SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- ------------------------------------------------------------------------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ______________
Commission File Number 1-10000
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
CORESTATES EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
FIRST UNION CORPORATION
One First Union Center
Charlotte, North Carolina 28288-0013
<PAGE>
(a) The following financial statements and reports, which have
been prepared pursuant to the requirements of the Employee Retirement Income
Security Act of 1974, are filed as part of this Annual Report on Form 11-K:
Report of Independent Auditors.
Financial Statements:
Statement of Net Assets Available for Benefits, with Fund
Information, December 31, 1997.
Statement of Net Assets
Available for Benefits, with Fund
Information, December 31, 1996.
Statement of Changes in Net Assets Available for
Benefits, with Fund Information, Year ended December
31, 1997.
Statement of Changes in Net Assets Available for
Benefits, with Fund Information, Year ended December
31, 1996.
Notes to Financial Statements.
Line 27-a--Assets Held for Investment Purposes.
Line 27-d--Reportable Transactions.
(b) The following Exhibit is filed as part of this Annual
Report on Form 11-K:
Consent of Ernst & Young LLP.
<PAGE>
Financial Statements
and Supplemental Schedules
CoreStates Employee Stock Ownership
and Savings Plan
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Financial Statements and
Supplemental Schedules
Years ended December 31, 1997 and 1996
Contents
<TABLE>
<S> <C>
Report of Independent Auditors...........................................................................1
Audited Financial Statements
Statement of Net Assets Available for Benefits, With Fund
Information, December 31, 1997........................................................................2
Statement of Net Assets Available for Benefits, With Fund
Information, December 31, 1996........................................................................3
Statement of Changes in Net Assets Available for Benefits, With Fund
Information, Year ended December 31, 1997.............................................................4
Statement of Changes in Net Assets Available for Benefits, With Fund
Information, Year ended December 31, 1996.............................................................5
Notes to Financial Statements............................................................................6
Supplemental Schedules
Line 27-a--Assets Held for Investment Purposes...........................................................17
Line 27-d--Reportable Transactions.......................................................................18
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
First Union Corporation
We have audited the accompanying statements of net assets available for benefits
of the CoreStates Employee Stock Ownership and Savings Plan as of December 31,
1997 and 1996, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan at
December 31, 1997 and 1996, and the changes in its net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1997, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The Fund information in
the statement of net assets available for benefits and the statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in our audit of the financial statements and, in our opinion, are fairly
stated in all material respects in relation to the financial statements taken as
a whole.
Philadelphia, PA
April 28, 1998 Ernst & Young LLP
1
<PAGE>
<TABLE>
<CAPTION>
CoreStates Employee Stock Ownership and Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1997
Fund Information
-----------------------------------------------------------------------------------------------
CoreStates
Financial CoreStates
Corp CoreStates Short- CoreStates CoreStates CoreStates CoreStates
Common Growth Intermediate Equity Liquidity CoreStates Internation Core
Total Stock Fund Equity Fund Bond Fund Index Fund Fund Balanced Growth Fund Equity
Fund Fund
-------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments, at fair value
(cost $630,582,985):
CoreStates Financial
Corp
common stock $624,485,399 $423,944,610 $ - $ - $ - $ - $ - $ - $ -
Mutual funds 366,181,163 690,193 90,453,822 19,817,390 35,353,538 70,057,461 60,988,214 8,978,192 69,288,822
Participants' notes
receivable 25,390,070 - - - - - - - -
------------------------------------------------------------------------------------------------------------
Total investments 1,016,056,632 424,634,803 90,453,822 19,817,390 35,353,538 70,057,461 60,988,214 8,978,192 69,288,822
Receivables:
Due from broker 8,058,763 7,357,776 36,032 133,158 - - - 338,649 -
Accrued investment
income 4,634,243 2,682,503 - 96,985 106,365 - 305,118 114,450 38,397
Interfund receivable 2,868,266 2,152,544 - - 38,239 - 102,259 10,430 -
Cash 6,615,844 - 1,167,079 84,195 1,551,047 - 1,629,906 - 1,480,116
------------------------------------------------------------------------------------------------------------
Total assets 1,038,233,748 436,827,626 91,656,933 20,131,728 37,049,189 70,057,461 63,025,497 9,441,721 70,807,335
Current liabilities:
