
VALUE. For the fiscal years ended December 31, 1994, 1995 and 1996, $83,225,
$305,407 and $418,533, respectively, on behalf of Class B shares; and $239,
$1,599 and $2,902, respectively, on behalf of Class C shares.
UTILITY. For the fiscal years ended December 31, 1994, 1995 and 1996, $24,141,
$78,119 and $94,625, respectively, on behalf of Class B shares; and $77, $424
and $948, respectively, on behalf of Class C shares.
- --------------------------------------------------------------------------------
ALLOCATION OF BROKERAGE
- --------------------------------------------------------------------------------
Decisions regarding each Fund's portfolio are made by its Adviser, subject
to the supervision and control of the Trustees. Orders for the purchase and sale
of securities and other investments are placed by employees of each Fund's
Adviser. In general, the same individuals perform the same functions for the
other funds managed by each Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
A substantial portion of the transactions in equity securities for each
Fund will occur on domestic stock exchanges. Transactions on stock exchanges
involve the payment of brokerage commissions. In transactions on stock exchanges
in the United States, these commissions are negotiated, whereas on many foreign
stock exchanges these commissions are fixed. In the case of securities traded in
the foreign and domestic over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup.
Over-the-counter transactions will generally be placed directly with a principal
market maker, although the Fund may place an over-the-counter order with a
broker-dealer if a better price (including commission) and execution are
available.
It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. Each Adviser will also consider such factors as the price of the
securities and the size and difficulty of execution of the order. If these
objectives may be met with more than one firm, the Adviser will also consider
the availability of statistical and investment data and economic facts and
opinions helpful to the Fund. To the extent that receipt of these services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the SEC, Lieber may be compensated for
effecting transactions in portfolio securities for a Fund on a national
securities exchange provided the conditions of the rules are met. Each Fund
advised by Evergreen Asset has entered into an agreement with Lieber authorizing
Lieber to retain compensation for brokerage services. In accordance with such
agreement, it is contemplated that Lieber, a member of the New York and American
Stock Exchanges, will, to the extent practicable, provide brokerage services to
Growth and Income, Income and Growth, American Retirement, Small Cap, Foundation
and Tax Strategic with respect to substantially all securities transactions
effected on the New York and American Stock Exchanges. In such transactions, the
Adviser will seek the best execution at the most favorable price while paying a
commission rate no higher than that offered to other clients of Lieber or that
which can be reasonably expected to be offered by an unaffiliated broker-dealer
having comparable execution capability in a similar transaction. However, no
Fund will engage in transactions in which Lieber would be a principal. While no
Fund advised by Evergreen Asset contemplates any ongoing arrangements with other
brokerage firms, brokerage business may be given from time to time to other
firms. In addition, the Trustees have adopted procedures pursuant to Rule 17e-1
under the 1940 Act to ensure that all brokerage transactions with Lieber, as an
affiliated broker-dealer, are fair and reasonable.
The Fund's Board of Trustees has determined that the Fund may consider
sales of Fund shares as a factor in the selection of brokers to execute
portfolio transactions, subject to the requirements of best execution described
above. The Fund expects that purchases and sales of securities will usually be
effected 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 mark-down. 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. Under its Investment
Advisory Agreement, Keystone is permitted to pay higher brokerage commissions
for brokerage and research services in accordance with Section 28(e) of the
Securities Exchange Act of 1934. In the event Keystone follows such a practice,
it will do so on a basis that is fair and equitable to the Total Return Fund.
Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for Growth and Income, Income and Growth, American
Retirement, Small Cap, Foundation and Tax Strategic will accrue to FUNB and to
its ultimate parent, First Union. The Investment Advisory Agreements do not
provide for a reduction of the Adviser's fee with respect to any Fund by the
amount of any profits earned by Lieber from brokerage commissions generated by
portfolio transactions of the Fund.
The following chart shows: (i) the brokerage commissions paid by each
Fund advised by Evergreen Asset during their last three fiscal years; (ii) the
amount and percentage thereof paid to Lieber; and (iii) the percentage of the
total dollar amount of all portfolio transactions with respect to which
commissions have been paid which were effected by Lieber:
<TABLE>
<CAPTION>
INCOME AND GROWTH Year Ended Year Ended Year Ended
1/31/97 1/31/96 1/31/95
<S> <C> <C> <C>
Total Brokerage $3,529,313 $3,255,068 $3,755,606
Commissions
Dollar Amount and % $2,835,293 $2,982,640 $3,465,900
paid to Lieber 80% 92% 92%
% of Transactions
Effected by Lieber 47% 90% 97%
FOUNDATION Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/97
Total Brokerage $83,153 $689,724 $393,121 $282,250
Commissions
Dollar Amount and % $81,365 $680,252 $380,226 $ 276,985
paid to Lieber 98% 99% 98% 98%
% of Transactions
Effected by Lieber 97% 96% 97% 98%
SMALL CAP Year Ended Year Ended Period Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $14,647 $5,968 $ 3,998
Commissions
Dollar Amount and % $13,246 $4,863 $ 3,618
paid to Lieber 90% 81% 90%
% of Transactions
Effected by Lieber 87% 77% 90%
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $519,064 $210,923 $80,871
Commissions
Dollar Amount and % $429,888 $160,659 $71,721
paid to Lieber 83% 76% 89%
% of Transactions 78% 74% 88%
AMERICAN RETIREMENT Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/94
Total Brokerage $14,54 $55,581 $57,216 $203,922
Commissions
Dollar Amount and % $11,925 $51,579 $53,276 $202,838
paid to Lieber 82% 93% 93% 99%
% of Transactions
Effected by Lieber 68% 89% 82% 99%
TAX STRATEGIC Three Months Year Ended Year Ended Period Ended
Ended 3/31/97 12/31/96 12/31/9 12/31/94
Total Brokerage $11,34 $51,273 $37,374 $24,872
Commissions
Dollar Amount and % $10,75 $50,033 $35,954 $24,072
paid to Lieber 95% 98% 96% 97%
% of Transactions
Effected by Lieber 97% 97% 94% 98%
</TABLE>
Income and Growth changed its fiscal year end from March 31 to January
31 during the first period covered by the foregoing table. Accordingly, the
commissions reported in the foregoing table reflect for Income and Growth the
period from April 1, 1994 to January 31, 1995.
American Retirement, Balanced, Foundation and Tax Strategic have
changed their fiscal year ends to March 31 from December 31, effective March 31,
1997.
Balanced, Value, Utility and Total Return did not pay any commissions
to Lieber. For the three month period ended March 31, 1997 and the fiscal years
ended December 31, 1996, 1995 and 1994, Balanced paid $256,092, $522,227,
$615,041 and $450,569, respectively, in commissions on brokerage transactions.
For the fiscal year ended December 31, 1996 and 1995, and for the period from
January 4, 1994 (commencement of operations) to December 31, 1994, Utility paid
$323,978, $272,806 and $66,294, respectively, in commissions on brokerage
transactions. For the fiscal years ended December 31, 1996, 1995 and 1994, Value
paid $3,164,292, $1,644,077 and $1,437,338, respectively, in commissions on
brokerage transactions. For the fiscal years ended November 30, 1996, 1995 and
1994, Total Return paid $227,013, $92,665 and $65,514, respectively, in
commissions on brokerage transactions.
- --------------------------------------------------------------------------------
ADDITIONAL TAX INFORMATION
(SEE ALSO "OTHER INFORMATION - DIVIDENDS,
DISTRIBUTIONS AND TAXES" IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (i)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; (ii) derive less than 30% of its gross
income from the sale or other disposition of securities, options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(iii) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions will be taxable as described above to shareholders (who
are not exempt from tax), whether made in shares or in cash. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for federal income tax purposes in each share so received equal to
the net asset value of a share of a Fund on the reinvestment date.
Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable as ordinary income or
capital gain as described above to shareholders (who are not exempt from tax),
even though, from an investment standpoint, it may constitute a return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution. The price of shares
purchased at that time includes the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will then receive what is in
effect a return of capital upon the distribution which will nevertheless be
taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
If more than 50% of the value of a Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and a Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount a Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on a Fund's investments.
The shareholder will be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the above-described tax credit and deductions are
subject to certain limitations.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Strategic
With respect to Tax Strategic, to the extent that the Fund distributes
exempt interest dividends to a shareholder, interest on indebtedness incurred or
continued by such shareholder to purchase or carry shares of the Fund is not
deductible. Furthermore, entities or persons who are "substantial users" (or
related persons) of facilities financed by "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds) should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is defined generally as including a "non-exempt person" who regularly uses
in its trade or business a part of a facility financed from the proceeds of
industrial development bonds.
The percentage of the total dividends paid by the Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
The following information supplements that set forth in each Fund's
Prospectus under the subheading "How to Buy Shares - How the Funds Value Their
Shares" in the Section entitled "Purchase and Redemption of Shares."
The public offering price of shares of a Fund is its net asset value
plus, in the case of Class A shares, a sales charge which will vary depending
upon the purchase alternative chosen by the investor, as more fully described in
the Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales
Charge Alternative." On each Fund business day on which a purchase or redemption
order is received by a Fund and trading in the types of securities in which a
Fund invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any weekday,
exclusive of national holidays on which the Exchange is closed and Good Friday.