Interfund payable 2,868,266 498,814 389,072 108,953 82,111 1,131,398 47,812 15,373 19,750
Due to broker 3,453,754 - - - 1,239,132 - 728,373 - 894,399
Accrued interest
expense 1,242,045 - - - - - - - -
Current portion of
loan payable 1,496,813 - - - - - - - -
Overdrafts 6,790,921 5,365,888 - - - 1,173,672 - 251,361 -
Noncurrent liabilities:
Loan payable 54,640,871 - - - - - - - -
------------------------------------------------------------------------------------------------------------
Total liabilities 70,492,670 5,864,702 389,072 108,953 1,321,243 2,305,070 776,185 266,734 914,149
------------------------------------------------------------------------------------------------------------
Net assets available
for benefits $967,741,078 $430,962,924 $91,267,861 $20,022,775 $35,727,946 $67,752,391 $62,249,312 $9,174,987 $69,893,186
============================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------
CoreStates CoreStates CoreStates CoreStates
CoreStates Employee Contribution ESOP ESOP
Bond Fund Loan Fund Fund Allocated Unallocated
Assets ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments, at fair value
(cost $630,582,985):
CoreStates Financial
Corp
common stock $ - $ - $ - $26,806,758 $173,734,031
Mutual funds 10,385,200 103,612 61,113 62 3,544
Participants' notes
receivable - 25,390,070 - - -
--------------------------------------------------------------
Total investments 10,385,200 25,493,682 61,113 26,806,820 173,737,575
Receivables:
Due from broker - - - 193,148 -
Accrued investment
income 45,366 - - 164,166 1,080,893
Interfund receivable - 564,794 - - -
Cash 689,650 770 215 12,852 14
--------------------------------------------------------------
Total assets 11,120,216 26,059,246 61,328 27,176,986 174,818,482
Current liabilities:
Interfund payable - 574,813 170 - -
Due to broker 591,850 - - - -
Accrued interest
expense - - - - 1,242,045
Current portion of
loan payable - - - - 1,496,813
Overdrafts - - - - -
Noncurrent liabilities:
Loan payable - - - - 54,640,871
--------------------------------------------------------------
Total liabilities 591,850 574,813 170 - 57,379,729
--------------------------------------------------------------
Net assets available
for benefits $10,528,366 $25,484,433 $61,158 $27,176,986 $117,438,753
==============================================================
</TABLE>
See accompanying notes.
2
<PAGE>
CoreStates Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1996
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------------
CoreStates
CoreStates CoreStates Short-
Financial Growth Intermediate CoreStates CoreStates
Corp Common Equity Bond Equity Index Liquidity
Total Stock Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value
(cost $296,526,722):
CoreStates Financial Corp common
stock $ 210,426,578 $ 210,426,578 $ - $ - $ - $ -
Mutual funds 199,446,716 652,433 67,749,653 18,545,937 16,063,342 43,178,687
Participants' notes receivable 15,760,146 - - - - -
-------------------------------------------------------------------------------------
Total investments 425,633,440 211,079,011 67,749,653 18,545,937 16,063,342 43,178,687
Receivables:
Due from broker 9,071,432 8,536,682 - 184,161 - -
Accrued investment income 2,667,991 1,981,596 60,543 93,131 58,815 -
Interfund receivable 6,165,947 13,179 1,240,342 1,091 2,306,572 1,380,027
Cash 189,842 3,882 1,635 463 322 181,614
-------------------------------------------------------------------------------------
Total assets 443,728,652 221,614,350 69,052,173 18,824,783 18,429,051 44,740,328
Current liabilities
Interfund payable 6,165,947 5,730,609 102,926 66,192 24,719 155,771
Due to broker 4,157,535 903,240 780,652 - 1,902,478 -
-------------------------------------------------------------------------------------
Total liabilities 10,323,482 6,633,849 883,578 66,192 1,927,197 155,771
-------------------------------------------------------------------------------------
Net assets available for benefits $ 433,405,170 $214,980,501 $68,168,595 $ 18,758,591 $ 16,501,854 $ 44,584,557
=====================================================================================
</TABLE>
<PAGE>
Fund Information
-------------------------------------------
CoreStates
CoreStates CoreStates Employee
Balanced International Loan
Fund Growth Fund Fund
-------------------------------------------
Assets
Investments, at fair value
(cost $296,526,722):
CoreStates Financial Corp common
stock $ - $ - $ -
Mutual funds 48,446,691 4,809,973 -
Participants' notes receivable - - 15,760,146
Total investments -------------------------------------------
48,446,691 4,809,973 15,760,146
Receivables: 350,589 - -
Due from broker 355,248 118,658 -
Accrued investment income 116,069 679,496 429,171
Interfund receivable
1,767 154 5
Cash -------------------------------------------
49,270,364 5,608,281 16,189,322
Total assets
Current liabilities 76,870 8,860 -
Interfund payable - 571,165 -
Due to broker -------------------------------------------
76,870 580,025 -
Total liabilities -------------------------------------------
Net assets available for benefits $ 49,193,494 $ 5,028,256 $16,189,322
===========================================
See accompanying notes.
3
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Statement of Changes in Net Assets Available for Benefits, With Fund Information
Year ended December 31, 1997
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------------------------------
CoreStates
Financial CoreStates CoreStates
Corp Growth Short- CoreStates CoreStates CoreStates
Total Common Stock Equity Intermediate Equity Index Liquidity CoreStates International
Fund Fund Bond Fund Fund Fund Balanced Fund Growth Fund
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 14,426,961 $ - $ - $ - $ - $ - $ - $ -
Employee 28,167,679 - - - - - - -
Rollovers 646,991 179,340 97,516 14,236 66,879 61,139 60,374 54,763
---------------------------------------------------------------------------------------------------------
Total contributions 43,241,631 179,340 97,516 14,236 66,879 61,139 60,374 54,763
Investment income:
Interest 6,587,945 86,788 37,126 1,140,509 25,753 2,888,253 28,205 9,630
Dividends on CoreStates
Financial Corp
common stock 15,274,780 8,216,890 - - - - - -
Dividend income 2,618,508 - 77,850 - 354,380 - 1,326,300 114,450
Distribution - Capital
Gains 19,149,410 - 6,334,396 - 1,014,607 - 3,103,529 366,518
---------------------------------------------------------------------------------------------------------
Total investment income 43,630,643 8,303,678 6,449,372 1,140,509 1,394,740 2,888,253 4,458,034 490,598
Net realized and
unrealized
appreciation
(depreciation)
in fair value of
investments 260,738,083 113,893,019 14,775,000 181,744 5,112,167 - 4,962,683 (214,345)
Transfers from Meridian
Bancorp, Inc. Employee
Stock Ownership Plan 72,428,016 - - - - - - -
Transfers from Meridian
Bancorp, Inc.