For each Fund, securities for which the primary market is on a domestic
or foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked prices and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
The respective per share net asset values of the Class A, Class B, Class C
and Class Y shares are expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the Class B and Class
C shares may be lower than the per share net asset value of the Class A shares
(and, in turn, that of Class A shares may be lower than Class Y shares) as a
result of the greater daily expense accruals, relative to Class A and Class Y
shares, of Class B and Class C shares relating to distribution services fees
(and, with respect to Balanced, Utility and Value, Shareholder Service Plan fee)
and, to the extent applicable, transfer agency fees and the fact that Class Y
shares bear no additional distribution, shareholder service or transfer agency
related fees. While it is expected that, in the event each Class of shares of a
Fund realizes net investment income or does not realize a net operating loss for
a period, the per share net asset values of the four Classes will tend to
converge immediately after the payment of dividends, which dividends will differ
by approximately the amount of the expense accrual differential among the
Classes, there is no assurance that this will be the case. In the event one or
more Classes of a Fund experiences a net operating loss for any fiscal period,
the net asset value per share of such Class or Classes will remain lower than
that of Classes that incurred lower expenses for the period.
To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York.
Furthermore, trading takes place in various foreign markets on days
which are not business days in New York and on which the Fund's net asset value
is not calculated. Such calculation does not take place contemporaneously with
the determination of the prices of the majority of the portfolio securities used
in such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the Exchange
will not be reflected in a Fund's calculation of net asset value unless the
Trustees deem that the particular event would materially affect net asset value,
in which case an adjustment will be made. Securities transactions are accounted
for on the trade date, the date the order to buy or sell is executed. Dividend
income and other distributions are recorded on the ex-dividend date, except
certain dividends and distributions from foreign securities which are recorded
as soon as the Fund is informed after the ex-dividend date.
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The following information supplements that set forth in each Fund's
Prospectus under the heading "Purchase and Redemption of Shares - How To Buy
Shares."
General
Shares of each Fund will be offered on a continuous basis at a price equal
to their net asset value plus an initial sales charge at the time of purchase
(the "front-end sales charge alternative"), with a contingent deferred sales
charge (the deferred sales charge alternative"), or without any front-end sales
charge, but with a contingent deferred sales charge imposed only during the
first year after the month of purchase (the "level-load alternative"), as
described below. Class Y shares which, as described below, are not offered to
the general public, are offered without any front-end or contingent sales
charges. Shares of each Fund are offered on a continuous basis through (i)
investment dealers that are members of the National Association of Securities
Dealers, Inc. and have entered into selected dealer agreements with the
Distributor ("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered into selected
agent agreements with the Distributor ("selected agents"), or (iii) the
Distributor. The minimum for initial investment is $1,000; there is no minimum
for subsequent investments. The subscriber may use the Application available
from the Distributor for his or her initial investment. Sales personnel of
selected dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A, Class B or Class C shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Application. Payment for shares
purchased by telephone can be made only by Electronic Funds Transfer from a bank
account maintained by the shareholder at a bank that is a member of the National
Automated Clearing House Association ("ACH"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a Fund business
day, the order to purchase shares is automatically placed the same Fund business
day for non-money market funds, and two days following the day the order is
received for money market funds, and the applicable public offering price will
be the public offering price determined as of the close of business on such
business day. Full and fractional shares are credited to a subscriber's account
in the amount of his or her subscription. As a convenience to the subscriber,
and to avoid unnecessary expense to a Fund, stock certificates representing
shares of a Fund are not issued. This facilitates later redemption and relieves
the shareholder of the responsibility for and inconvenience of lost or stolen
certificates.
Alternative Purchase Arrangements
Each Fund issues four classes of shares: (i) Class A shares, which are sold
to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; (iii) Class C shares, which are sold to investors choosing the
level-load sales charge alternative; and (iv) Class Y shares, which are offered
only to (a) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (b) certain investment advisory clients
of the Advisers and their affiliates, and (c) institutional investors. The four
Classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (i) only Class A, Class B and Class C shares are subject to a Rule
12b-1 distribution fee, (ii) Class B and Class C shares of Balanced, Utility and
Value are subject to a Shareholder Service Plan fee, (iii) Class A shares bear
the expense of the front-end sales charge and Class B and Class C shares bear
the expense of the deferred sales charge, (iv) Class B shares and Class C shares
each bear the expense of a higher Rule 12b-1 distribution services fee and
shareholder service fee than Class A shares and, in the case of Class B shares,
higher transfer agency costs, (v) with the exception of Class Y shares, each
Class of each Fund has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services (and, to the extent
applicable, Shareholder Service Plan fee) is paid which relates to a specific
Class and other matters for which separate Class voting is appropriate under
applicable law, provided that, if the Fund submits to a simultaneous vote of
Class A, Class B and Class C shareholders an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder with respect to
the Class A shares, the Class A shareholders and the Class B and Class C
shareholders will vote separately by Class, and (vi) only the Class B shares are
subject to a conversion feature. Each Class has different exchange privileges
and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, Shareholder Service Plan) fee and contingent deferred sales
charges on Class B shares prior to conversion, or the accumulated distribution
services (and, to the extent applicable, shareholder service) fee on Class C
shares, would be less than the front-end sales charge and accumulated
distribution services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher return of Class A
shares. Class B and Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at the lowest applicable sales
charge. For this reason, the Distributor will reject any order (except orders
for Class B shares from certain retirement plans) for more than $250,000 for
Class B shares or $500,000 for Class C shares.
Class A shares are subject to a lower distribution services fee and no
Shareholder Service Plan fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares. However, because
front-end sales charges are deducted at the time of purchase, investors
purchasing Class A shares would not have all their funds invested initially and,
therefore, would initially own fewer shares. Investors not qualifying for
reduced front-end sales charges who expect to maintain their investment for an
extended period of time might consider purchasing Class A shares because the
accumulated continuing distribution (and, to the extent applicable, Shareholder
Service Plan) charges on Class B shares or Class C shares may exceed the
front-end sales charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration against the fact
that, because of such front-end sales charges, not all their funds will be
invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution services (and, to the extent applicable, Shareholder Service Plan)
fees and, in the case of Class B shares, being subject to a contingent deferred
sales charge for a six-year period. For example, based on current fees and
expenses, an investor subject to the 4.75% front-end sales charge imposed on
Class A shares of the Funds would have to hold his or her investment
approximately seven years for the Class B and Class C distribution services
(and, to the extent applicable, Shareholders Service Plan) fees, to exceed the
front-end sales charge plus the accumulated distribution services fee of Class A
shares. In this example, an investor intending to maintain his or her investment
for a longer period might consider purchasing Class A shares. This example does
not take into account the time value of money, which further reduces the impact
of the Class B and Class C distribution services (and, to the extent applicable,
shareholder service) fees on the investment, fluctuations in net asset value or
the effect of different performance assumptions.
Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the six year period during
which Class B shares are subject to a contingent deferred sales charge may find
it more advantageous to purchase Class C shares.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B, Class C
and Class Y shares. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
Front-End Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing
the front-end sales charge alternative is the net asset value plus a sales
charge as set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date Net Asset Per Share Offering Price
Value Sales Charge Per Share
Balanced 3/31/97 $12.87 $0.64 $13.51
Growth and Income 12/31/96 $22.53 $1.12 $23.65
Income and Growth 1/31/97 $21.79 $1.09 $22.88
American Retirement 3/31/97 $13.74 $0.69 $14.43
Small Cap 12/31/96 $13.10 $0.65 $13.75
Foundation 3/31/97 $16.00 $0.80 $16.80
Tax Strategic 3/31/97 $13.57 $0.68 $14.25
Utility 12/31/96 $10.57 $0.53 $11.10
Value 12/31/96 $20.57 $1.03 $21.60
Total Return 11/30/96 $17.33 $1.06 $18.39
</TABLE>
Prior to January 3, 1995, shares of Growth and Income, Income and
Growth, American Retirement, Small Cap, Foundation and Tax Strategic were
offered exclusively on a no-load basis and, accordingly, no underwriting
commissions were paid in respect of sales of shares of these Funds or retained
by the Distributor. In addition, since Class B and Class C shares were not
offered by Growth and Income, Income and Growth, American Retirement, Small Cap,
Foundation or Tax Strategic prior to January 3, 1995, contingent deferred sales
charges have been paid to the Distributor with respect to Class B or Class C
shares only since January 3, 1995.