Employees Savings Plan 193,877,755 - - - - - - -
Interest expense (4,986,682) - - - - - - -
Participants' withdrawals (74,270,422) (17,399,237) - - - - - -
Participants' interfund
transfers - 111,005,623 1,777,378 (72,305) 12,652,306 20,218,442 3,574,727 3,815,715
Other (disbursements)
receipts (323,116) - - - - - - -
---------------------------------------------------------------------------------------------------------
Increase in net assets
available for Plan
benefits during the
year 534,335,908 215,982,423 23,099,266 1,264,184 19,226,092 23,167,834 13,055,818 4,146,731
Net assets available for
benefits at beginning
of year 433,405,170 214,980,501 68,168,595 18,758,591 16,501,854 44,584,557 49,193,494 5,028,256
---------------------------------------------------------------------------------------------------------
Net assets available for
benefits at end of year $967,741,078 $430,962,924 $91,267,861 $20,022,775 $35,727,946 $67,752,391 $62,249,312 $9,174,987
=========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------------------------------------------------
CoreStates CoreStates CoreStates CoreStates CoreStates CoreStates
Core Equity CoreStates Employee Contribution Distribution ESOP ESOP Meridian
Fund Bond Fund Loan Fund Fund Fund Allocated Unallocated Fund C
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ - $ - $ - $12,239,620 $ - $ 420,934 $ 1,766,407 $ -
Employee - - - 28,167,679 - - - -
Rollovers 62,758 12,270 - - - - - 31,541
-------------------------------------------------------------------------------------------------------
Total contributions 62,758 12,270 - 40,407,299 - 420,934 1,766,407 31,541
Investment income:
Interest 145,708 40,285 1,210,872 9,823 1,353 3,787 1,696 4,604
Dividends on CoreStates
Financial Corp
common stock - - - - - 535,730 4,223,906 2,298,254
Dividend income 177,046 568,482 - - - - - -
Distribution - Capital
Gains 8,330,360 - - - - - - -
-------------------------------------------------------------------------------------------------------
Total investment income 8,653,114 608,767 1,210,872 9,823 1,353 539,517 4,225,602 2,302,858
Net realized and
unrealized
appreciation
(depreciation)
in fair value of
investments 6,540,039 238,649 - - - 10,039,886 65,049,099 40,160,142
Transfers from Meridian
Bancorp, Inc. Employee
Stock Ownership Plan - - - - - 12,127,342 60,300,674 -
Transfers from Meridian
Bancorp, Inc.
Employees Savings Plan 49,226,075 8,207,261 - 1,926,296 - - - 96,287,894
Interest expense - - - - - - (4,986,682) -
Participants' withdrawals - - - - (51,443,485) (947,563) - (4,480,137)
Participants' interfund
transfers 5,411,200 1,461,419 8,084,239 (42,282,260) 51,765,248 4,996,870 (8,916,347)(134,302,298)
Other (disbursements)
receipts - - - - (323,116) - - -
-------------------------------------------------------------------------------------------------------
Increase in net assets
available for Plan
benefits during the
year 69,893,186 10,528,366 9,295,111 61,158 - 27,176,986 117,438,753 -
Net assets available for
benefits at beginning
of year - - 16,189,322 - - - - -
-------------------------------------------------------------------------------------------------------
Net assets available for
benefits at end of year $69,893,186 $10,528,366 $25,484,433 $ 61,158 $ - $ 27,176,986 $117,438,753 $ -
=======================================================================================================
</TABLE>
<PAGE>
Fund Information
------------------------------------------------------
Meridian Meridian
Meridian Meridian Segregated Rollover
Fund B Loan Fund Payment Fund Fund
------------------------------------------------------
Contributions:
Employer $ - $ - $ - $ -
Employee - - - -
Rollovers 6,175 - - -
-----------------------------------------------------
Total contributions 6,175 - - -
Investment income:
Interest 940,503 4,446 8,360 244
Dividends on CoreStates
Financial Corp
common stock - - - -
Dividend income - - - -
Distribution - Capital
Gains - - - -
-----------------------------------------------------
Total investment income 940,503 4,446 8,360 244
Net realized and
unrealized
appreciation
(depreciation)
in fair value of
investments - - - -
Transfers from Meridian
Bancorp, Inc. Employee
Stock Ownership Plan - - - -
Transfers from Meridian
Bancorp, Inc.
Employees Savings Plan 27,866,870 9,064,930 1,190,859 107,570
Interest expense - - - -
Participants' withdrawals - - - -
Participants' interfund
transfers (28,813,548) (9,069,376) (1,199,219) (107,814)
Other (disbursements)
receipts - - - -
-----------------------------------------------------
Increase in net assets
available for Plan
benefits during the
year - - - -
Net assets available for
benefits at beginning
of year - - - -
-----------------------------------------------------
Net assets available for
benefits at end of year $ - $ - $ - $ -
=====================================================
See accompanying notes.