With respect to Balanced, Utility and Value, the following commissions
were paid to and amounts were retained by Federated Securities Corp. through
July 7, 1995, which until such date was the principal underwriter of portfolios
of Evergreen Investment Trust. For the period from July 8 through December 31,
1995, commissions were paid to and amounts were retained by the current
Distributor as noted below:
<TABLE>
<CAPTION>
Three Months Year Ended Period From Period From
Ended 3/31/97 12/31/96 7/8/95 1/1/95
to 12/31/95 to 7/7/95
<S> <C> <C> <C> <C>
BALANCED
Commissions $25,829 $77,026 $15,844 $11,841
Received
Commissions $3,100 $9,150 $1,731 $1,303
Retained
VALUE
Commissions $522,573 $58,797 $56,058
Received
Commissions $ 56,609 $ 6,615 $ 6,001
Retained
UTILITY
Commissions $ 74,988 $ 15,692 $ 20,958
Received
Commissions $ 7,857 $ 1,727 $ 2,228
Retained
</TABLE>
With respect to Income and Growth, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic, the following commissions
were paid to and amounts were retained by the Distributor for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Year Ended Year Ended Period from 1/3/95
Ended 3/31/97 1/31/97 1/31/96 to 1/31/95
<S> <C> <C> <C> <C>
INCOME AND GROWTH
Commissions Received $ 187,403 $ 98,890 $ 4,585
Commissions Retained $ 20,208 $ 10,733 ---
Year Ended Year Ended
12/31/96 12/31/95
GROWTH AND INCOME
Commissions Received $ 1,473,258 $ 326,249
Commissions Retained $ 158,858 $ 37,300
AMERICAN RETIREMENT
Commissions Received $121,810 $ 317,718 $ 42,447
Commissions Retained $12,910 $ 20,024
$ 7,397
SMALL CAP
Commissions Received $ 3,568 $ 778
Commissions Retained $ 340 $ 284
Three Months Year Ended Year Ended Period from 1/3/95
Ended 3/31/97 1/31/97 1/31/96 to 1/31/95
FOUNDATION
Commissions Received $ 495,558 $ 2,418,388 $1,604,275
Commissions Retained $ 53,267 $ 57,736 $ 178,885
TAX STRATEGIC
Commissions Received $ 141,912 $ 199,131 $ 28,976
Commissions Retained $ 16,111 $ 25,078 $ 3,266
With respect to Total Return, the following commissions were paid to and
amounts were retained by Keystone Investment Distributors Company, which prior
to December 1, 1996, was the distributor for Total Return.
Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 11/30/96 11/30/95 11/30/94
TOTAL RETURN
Commissions Received $355,043 $190,327 $106,144
Commissions Retained ($595,877) ($243,621) ($ 90,031)
</TABLE>
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
Keystone Funds (other than the money market funds) into a single "purchase," if
the resulting "purchase" totals at least $100,000. The term "purchase" refers
to: (i) a single purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an individual,
his or her spouse and their children under the age of 21 years purchasing shares
for his, her or their own account(s); (ii) a single purchase by a trustee or
other fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase by an organization exempt from federal income tax under Section 501
(c)(3) or (13) of the Code; a pension, profit-sharing or other employee benefit
plan whether or not qualified under Section 401 of the Code. The term "purchase"
also includes purchases by any "company," as the term is defined in the 1940
Act, but does not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen Keystone Fund.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the previous day) of
(a) all Class A shares of the Fund held by the investor and (b) all such shares
of any other Evergreen Keystone Fund held by the investor; and
(iii) the net asset value of all shares described in paragraph; and
(iv) owned by another shareholder eligible to combine his or her purchase
with that of the investor into a single "purchase" (see above).
For example, if an investor owned Class A, B or C shares of an
Evergreen Keystone Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of a Fund worth an additional
$100,000, the sales charge for the $100,000 purchase, in the case of the Funds,
would be at the 2.50% rate applicable to a single $300,000 purchase of shares of
the Fund, rather than the 3.75% rate.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Letter of Intent. Class A investors may also obtain the reduced sales
charges shown in the Prospectus by means of a written Letter of Intent, which
expresses the investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares of the Fund or any other Evergreen
Keystone Fund. Each purchase of shares under a Letter of Intent will be made at
the public offering price or prices applicable at the time of such purchase to a
single transaction of the dollar amount indicated in the Letter of Intent. At
the investor's option, a Statement of Intention may include purchases of Class A
shares of the Fund or any other Evergreen Keystone Fund made not more than 90
days prior to the date that the investor signs a Statement of Intention;
however, the 13-month period during which the Letter of Intent is in effect will
begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen Keystone Funds under a single Letter
of Intent. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in Class A shares of the Fund or any
other Evergreen Keystone Fund, to qualify for the 3.75% sales charge applicable
to purchases in any Evergreen Keystone Equity or Long-Term Bond Fund on the
total amount being invested (the sales charge applicable to an investment of
$100,000).
The Statement of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released. To the extent
that an investor purchases more than the dollar amount indicated on the Letter
of Intent and qualifies for a further reduced sales charge, the sales charge
will be adjusted for the entire amount purchased at the end of the 13-month
period. The difference in sales charge will be used to purchase additional
shares of the Fund subject to the rate of sales charge applicable to the actual
amount of the aggregate purchases.
Investors wishing to enter into a Letter of Intent in conjunction with
their initial investment in Class A shares of a Fund should complete the
appropriate portion of the Application while current Class A shareholders
desiring to do so can obtain a form of Letter of Intent by contacting a Fund at
the address or telephone number shown on the cover of this Statement of
Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain qualified
and non-qualified benefit and savings plans may make shares of the Evergreen
Keystone Funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative." The Advisers may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen Keystone Funds available to
their participants.
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes except that no
loss will be recognized to the extent that the proceeds are reinvested in shares
of the Fund. The reinstatement privilege may be used by the shareholder only
once, irrespective of the number of shares redeemed or repurchased, except that
the privilege may be used without limit in connection with transactions whose
sole purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of Additional
Information.
Sales at Net Asset Value. In addition to the categories of investors set
forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trusts; present or former trustees of other investment companies
managed by the Advisers; officers, directors and present or retired full-time
employees of the Advisers, the Distributor, and their affiliates; officers,
directors and present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant (collectively
"relatives") of any such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or relative; or the
estate of any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the Fund); (iii)
certain employee benefit plans for employees of the Advisers, the Distributor
and their affiliates; (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer and approved by the
Distributor, pursuant to which such persons pay an asset-based fee to such
broker-dealer, or its affiliate or agent, for service in the nature of
investment advisory or administrative services. These provisions are intended to
provide additional job-related incentives to persons who serve the Funds or work
for companies associated with the Funds and selected dealers and agents of the
Funds. Since these persons are in a position to have a basic understanding of
the nature of an investment company as well as a general familiarity with the
Fund, sales to these persons, as compared to sales in the normal channels of
distribution, require substantially less sales effort. Similarly, these
provisions extend the privilege of purchasing shares at net asset value to
certain classes of institutional investors who, because of their investment
sophistication, can be expected to require significantly less than normal sales
effort on the part of the Funds and the Distributor.
Deferred Sales Charge Alternatives--Class B and Class C Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee (and, with respect to Balanced, Utility and Value, the Shareholder
Service Plan fee) enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher distribution services
fee (and, with respect to Balanced, Utility and Value, the Shareholder Service
Plan fee) incurred by Class B shares will cause such shares to have a higher
expense ratio and to pay lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within six years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed that the redemption is first of any Class A
shares or Class C shares in the shareholder's Fund account, second of Class B
shares held for over six years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B shares held
longest during the six-year period.
To illustrate, assume that an investor purchased 100 Class B shares at $10
per share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor has acquired 10
additional Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares, 10 Class B
shares will not be subject to charge because of dividend reinvestment. With
respect to the remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net asset value of $2
per share. Therefore, of the $600 of the shares redeemed $400 of the redemption
proceeds (40 shares x $10 original purchase price) will be charged at a rate of
4.0% (the applicable rate in the second year after purchase for a contingent
deferred sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(I) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after the
end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee (and, with respect to
Balanced, Utility and Value, the Shareholder Service Plan fee) imposed on Class
B shares. Such conversion will be on the basis of the relative net asset values
of the two classes, without the imposition of any sales load, fee or other
charge. The purpose of the conversion feature is to reduce the distribution
services fee paid by holders of Class B shares that have been outstanding long
enough for the Distributor to have been compensated for the expenses associated
with the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (I) the
assessment of the higher distribution services fee (and, with respect to
Balanced, Utility and Value, Shareholder Service Plan fee) and transfer agency
costs with respect to Class B shares does not result in the dividends or
distributions payable with respect to other Classes of a Fund's shares being
deemed "preferential dividends" under the Code, and (ii) the conversion of Class
B shares to Class A shares does not constitute a taxable event under Federal
income tax law. The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution
services fee (and, with respect to Balanced, Utility and Value, the Shareholder
Service Plan fee) for an indefinite period which may extend beyond the period
ending seven years after the end of the calendar month in which the
shareholder's purchase order was accepted.
Level-Load Alternative--Class C Shares
Investors choosing the level load sales charge alternative purchase Class C
shares at the public offering price equal to the net asset value per share of
the Class C shares on the date of purchase without the imposition of a front-end
sales charge. However, you will pay a 1.0% contingent deferred sales charge if
you redeem shares during the first year after the month of purchase. No charge
is imposed in connection with redemptions made more than one year after the
month of purchase. Class C shares are sold without a front-end sales charge so
that the Fund will receive the full amount of the investor's purchase payment
and after the first year without a contingent deferred sales charge so that the
investor will receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee (and, with
respect to Balanced, Utility and Value, Shareholder Service Plan fee) enables
the Fund to sell Class C of shares without either a front-end or contingent
deferred sales charge. However, unlike Class B shares, Class C shares do not
convert to any other Class shares of the Fund. Class C shares incur higher
distribution services fees (and, with respect to Balanced, Utility and Value,
Shareholder Service Plan fee) than Class A shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class A shares.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUNDS
(SEE ALSO "OTHER INFORMATION - GENERAL INFORMATION"
IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
Capitalization and Organization
Each of the Evergreen Growth and Income Fund and Evergreen Income and
Growth Fund is a Massachusetts business trust. Evergreen American Retirement
Fund and Evergreen Small Cap Equity Income Fund are each separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust. The
Evergreen Foundation Fund and Evergreen Tax Strategic Foundation Fund are each
separate series of the Evergreen Foundation Trust, a Massachusetts business
trust. The Evergreen Balanced Fund, Evergreen Utility Fund and Evergreen Value
Fund, which prior to July 7, 1995 were known as the First Union Balanced
Portfolio, First Union Utility Portfolio and First Union Value Portfolio,
respectively, are each separate series of Evergreen Investment Trust, a
Massachusetts business trust. Keystone Fund for Total Return (formerly Keystone
America Fund for Total Return) is a Massachusetts business trust. On July 7,
1995, First Union Funds changed its name to Evergreen Investment Trust. The
above-named Trusts are individually referred to in this Statement of Additional
Information as the "Trust" and collectively as the "Trusts." Each Trust is
governed by a Board of Trustees. Unless otherwise stated, references to the
"Board of Trustees" or "Trustees" in this Statement of Additional Information
refer to the Trustees of all the Trusts.
Income and Growth and Growth and Income may issue an unlimited number
of shares of beneficial interest with a $0.001 par value. American Retirement,
Small Cap, Foundation, Tax Strategic, Balanced, Value and Utility may issue an
unlimited number of shares of beneficial interest with a $0.0001 par value.
Total Return may issue an unlimited number of shares of beneficial interest with
a no par value. All shares of these Funds have equal rights and privileges. Each
share is entitled to one vote, to participate equally in dividends and
distributions declared by the Funds and on liquidation to their proportionate
share of the assets remaining after satisfaction of outstanding liabilities.
Shares of these Funds are fully paid, nonassessable and fully transferable when
issued and have no pre-emptive, conversion or exchange rights.
Fractional shares have proportionally the same rights, including voting rights,
as are provided for a full share.
Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Trust or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative 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 if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more of the Trusts. Any issuance of shares of another series or class would be
governed by the 1940 Act and the law of the Commonwealth of Massachusetts. If
shares of another series of a Trust were issued in connection with the creation
of additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related and other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act, will be available to shareholders of each Fund. The rights of the holders
of shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
Distributor
Evergreen Keystone Distributor, Inc. (formerly known as Evergreen Funds
Distributor, Inc. (the "Distributor")), 125 W. 55th Street, New York, New York
10019, serves as each Fund's principal underwriter, and as such may solicit
orders from the public to purchase shares of any Fund. The Distributor is not
obligated to sell any specific amount of shares and will purchase shares for
resale only against orders for shares. Under the Distribution Agreement between
each Fund and the Distributor, the Fund has agreed to indemnify the Distributor,
in the absence of its willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
Counsel
Sullivan & Worcester LLP, Washington, D.C. serves as counsel to the Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors
of Income and Growth.
KPMG Peat Marwick LLP has been selected to be the independent auditors of
Growth and Income, American Retirement, Small Cap, Balanced, Utility, Value,
Total Return, Foundation and Tax Strategic.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Total Return
From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for the most recent one, five, and ten-year periods (or
the period since the Fund's inception). The Fund's total return for such a
period is computed by finding, through the use of a formula prescribed by the
SEC, the average annual compounded rate of return over the period that would
equate an assumed initial amount invested to the value of such investment at the
end of the period. For purposes of computing total return, income dividends and
capital gains distributions paid on shares of the Fund are assumed to have been
reinvested when paid, and the maximum sales charge applicable to purchases of
Fund shares is assumed to have been paid. The Fund will include performance data
for Class A, Class B, Class C and Class Y shares in any advertisement or
information including performance data of the Fund.
With respect to Income and Growth, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic, the shares of each Fund
outstanding prior to January 3, 1995 have been reclassified as Class Y shares.
The average annual compounded total return for each Class of shares offered by
the Funds for the most recently completed one, five and ten year fiscal periods
(if applicable) and for the three months ended March 31, 1997 for American
Retirement, Foundation, Tax Strategic, and Balanced is set forth in the table
below.
<TABLE>
<CAPTION>
INCOME AND 1 Year Ended 5 Years 10 Years Ended
GROWTH 1/31/97 Ended 1/31/97 1/31/97
<S> <C> <C> <C>
Class A 8.4% 9.5% 7.7%
Class B 8.0% 10.0% 8.1%
Class C 11.9% 10.3% 8.1%
Class Y 14.1% 10.7% 8.3
GROWTH AND 1 Year Ended 5 Y ears Ended 10 Years
INCOME 12/31/96 12/31/96 Ended 12/31/96
Class A 17.6% 15.6% 14.0%
Class B 17.6% 16.2% 14.4%
Class C 21.6% 16.5% 14.4%
Class Y 23.8% 16.9% 14.6%
AMERICAN 3 Months Ended 1 Year Ended 5 Years Ended From inception*****
RETIREMENT 3/31/97 3/31/97 3/31/97 to 3/31/97
Class A (4.8%) 3.8% --- 13.89%
Class B (5.3%) 3.0% --- 14.37%
Class C (1.3%) 7.0% --- 15.52%
Class Y 0.0% 9.1% --- 10.53%
SMALL CAP 1 Year Ended From 10/1/93
12/31/96 (inception) to
12/31/96
Class A 16.2% 13.8%
Class B 16.1% 14.3%
Class C 20.1% 15.0%
Class Y 22.4% 15.7%
FOUNDATION 3 Months Ended 1 Year Ended 5 Years From inception
3/31/97 3/31/97 Ended ****** to
3/31/97 3/31/97
Class A (4.9%) 7.5% - 15.2%
Class B (5.3%) 7.0% - 15.7%
Class C (1.3%) 11.0% - 16.7%
Class Y 0.0% 13.2% 13.6% 15.7%
TAX STRATEGIC 3 Months Ended 1 Year Ended From inception
3/31/97 3/31/97 To 3/31/97
Class A (3.8%) 10.3% 15.9%
Class B (4.2%) 10.0% 17.1%
Class C (0.2%) 13.8% 17.5%
Class Y (1.0%) 16.1% 14.7%
BALANCED 3 Months 1 Year 5 Years From inception*
Ended Ended Ended to 3/31/97
3/31/97 3/31/97 3/31/97
Class A (4.5%) 4.4% 9.9% 10.5%
Class B (4.9%) 4.0% - 9.2%
Class C (0.9%) 7.4% - 11.8%
Class Y 0.3% 9.9% 11.2% 11.3%
UTILITY 1 Year Ended From inception***to
12/31/96 12/31/96
Class A -.6% 7.1%
Class B -1.3% 7.2%
Class C 2.5% 12.4%
Class Y 4.5% 11.2%
VALUE 1 Year Ended 5 Years Ended From inception***to
12/31/96 12/31/96 12/31/96
Class A 13.3% 12.4% 13.4%
Class B 13.1% -- 14.1%
Class C 17.1% -- 18.8%
Class Y 19.2% 13.8% 15.7%
TOTAL RETURN 1 Year Ended 5 Years Ended From inception****
11/30/96 11/30/96 to 11/30/96
Class A 22.4% 13.8% 11.4%
Class B 24.7% __ 13.7%
Class C 28.7% __ 14.3%
</TABLE>
Total Return commenced offering Class Y shares effective December 15, 1996.
* Inception date: Class A - June 6, 1991; Class B - January 26, 1993; Class C -
September 2, 1994; Class Y - April 1, 1991.
** Inception date: Class A - January 4, 1994; Class B - January 4, 1994; Class C
- - September 2, 1994; Class Y - February 28, 1994.
*** Inception date: Class A - April 12, 1985; Class B - January 25, 1993; Class
C - September 2, 1994; Class Y - December 31, 1990.
****Inception date: Class A - February 13, 1987; Class B and Class C- February
1, 1993.
***** Inception date: Class A, B and C - January 3, 1995; Class Y - March 14,
1988.
****** Inception date: Class A, B and C - January 3, 1995; Class Y- January 2,
1990.
******* Inception date: Class A - January 17, 1995; Class B - January 6, 1995;
Class C - March 3, 1995; Class Y - November 2, 1993
The performance numbers for Income and Growth, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic for the Class A,
Class B and Class C shares are hypothetical numbers based on the performance for
Class Y shares as adjusted for any applicable front-end sales charge or
contingent deferred sales charge through January 3, 1995 (commencement of class
operations) and the actual performance of each class subsequent to January 3,
1995. The performance data calculated prior to January 3, 1995, does not reflect
any Rule 12b-1 fees. If such fees were reflected the returns would be lower.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal investment in a Fund
is not fixed and will fluctuate in response to prevailing market conditions.