4
<PAGE>
CoreStates Savings Plan
Statement of Changes in Net Assets Available for Benefits, With Fund Information
Year ended December 31, 1996
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------------------------
CoreStates CoreStates CoreStates
Financial Growth Short- CoreStates CoreStates CoreStates
Corp Common Equity Intermediate Equity Index Liquidity Balanced
Total Stock Fund Fund Bond Fund Fund Fund Fund
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 12,456,272 $ - $ - $ - $ - $ - $ -
Employee 16,962,372 - - - - - -
Rollovers 3,419,104 811,090 439,509 110,428 732,413 587,005 539,485
----------------------------------------------------------------------------------------------
Total contributions 32,837,748 811,090 439,509 110,428 732,413 587,005 539,485
Investment income:
Interest 4,366,442 100,894 27,776 1,070,853 5,059 2,155,427 21,112
Dividends on CoreStates Financial
Corp common stock 7,234,871 7,234,871 - - - - -
Dividend income 1,443,449 - - - 170,775 - 1,219,244
Distribution capital gains 10,328,238 - 7,275,232 - 128,840 - 2,600,878
----------------------------------------------------------------------------------------------
Total investment income 23,373,000 7,335,765 7,303,008 1,070,853 304,674 2,155,427 3,841,234
Net realized and unrealized
appreciation (depreciation) in
fair value of investments 62,192,275 55,275,161 4,478,287 (201,219) 1,959,144 - 736,370
Participants' withdrawals (32,663,219) (4,848,873) - - (86) - -
Participants' interfund transfers - (3,540,473) 1,690,038 (989,114) 5,864,044 (3,107,389) 20,847
Other (disbursements) (109,405) - - - - - -
----------------------------------------------------------------------------------------------
Increase in net assets available
for benefits during the year 85,630,399 55,032,670 13,910,842 (9,052) 8,860,189 (364,957) 5,137,936
Net assets available for benefits at
beginning of year 347,774,771 159,947,831 54,257,753 18,767,643 7,641,665 44,949,514 44,055,558
----------------------------------------------------------------------------------------------
Net assets available for benefits at
end of year $433,405,170 $214,980,501 $ 68,168,595 $ 18,758,591 $ 16,501,854 $ 44,584,557 $ 49,193,494
==============================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------
CoreStates CoreStates
International Employee CoreStates CoreStates
Growth Loan Distribution Contribution
Fund Fund Fund Fund
------------------------------------------------------
<S> <C> <C> <C> <C>
Contributions:
Employer $ - $ - $ - $ 12,456,272
Employee - - - 16,962,372
Rollovers 199,174 - - -
------------------------------------------------------
Total contributions 199,174 - - 29,418,644
Investment income:
Interest 6,704 978,617 - -
Dividends on CoreStates Financial
Corp common stock - - - -
Dividend income 53,430 - - -
Distribution capital gains 323,288 - - -
------------------------------------------------------
Total investment income 383,422 978,617 - -
Net realized and unrealized
appreciation (depreciation) in
fair value of investments (55,468) - - -
Participants' withdrawals (243) - (27,814,017) -
Participants' interfund transfers 1,827,027 (269,758) 27,923,422 (29,418,644)
Other (disbursements) - - (109,405) -
------------------------------------------------------
Increase in net assets available
for benefits during the year 2,353,912 708,859 - -
Net assets available for benefits at
beginning of year 2,674,344 15,480,463 - -
------------------------------------------------------
Net assets available for benefits at
end of year $ 5,028,256 $ 16,189,322 $ - $ -
======================================================
</TABLE>
See accompanying notes.
5
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements
Years ended December 31, 1997 and 1996
1. Description of the Plan
The following brief description of the CoreStates Employee Stock Ownership and
Savings Plan (the Plan) is provided for general information only. Participants
should refer to the Plan Agreement for more complete information.
General
The Plan is a defined contribution, profit-sharing plan which covers qualified
employees of CoreStates Financial Corp and certain of its subsidiaries ("the
Company"). The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
The name of the Plan was changed from the CoreStates Savings Plan to the
CoreStates Employee Stock Ownership and Savings Plan on January 1, 1997, as a
result of the addition of an employee stock ownership feature to the Plan.
Additional changes were made to certain provisions of the Plan (i.e.
contributions) which are described in the following footnotes.