YIELD CALCULATIONS
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = [2[(a-b/cd)+ 1]6-1]
Where a = 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 = The maximum offering price per share on the last day of the period
Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. Gains and losses
generally are excluded from the calculation. Income calculated for purposes of
determining a Fund's yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rates of distributions a Fund paid over the same
period, or the net investment income reported in a Fund's financial statements.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The yield of American Retirement, Foundation, Tax Strategic and
Balanced, except Total Return, for the thirty-day period ended March 31, 1997
(January 31, 1997 with respect to Income and Growth and December 31, 1996 with
respect to Growth and Income, Small Cap, Utility and Value) for each Class of
shares offered by the Funds is set forth in the table below:
Income and Growth Tax Strategic
Class A 3.32% 2.49%
Class B 2.76% 1.89%
Class C 2.76% 1.82%
Class Y 3.73% 2.88%
Growth and Income Balanced
Class A .54% 3.49%
Class B -.17% 2.89%
Class C -.17% 2.92%
Class Y .81% 3.93%
American Retirement Utility
Class A 3.10% 3.70%
Class B 2.49% 3.13%
Class C 2.49% 3.13%
Class Y 3.52% 4.14%
Small Cap Value
Class A 2.13% 1.43%
Class B 1.50% .66%
Class C 1.51% .66%
Class Y 2.48% 1.78%
Foundation
Class A 3.79%
Class B 3.19%
Class C 3.19%
Class Y 4.24%
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
- --------------------------------------------------------------------------------
GENERAL
- --------------------------------------------------------------------------------
From time to time, a Fund may quote its performance in advertising and
other types of literature as compared to the performance of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average,
Russell 2000 Index, or any other commonly quoted index of common stock prices.
The Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average and the Russell 2000 Index are unmanaged indices of selected common
stock prices. A Fund's performance may also be compared to those of other mutual
funds having similar objectives. This comparative performance would be expressed
as a ranking prepared by Lipper Analytical Services, Inc. or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statements filed by the Trusts with the SEC under the Securities Act of 1933.
Copies of the Registration Statements may be obtained at a reasonable charge
from the SEC or may be examined, without charge, at the offices of the SEC in
Washington, D.C.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely Price Waterhouse LLP (in the case of Income
and Growth) or KPMG Peat Marwick LLP (in the case of Growth and Income, American
Retirement, Small Cap, Balanced, Utility, Foundation, Tax Strategic, Value, and
Total Return) are incorporated by reference into this Statement of Additional
Information. The Annual Reports to Shareholders for each Fund, which contain the
referenced statements, are available upon request and without charge.
<PAGE>
APPENDIX "A"
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Service. A Standard & Poor's corporate or
municipal bond rating is a current assessment of the credit worthiness of an
obligor with respect to a specific obligation. This assessment of credit
worthiness may take into consideration obligors such as guarantors, insurers or
lessees. The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit in connection
with the ratings and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or their arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest and
repay any principal.
AA - Debt rated AA also qualifies as high quality debt obligations.
Capacity to pay interest and repay principal is very strong and in the majority
of instances they differ from AAA issues 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 the 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 they normally exhibit 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.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a
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.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which 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 rated B has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon 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
is also 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 that 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.
C1 - The rating C1 is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace periods; it will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - To provide more detailed indications of credit
quality, 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.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service. A brief description of the applicable Moody's
rating symbols and their meanings follows:
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 edge". 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 fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in 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 sometime 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. Some bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. NOTE:
Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol "1" following the rating.
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 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
issue so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which may vary very slightly from time to time because of economic
conditions; A--average credit quality with adequate protection factors, but with
greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch Investors Service L.P.: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in three years or less will
likely receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to
other maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note.) Note rating
symbols are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and
municipal short-term obligations will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
are uppermost in importance in short-term borrowing, while various factors of
major importance in bond risk are of lesser importance over the short run.
Rating symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security
elements are accounted for but this is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries the
smallest degree of investment risk. The modifiers 1, 2, and 3 are used to denote
relative strength within this highest classification.
Standard & Poor's Ratings Service: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating
category utilized by Duff & Phelps which uses + or - to denote relative strength
within this classification. Duff 2 represents good certainty of timely payment,
with minimal risk factors. Duff 3 represents satisfactory protection factors,
with risk factors larger and subject to more variation.
Fitch Investors Service L.P.: F-1+ -- denotes exceptionally strong
credit quality given to issues regarded as having strongest degree of assurance
for timely payment; F-1 -- very strong, with only slightly less degree of
assurance for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.
<PAGE>
SUPPLEMENT TO THE STATEMENTS OF ADDITIONAL INFORMATION OF
Evergreen Aggressive Growth Fund, Evergreen American Retirement Fund,
Evergreen Emerging Markets Growth Fund,
Evergreen Florida High Income Municipal Bond Fund, Evergreen Foundation Fund,
Evergreen Fund, Evergreen Georgia Municipal Bond Fund,
Evergreen Global Leaders Fund, Evergreen Growth and Income Fund,
Evergreen High Grade Tax Free Fund, Evergreen Income and Growth Fund,
Evergreen Intermediate Term Government Securities Fund,
Evergreen International Equity Fund, Evergreen Select Money MarketFund,
Evergreen Select Municipal Money Market Fund,
Evergreen Select Treasury Money Market Fund, Evergreen Latin America Fund,
Evergreen Micro Cap Fund, Evergreen Money Market Fund,
Evergreen New Jersey Tax Free Income Fund,
Evergreen North Carolina Municipal Bond Fund,
Evergreen Pennsylvania Municipal Money Market Fund,
Evergreen Short-Intermediate Bond Fund,
Evergreen Short-Intermediate Municipal Fund,
Evergreen Small Cap Equity Income Fund,
Evergreen South Carolina Municipal Bond Fund,
Evergreen Municipal Money Market Fund,
Evergreen Tax Strategic Foundation Fund, Evergreen Treasury Money Market Fund,
Evergreen U.S. Government Fund, Evergreen Utility Fund,
Evergreen Value Fund, Evergreen Virginia Municipal Bond Fund,
Evergreen Capital Preservation and Income Fund,
Evergreen Fund for Total Return, Evergreen Global Opportunities Fund,
Evergreen Natural Resources Fund, Evergreen Omega Fund,
Evergreen Strategic Income Fund, Evergreen California Tax Free Fund,
Evergreen Massachusetts Tax Free Fund, Evergreen Missouri Tax Free Fund,
Evergreen New York Tax Free Fund, Evergreen Pennsylvania Tax Free Fund,
Evergreen Balanced Fund, Evergreen Diversified Bond Fund,
Evergeen High Yield Bond Fund, Evergreen Small Company Growth Fund,
Evergeen Strategic Growth Fund, Evergeen Blue Chip Fund,
Evergreen Select Adjustable Rate Fund, Evergreen Select Small Cap Growth Fund,
Evergreen International Growth Fund, Evergreen Precious Metals Fund, and
Evergreen Tax Free Fund
(each a "Fund" and, collectively, the "Funds")
The Statements of Additional Information of each of the Funds are
hereby supplemented as follows:
Standardized Fundamental Investment Restrictions
Each of the above funds has adopted the following standardized
fundamental investment restrictionS. These restrictions may be changed only by a
vote of Fund shareholders.
1. Diversification of Investments
The Fund may not make any investment inconsistent with the Fund's
classification as a diversified [non-diversified] investment company under the
Investment Company Act of
23612
<PAGE>
1940.
2. Concentration of a Fund's Assets in a Particular Industry. (All
Funds other than those listed below.)
The Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities
issued or guaranteed by the U.S. government or its agencies or instrumentalities
[or in the case of Money Market Funds domestic bank money instruments]).
FOR EVERGREEN UTILITY FUND
The Fund will concentrate its investments in the utilities industry.
FOR EVERGREEN PRECIOUS METALS FUND
The Fund will concentrate its investments in industries related to the
mining, processing or dealing in gold or other precious metals and minerals.
3. Issuance of Senior Securities
Except as permitted under the Investment Company Act of 1940, the Fund
may not issue senior securities.
4. Borrowing
The Fund may not borrow money, except to the extent permitted by
applicable law.
5. Underwriting
The Fund may not underwrite securities of other issuers, except insofar
as the Fund may be deemed an underwriter in connection with the disposition of
its portfolio securities.
6. Investment in Real Estate
The Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, the Fund may invest in (a) securities
directly or indirectly secured by real estate, or (b) securities issued by
companies that invest in real estate.
7. Commodities
The Fund may not purchase or sell commodities or contracts on
commodities except to the extent that the Fund may engage in financial futures
contracts 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.
8. Lending
The Fund may not make loans to other persons, except that the Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment instruments shall not be deemed to be the making of a loan.
23612
<PAGE>
9. Investment in Federally Tax Exempt Securities
The following Funds have also adopted a standardized fundamental
investment restriction in regard to investments in federally tax-exempt
securities:
<TABLE>
<CAPTION>
<S> <C>
EVERGREEN MUNICIPAL MONEY MARKET FUND EVERGREEN SELECT MUNICIPAL MONEY MARKET FUND
EVERGREEN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND EVERGREEN VIRGINIA MUNICIPAL BOND FUND
EVERGREEN NEW JERSEY TAX FREE INCOME FUND EVERGREEN MASSACHUSETTS TAX FREE FUND
EVERGREEN NEW YORK TAX FREE FUND EVERGREEN PENNSYLVANIA TAX FREE FUND
EVERGREEN CALIFORNIA TAX FREE FUND EVERGREEN MISSOURI TAX FREE FUND
</TABLE>
The Fund will, during periods of normal market conditions, invest its
assets in accordance with applicable guidelines issued by the Securities and
Exchange Commission or its staff concerning investment in tax-exempt securities
for Funds with the words tax exempt, tax free or municipal in their names.
Elimination of Certain Non-Fundamental Investment Restrictions
The nonfundamental investment restrictions described below have been
eliminated by each Fund listed under such restriction:
1. Prohibition on Investment in Unseasoned Issuers
EVERGREEN FUND, GROWTH AND INCOME FUND, INCOME AND GROWTH FUND,
AMERICAN RETIREMENT FUND, MONEY MARKET FUND, MUNICIPAL MONEY MARKET FUND,
SHORT-INTERMEDIATE MUNICIPAL FUND, GROWTH AND INCOME FUND (S-1), OMEGA FUND,
PRECIOUS METALS FUND, STRATEGIC GROWTH FUND, HIGH YIELD BOND FUND, CAPITAL
PRESERVATION AND INCOME FUND, SELECT ADJUSTABLE RATE FUND, STRATEGIC INCOME
FUND, FUND FOR TOTAL RETURN, GLOBAL OPPORTUNITIES FUND, INTERNATIONAL GROWTH
FUND
2. Prohibition on Investment in Companies for the Purpose of Exercising
Control or Management
EVERGREEN FUND, GROWTH AND INCOME FUND, INCOME AND GROWTH FUND, VALUE
FUND, INTERMEDIATE TERM GOVERNMENT SECURITIES FUND, FOUNDATION FUND, AMERICAN
RETIREMENT FUND, EMERGING MARKETS GROWTH FUND, INTERNATIONAL EQUITY FUND, GLOBAL
LEADERS FUND, MONEY MARKET FUND, MUNICIPAL MONEY MARKET FUND, PENNSYLVANIA TAX
FREE MONEY MARKET FUND, FLORIDA HIGH INCOME MUNICIPAL BOND FUND,
SHORT-INTERMEDIATE MUNICIPAL FUND, BLUE CHIP FUND, PRECIOUS METALS FUND,
STRATEGIC GROWTH FUND, HIGH YIELD BOND FUND, FUND FOR TOTAL RETURN, GLOBAL
OPPORTUNITIES FUND, INTERNATIONAL GROWTH FUND
3. Prohibition on Investment in Companies in which Trustees or Officers
of the Funds Also Hold Shares Above Certain Percentage Levels
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EVERGREEN FUND, MICROCAP FUND, GROWTH AND INCOME FUND, INCOME AND
GROWTH FUND, INTERMEDIATE TERM GOVERNMENT SECURITIES FUND, FOUNDATION FUND,
AMERICAN RETIREMENT FUND, MONEY MARKET FUND, MUNICIPAL MONEY MARKET
FUND,TREASURY MONEY MARKET FUND, SHORT-INTERMEDIATE MUNICIPAL FUND, PRECIOUS
METALS FUND
4. Prohibition on Investment of More Than 5% of a Fund's Net Assets in
Warrants, With No More Than 2% of Net Assets Being Invested in Warrants That Are
Listed on Neither the New York nor American Stock Exchanges
EVERGREEN FUND, MICROCAP FUND, GROWTH AND INCOME FUND, INCOME AND GROWTH
FUND, FOUNDATION FUND, AMERICAN RETIREMENT FUND, MUNICIPAL MONEY MARKET FUND,
SHORT-INTERMEDIATE MUNICIPAL FUND
5. Prohibition on Investment in Oil, Gas or Other Mineral Exploration
or Development Programs
EVERGREEN FUND, MICROCAP FUND, AGGRESSIVE GROWTH FUND, GROWTH AND
INCOME FUND, SMALL CAP EQUITY FUND, INCOME AND GROWTH FUND, VALUE FUND,
INTERMEDIATE TERM GOVERNMENT SECURITIES FUND, FOUNDATION FUND, AMERICAN
RETIREMENT FUND, MONEY MARKET FUND, MUNICIPAL MONEY MARKET FUND, PENNSYLVANIA
MUNICIPAL MONEY MARKET FUND, FLORIDA HIGH INCOME MUNICIPAL BOND FUND,
SHORT-INTERMEDIATE MUNICIPAL FUND, HIGH GRADE TAX FREE FUND, PRECIOUS METALS
FUND
6. Prohibition on Joint Trading Accounts
EVERGREEN FUND, MICROCAP FUND, GROWTH AND INCOME FUND, INCOME AND
GROWTH FUND, FOUNDATION FUND, AMERICAN RETIREMENT FUND, FLORIDA HIGH INCOME
MUNICIPAL BOND FUND
7. Prohibition on Investment in Other Investment Companies. [Note: The
Funds may invest in such companies to the extent permitted by the Investment
Company Act of 1940 and the rules thereunder.]
GROWTH AND INCOME FUND, UTILITY FUND, SMALL CAP EQUITY INCOME FUND,
INCOME AND GROWTH FUND, VALUE FUND, SHORT-INTERMEDIATE BOND FUND, INTERMEDIATE
TERM GOVERNMENT SECURITIES FUND, FOUNDATION FUND, TAX STRATEGIC FOUNDATION FUND,
AMERICAN RETIREMENT FUND, NEW JERSEY TAX FREE INCOME FUND, HIGH GRADE TAX FREE
FUND, BLUE CHIP FUND, OMEGA FUND, PRECIOUS METALS FUND, STRATEGIC GROWTH FUND,
HIGH YIELD BOND FUND, SELECT ADJUSTABLE RATE FUND, STRATEGIC INCOME FUND, FUND
FOR TOTAL RETURN, GLOBAL OPPORTUNITIES FUND, INTERNATIONAL GROWTH FUND,
MASSACHUSETTS TAX FREE FUND, NEW YORK TAX FREE FUND, PENNSYLVANIA TAX FREE FUND,
CALIFORNIA TAX FREE FUND AND MISSOURI TAX FREE FUND.
Reclassification of All Other Fundamental Investment Restrictions
All investment restrictions other than those described above as having
been standardized or eliminated have been reclassified from fundamental to
nonfundamental and, as, such, may be changed by the Funds' Boards of Trustees at
any time without a shareholder vote.
Trustees
The Trustees and executive officers of each Trust, their ages, and
their principal occupations during the last five years are shown below:
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<PAGE>
JAMES S. HOWELL (72), 4124 Crossgate Road, Charlotte, NC-Chairman of
the Evergreen Group of Mutual Funds and Trustee. Retired Vice President of Lance
Inc. (food manufacturing); Chairman of the Distribution Comm. Foundation for the
Carolinas from 1989 to 1993.
RUSSELL A. SALTON, III, M.D. (49), 205 Regency Executive Park,
Charlotte, NC- Trustee. Medical Director, U.S. Healthcare of Charlotte, North
Carolina since 1996; President, Primary Physician Care from 1990 to 1996.
MICHAEL S. SCOFIELD (53), 212 S. Tryon Street, Suite 980, Charlotte,
NC-Trustee. Attorney, Law Offices of Michael S. Scofield since 1969.
GERALD M. MCDONNELL (57), 821 Regency Drive, Charlotte, NC - Trustee.
Sales Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
THOMAS L. McVERRY (58), 4419 Parkview Drive, Charlotte, NC - Trustee.
Director of Carolina Cooperative Federal Credit Union since 1990 and Rexham
Corporation from 1988 to 1990; Vice President of Rexham Industries, Inc.
(diversified manufacturer) from 1989 to 1990; Vice President - Finance and
Resources, Rexham Corporation from 1979 to 1990.
WILLIAM WALT PETTIT (41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NC - Trustee. Partner in the law firm William Walt Pettit, P.A. since
1990.
LAURENCE B. ASHKIN (68), 180 East Pearson Street, Chicago, IL -
Trustee. Real estate developer and construction consultant since 1980; President
of Centrum Equities since 1987 and Centrum Properties, Inc. since 1980.
CHARLES A. AUSTIN III (61), Trustee. Investment counselor to Appleton
Partners, Inc.; former Managing Director, Seaward Management Corporation
(investment advice); and former Director, Executive Vice President and
Treasurer, State Street Research & Management Company (investment advice).
K. DUN GIFFORD (57) Trustee. Chairman of the Board, Director, and
Executive Vice President, The London Harness Company; Managing Partner,
Roscommon Capital Corp.; Trustee, Cambridge College; Chairman Emeritus and
Director, American Institute of Food and Wine; Chief Executive Officer, Gifford
Gifts of Fine Foods; Chairman, Gifford, Drescher & Associates (environmental
consulting); President, Oldways Preservation and Exchange Trust (education); and
former Director, Keystone Investments, Inc. and Keystone Investment Management
Company.
LEROY KEITH, JR. (57) Trustee. 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.
DAVID M. RICHARDSON (55) Trustee. Executive Vice President, DMR
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.
RICHARD J. SHIMA (57) Trustee and Advisor to the Boards of Trustees of
the Evergreen Group of Mutual Funds. Chairman, Environmental Warranty, Inc., and
Consultant, Drake Beam
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<PAGE>
Morin, Inc. (executive outplacement); Director of Connecticut Natural Gas
Corporation, Trust Company of Connecticut, HartfordHospital, Old State House
Association, and Enhance Financial Services, Inc.; Chairman, Board of Trustees,
Hartford YMCA; former Director; Executive Vice President, and Vice Chairman of
The Travelers Corporation.
Executive Officers
WILLIAM J. TOMKO (40), 3435 Stelzer Road, Columbus, OH - President and
Treasurer. Senior Vice President and Operations Executive, BISYS Fund Services.
GEORGE O. MARTINEZ (37), 3435 Stelzer Road, Columbus, OH - Secretary.
Senior Vice President/Director of Administration and Regulatory Services, BISYS
Fund Services since April 1995. Vice President/Assistant General Counsel,
Alliance Capital Management from 1988 to 1995.
The officers of the Trusts are officers and/or employees of The BISYS
Group, Inc. ("BISYS Group"). The BISYS Group is an affiliate of Evergreen
Distributor, Inc. ("EDI"), the distributor of each class of shares of each Fund.
No officer or Trustee of the Trusts owned more than 1.0% of any Class
of shares of any of the Funds as of November 30, 1997.
Distribution Plans
The following is added to the disclosure under the caption
"Distribution Plan"
Class A and B shares are made available to employer-sponsored
retirement or savings plans ("Plans") without a sales charge if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch
and, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping
ServiceAgreement, the Plan has $3 million or more in assets invested in
broker/dealerfunds not advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM")that are made available pursuant to a Services
Agreement between Merrill Lynchand the Fund's principal underwriter or
distributor and in Funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the Plan is record kept on a daily valuation basis by an
independent recordkeeper whose services are provided through a contract
or alliance arrangement with Merrill Lynch, and on the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service Agreement, the
Plan has $3 million or more in assets, excluding money market funds,
invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the Plan Sponsor
signs the Merrill Lynch Recordkeeping Service Agreement.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B shares convert to Class A shares once the Plan has reached $5 million
invested in Applicable Investments. The Plan will receive a Plan level share
conversion.
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<PAGE>
The following is added to the statement of additional information of
each of EVERGREEN HIGH YIELD BOND FUND, EVERGREEN STRATEGIC GROWTH FUND,
EVERGREEN BLUE CHIP FUND, EVERGREEN PRECIOUS METALS FUND, and EVERGREEN
INTERNATIONAL GROWTH FUND.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Distribution Plans and Agreements
Distribution fees are accrued daily and paid monthly on Class A, Class
B and Class C shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B shares and Class C shares are
designed to permit an investor to purchase such shares through broker-dealers
without the assessment of a front-end sales charge, and, in the case of Class C
shares, without the assessment of a contingent deferred sales charge after the
first year following the month of purchase, while at the same time permitting
the Distributor to compensate broker-dealers in connection with the sale of such
shares. In this regard, the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class B shares and
the Class C shares are the same as those of the front-end sales charge and
distribution fee with respect to the Class A shares in that in each case the
sales charge and/or distribution fee provide for the financing of the
distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plans and the purposes for which such expenditures
were made to the Trustees of the Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of the disinterested
Trustees are committed to the discretion of such disinterested Trustees then in
office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the SEC make payments for distribution
services to the Distributor; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Trust or by vote
of the holders of a majority of the outstanding voting securities of that Class
and, in either case, by a majority of the Independent Trustees of the Trust who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to each Fund and holders of Class A, Class B
and Class C shares and (ii) stimulate administrators to render administrative
support services to the Fund and holders of Class A, Class B and Class C shares.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to providing office space, equipment, telephone facilities, and
various personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B and Class C shares; assisting clients in changing
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<PAGE>
dividend options, account designations, and addresses; and providing such other
services as the Fund reasonably requests for its Class A, Class B and Class C
shares.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of the Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. Any Plan, Shareholder Services
Plan or Distribution Agreement may be terminated (i) by a Fund without penalty
at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by Class or by a majority vote of the
disinterested Trustees, or (ii) by the Distributor. To terminate any
Distribution Agreement, any party must give the other parties 60 days' written
notice; to terminate a Plan only, the Fund need give no notice to the
Distributor. Any Distribution Agreement will terminate automatically in the
event of its assignment.
HOW THE FUNDS OFFER SHARES TO THE PUBLIC
You may buy shares of a Fund through the Funds' distributor,
broker-dealers that have entered into special agreements with the Funds'
distributor or certain other financial institutions. Each Fund offers four
classes of shares that differ primarily with respect to sales charges and
distribution fees. Depending upon the class of shares, you will pay an initial
sales charge when you buy a Fund's shares, a contingent deferred sales charge (a
"CDSC") when you redeem a Fund's shares or no sales charges at all.
Purchase Alternatives
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 4.75%. (The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases.) If you purchase Class A shares in the amount of $1
million or more, without an initial sales charge, the Funds will charge a CDSC
of 1.00% if you redeem during the month of your purchase and the 12-month period
following the month of your purchase. See "Calculation of Contingent Deferred
Sales Charge" below.
Class B Shares
The Funds offer Class B shares at net asset value (without a front-end
load). With certain exceptions, however, the Funds will charge a CDSC of 1.00%
on shares you redeem within 72 months after the month of your purchase. The
Funds will charge CDSCs at the
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following rate:
REDEMPTION TIMING CDSC RATE
Month of purchase and the first twelve-month
period following the month of purchase...................................5.00%
Second twelve-month period following the month of purchase...............4.00%
Third twelve-month period following the month of purchase................3.00%
Fourth twelve-month period following the month of purchase...............3.00%
Fifth twelve-month period following the month of purchase................2.00%
Sixth twelve-month period following the month of purchase................1.00%
Thereafter...............................................................0.00%
Class B shares that have been outstanding for seven years after the
month of purchase will automatically convert to Class A shares without
imposition of a front-end sales charge or exchange fee. (Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificate to ESC.
Class C Shares
Class C shares are available only through broker-dealers who have
entered into special distribution agreements with the Underwriter. The Funds
offer Class C shares at net asset value (without an initial sales charge). With
certain exceptions, however, the Funds will charge a CDSC of 1.00% on shares you
redeem within 12-months after the month of your purchase. See "Contingent
Deferred Sales Charge" below.
Class Y Shares
No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only to (1) persons who
at or prior to December 31, 1994 owned shares in a mutual fund advised by
Evergreen Asset Management Corp. ("Evergreen Asset"), (2) certain institutional
investors and (3) investment advisory clients of the Capital Management Group of
First Union National Bank ("FUNB"), Evergreen Asset, Keystone Investment
Management Company, or their affiliates. Class Y shares are offered at net asset
value without a front-end or back-end sales charge and do not bear any Rule
12b-1 distribution expenses.
Contingent Deferred Sales Charge
The Funds charge a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution Plan"). If imposed, the Funds
deduct the CDSC from the redemption proceeds you would otherwise receive. The
CDSC is a percentage of the lesser of (1) the net asset value of the shares at
the time of redemption or (2) the shareholder's original net cost for such
shares. Upon request for redemption, to keep the CDSC a shareholder must pay as
low as possible, a Fund will first seek to redeem shares not subject to the CDSC
and/or shares held the longest, in that order. The CDSC on any redemption is, to
the extent permitted by the National Association of Securities Dealers, Inc.
("NASD"), paid to the Principal Underwriter or its predecessor.
SALES CHARGE WAIVERS OR REDUCTIONS
Reducing Class A Front-end Loads
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With a larger purchase, there are several ways that you can combine
multiple purchases of Class A shares in Evergreen funds and take advantage of
lower sales charges.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen funds. For example, if you invested $75,000 in each
of two different Evergreen funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares
of Evergreen funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.
Letter of Intent
You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen fund during the period will qualify as Letter of
Intent purchases.
Shares That Are Not Subject to a Sales Charge or CDSC
Waiver of Sales Charges
The Funds may sell their shares at net asset value without an initial
sales charge to:
1. purchases of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1 tax sheltered
annuity or TSA plan sponsored by an organization having 100 or more
eligible employees (a "Qualifying Plan") or a TSA plan sponsored by a
public educational entity having 5,000 or more eligible employees (an
"Educational TSA Plan");
3. institutional investors, which may include bank trust departments
and registered investment advisers;
4. investment advisers, consultants or financial planners who place
trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee;
5. clients of investment advisers or financial planners who place
trades for their own accounts if the accounts are linked to master
account of such investment advisers or financial planners on the books
of the broker-dealer through whom shares are purchased;
6. institutional clients of broker-dealers, including retirement and
deferred compensation plans and the trusts used to fund these plans,
which place trades through an omnibus account maintained with a Fund by
the broker-dealer;
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<PAGE>
7. employees of FUNB, its affiliates, Evergreen Distributor, Inc., any
broker-dealer with whom Evergreen Distributor, Inc., has entered into
an agreement to sell shares of the Funds, and members of the immediate
families of such employees;
8. certain Directors, Trustees, officers and employees of the Evergreen
Funds, the Distributor or their affiliates and to the immediate
families of such persons; or
9. a bank or trust company in a single account in the name of such bank
or trust company as trustee if the initial investment in or any
Evergreen fund made pursuant to this waiver is at least $500,000 and
any commission paid at the time of such purchase is not more than 1% of
the amount invested.
With respect to items 8 and 9 above, each Fund will only sell shares to
these parties upon the purchasers written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Funds will not charge any
CDSC on redemptions by such purchasers.
Waiver of CDSCs
The Funds do not impose a CDSC when the shares you are redeeming
represent:
1. an increase in the share value above the net cost of such shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of dividend
income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died or
become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit plan
qualified under the Employee Retirement Income Security Act of 1974
("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder who is
a least 59 1/2 years old;
6. shares in an account that we have closed because the account has an
aggregate net asset value of less than $1,000;
7. an automatic withdrawals under an Systematic Income Plan of up to
1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawals made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan that
purchased Class C shares (this waiver is not available in the event a
Qualifying Plan, as a whole, redeems substantially all of its assets).
Distribution Plans
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<PAGE>
The following is added to the disclosure under the caption
"Distribution Plan"
Class A and B shares are made available to employer-sponsored
retirement or savings plans ("Plans") without a sales charge if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch
and, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement, the Plan has $3 million or more in assets invested
in broker/dealer funds not advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a
Services Agreement between Merrill Lynch and the Fund's principal
underwriter or distributor and in Funds advised or managed by MLAM
(collectively, the "Applicable Investments"); or
(ii) the Plan is record kept on a daily valuation basis by an
independent recordkeeper whose services are provided through a contract
or alliance arrangement with Merrill Lynch, and on the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service Agreement, the
Plan has $3 million or more in assets, excluding money market funds,
invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the Plan Sponsor
signs the Merrill Lynch Recordkeeping Service Agreement.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B shares convert to Class A shares once the Plan has reached $5 million
invested in Applicable Investments. The Plan will receive a Plan level share
conversion.
EXCHANGES
Investors may exchange shares of a Fund for shares of the same class of
any other Evergreen fund, as described under the section entitled "Exchanges" in
a Fund's prospectus. Before you make an exchange, you should read the prospectus
of the Evergreen fund into which you want to exchange. The Trust's Board of
Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
HOW THE FUNDS VALUE SHARES
How and When a Fund Calculates its Net Asset Value per Share ("NAV")
Each Fund computes its NAV 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.
The NAV of each Fund is calculated by dividing the value of a Fund's
net assets attributable to that class by all of the shares issued for that
class.
How a Fund Values the Securities it Owns
Current values for a Fund's portfolio securities are determined as
follows:
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<PAGE>
(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 on the 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.
(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 SERVICES
As described in the prospectus, a shareholder may elect to receive
their dividends and capital grains 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 Funds 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. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
January 30, 1998
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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.
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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.
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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
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<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.
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<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
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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.
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<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.
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- 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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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).
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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,
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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.
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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.
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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.
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- 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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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.
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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.
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<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
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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
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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
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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 4.04% 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
[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.
-87-
<PAGE>
EVERGREEN 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 Equity Trust's Registration Statement on Form N-1A filed
on October 8, 1997 - Registration No. 333-37453 ("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 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). Investment Advisory Agreement between Evergreen Asset Management Corp. and
Evergreen 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.
6(c). Sub-Advisory Agreement between Evergreen Asset Management
Corp. and Lieber & Company. Filed herewith.
7(a). Distribution Agreement between Evergreen Distributor, Inc.
and Evergreen Equity Trust. Incorporated by reference to the Form
N-1A Registration Statement.
-88-
<PAGE>
7(b). Form of Dealer Agreement for Class A, Class B and Class C 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.
9. Agreement between State Street Bank and Trust Company and Evergreen Equity
Trust. Incorporated by reference to Form N-1A Registration Statement.
10. 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(a). Consent of KPMG Peat Marwick LLP. Filed herewith.
14(b). 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
-89-
<PAGE>
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.
-90-
<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 13th day of April, 1998.
EVERGREEN 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 13th 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.
-91-
<PAGE>
/s/Gerald M. McDonnell* Trustee
- ----------------------
Gerald M. McDonnell
/s/Thomas L. McVerry* Trustee
- --------------------
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.
-92-
<PAGE>
INDEX TO EXHIBITS
N-14
EXHIBIT NO.
6(c) Sub-Advisory Agreement
11 Opinion and Consent of Sullivan & Worcester LLP
12 Tax Opinion and Consent of Sullivan & Worcester LLP
14(a) Consent of KPMG Peat Marwick LLP
14(b) Consent of Ernst & Young LLP
16 Powers of Attorney
17 Form of Proxy
- --------------------
-93-
<PAGE>
September 18, 1997
Lieber & Company
2500 Westchester Avenue
Purchase, New York 10577
Ladies and Gentlemen:
We have entered into an agreement with Evergreen Equity Trust, a Delaware
business trust (the "Trust"), pursuant to which we act as investment adviser to
the series under the Trust listed on Schedule A hereto (each a "Fund"). We
hereby agree with you as follows:
1. You agree for the duration of this Agreement that you will provide us
with office facilities and, through your research personnel, furnish us with all
such factual information and investment recommendations and such other services
as we shall reasonably request. We shall expect of you, and you shall give us,
the benefit of your best judgment and efforts in rendering these services to us,
and we agree as an inducement to your undertaking these services that you shall
not be liable to us under this paragraph for any mistake of judgment or in any
event whatsoever, except for lack of good faith. However, nothing herein shall
be deemed to protect or purport to protect you against any liability to the Fund
or its shareholders to which you would otherwise be subject by reason of wilful
misfeasance, bad faith, or gross negligence in the performance of your duties,
or by reason of your reckless disregard of your obligations and duties
hereunder.
2. We agree to reimburse you on the basis of your direct and indirect costs
of performing the services set forth in paragraph 1 above. Indirect costs shall
be allocated on a basis mutually satisfactory to you and us.
3. As used in this Agreement, the terms "assignment" and "vote of a
majority of the outstanding voting securities" shall have the meanings given to
them by Sections 2(a) (4) and 2(a) (42), respectively, of the Investment Company
Act of 1940, as amended (the "Act").
1
<PAGE>
This Agreement will terminate automatically in the event of its assignment,
or upon termination of the above-mentioned agreement between the Fund and the
undersigned.
This Agreement may be terminated at any time, without the payment of any
penalty, (a) by the Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Fund or by the undersigned, on sixty days'
written notice addressed to you at your principal place of business; and (b) by
you, without payment of any penalty, on sixty days' written notice addressed to
the Fund and the undersigned at the Fund's principal place of business.
This Agreement shall be in effect until September 17, 1999. This Agreement
shall continue in effect from year to year thereafter so long as such
continuance is specifically approved at least annually by a majority of the
Trustees of the Fund who are not interested persons (as such term is defined in
the Act) of any party to this Agreement, voting in person at a meeting called
for the purpose of voting on such approval, and by a vote of the Trustees of the
Fund or a majority of the outstanding voting securities of the Fund.
You agree to advise us of any change in your partnership within a
reasonable time after such a change.
4. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you.
5. It is expected that you will provide brokerage services to the Fund.
Accordingly, you agree to comply with Section 11(a)(1) of the Securities
Exchange Act of 1934 and any rules prescribed by the Securities and Exchange
Commission thereunder, as amended from time to time, with respect to brokerage
transactions effected and/or executed by you on behalf of the Fund. In addition,
you shall furnish at least annually to us a statement setting forth the total
amount of all compensation retained by you in connection with effecting and/or
executing transactions for the account during the period covered by the
statement, as required by Section 11(a)(1).
2
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart hereof and return the same to us.
Very truly yours,
EVERGREEN ASSET MANAGEMENT CORP.
The foregoing Agreement is By:/s/ Stephen A. Lieber
hereby accepted as of the Name: Stephen A. Lieber
date first above written Title:
LIEBER & COMPANY
By: /s/ Nola M. Falcone
Name: Nola M. Falcone
Title:
3
<PAGE>
SCHEDULE A
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Small Cap Equity Income Fund
Evergreen Growth and Income Fund
Evergreen Income and Growth Fund
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
4
<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 13, 1998
Evergreen Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
We have been requested by the Evergreen 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 Foundation 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 Balanced 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 of Delaware are involved in the opinion set forth herein
below,
<PAGE>
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
knowlege 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>
Balanced Fund
Evergreen Foundation Fund
April 14, 1998
Page 1
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 14, 1998
Balanced Fund
Evergreen Foundation Fund
200 Berkeley Street
Boston, Massachusetts 02116
Re: Acquisition of Assets of Balanced Fund by
Evergreen Foundation 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. Balanced Fund ("Target Fund") is a series
of CoreFunds, Inc., a Maryland corporation.
Evergreen Foundation Fund ("Acquiring Fund") is a series of Evergreen
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 14, 1998 which describes the proposed transaction, and on the
information provided in such prospectus/proxy statement. We have relied, without
independent
<PAGE>
Balanced Fund
Evergreen Foundation Fund
April 14, 1998
Page 2
verification, upon the factual statements made therein, and assume that there
will be no change in material facts disclosed 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
<PAGE>
Balanced Fund
Evergreen Foundation Fund
April 14, 1998
Page 3
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 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 INDEPENDENT AUDITORS
The Trustees and Shareholders
Evergreen Equity Trust
We consent to the use of our report dated May 2, 1997 for Evergreen Foundation
Fund incorporated by reference herein and to the reference to our firm under the
caption "FINANCIAL STATEMENTS AND EXPERTS" in the Prospectus/Proxy Statement.
/s/KPMG Peat Marwick LLP
Boston, Massachusetts
April 13, 1998
<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 Equity Trust (Evergreen Foundation
Fund), of this reference and of our report dated August 12, 1997 on the
CoreFunds, Inc. Balanced Fund.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
April 13, 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
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.
-- - - - - - - - - - - - - - - - - - - - -
BALANCED 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 H. 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 Balanced Fund,
a series of CoreFunds, Inc. ("CoreFunds Balanced") that the undersigned is
entitled to vote at the special meeting of shareholders of CoreFunds Balanced 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
Foundation Fund, a series of Evergreen Equity Trust, will (i) acquire all of the
assets of CoreFunds Balanced in exchange for shares of Evergreen Foundation
Fund; and (ii) assume the identified liabilities of CoreFunds Balanced, 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>