Participants of the Meridian Bancorp, Inc. Savings Plan and the Meridian
Bancorp, Inc. Employee Stock Ownership Plan, became eligible to participate in
the Plan as a result of the April 9, 1996, acquisition by CoreStates Financial
Corp of Meridian Bancorp, Inc. The net assets of the Meridian Bancorp, Inc.
Employees Savings Plan (approximately $194 million) and the net assets of the
Meridian Bancorp, Inc. Employee Stock Ownership Plan (approximately $72 million)
were transferred into the Plan on January 1, 1997.
On April 28, 1998, the Plan sponsor was acquired by First Union Corporation. As
a result of the merger, each share of the Plan's investments in CoreStates
common stock were exchanged for 1.62 shares of First Union Corporation common
stock. Management intends to merge the Plan with the First Union Corporation
Savings Plan and Trust in 1999.
Contributions
Employee
The Plan provides for employee contributions on either an after-tax basis or a
before-tax basis (up to $9,500 in 1997 and 1996) equal to any whole percentage
of the participant's compensation up to 12% (10% in 1996).
6
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Employer
The Company makes a matching contribution to the Plan on behalf of each
participant. In 1997, the Company's match was determined as follows:
Employee
Contribution as a CoreStates Matching Contributions as a
Percentage of Base Pay Percentage of Employee Contribution
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1% - 4% Variable: 50% to 150%
5% - 8% Fixed: 50%
The amount of the variable match is based on the Company's attainment of its
performance targets. The variable match for 1997 was 100%.
The first 50% of the variable match is invested in CoreStates common stock. The
Plan owns Company common shares acquired with proceeds from a bank borrowing,
and holds the stock in a trust established under the Plan. The borrowing is to
be repaid over a period of twenty years from interest and dividend income earned
in the unallocated trust and to the extent necessary, by fully deductible
contributions to the trust fund.
As the Plan makes principal payments, stock held in the unallocated fund is
released for allocation to participants through Company match contributions.
Dividends on allocated shares may be either distributed or reinvested in Company
stock at the discretion of the Company. Dividends on unallocated shares are used
to repay the loan.
The borrowing is collateralized by the unallocated shares of stock and is
guaranteed by the Company. The lender has no rights against shares once they are
allocated under the Plan. Accordingly, the financial statements of the Plan for
the year 1997 present separately the assets and liabilities and changes therein
pertaining to:
(a) the accounts of employees with vested rights in allocated stock (Allocated)
and
(b) stock not yet allocated to employees (Unallocated).
Each participant is entitled to exercise voting rights attributable to the
shares allocated to his or her account and is notified by the Trustee prior to
the time that such rights are to be exercised. The Trustee is required to vote
all shares in the Plan, including unallocated shares, in proportion to the
response received for participants and beneficiaries with respect to stock
allocated to participant accounts.
7
<PAGE>
1. Description of the Plan (continued)
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
The employer match for 1996 was determined, based on years of service, as
follows:
Participant's Years of Vesting Service Preceding Percent of Basic
Contribution Contribution
------------------------------------------------------- ---------------------
Fewer than 2 years 50%
At least 2 years but fewer than 3 years 75%
3 years or more 100%
Vesting
Employee contributions, rollovers, and qualified voluntary employee contribution
accounts, as affected by investment results, are fully vested at all times.
Employer contributions, other than qualified non-elective contributions, as
affected by investment results, are 50% vested after 2 years of vesting service,
and 100% vested after 3 years of vesting service. Employer contributions are
also fully vested upon termination of employment because of normal retirement,
death, or disability.
Upon the participant's employment termination date, that portion of the
Employer's contributions applicable to such participant which is not vested is
forfeited and applied to reduce future Employer contributions.
Unvested portions are restored to participant's accounts if the participant is
reemployed by the Company before incurring a five-year break in service.
Expenses
The expenses of the Plan, including but not limited to legal and accounting
fees, shall be paid by the Plan unless voluntarily paid by the Company.
Payment of Benefits
Distributions from the Plan will be made when a participant retires, dies (in
which case, payment shall be made to his or her beneficiary or, if none, his or
her legal representatives), becomes totally and permanently disabled, or
otherwise terminates employment with the Company.
A participant may receive vested benefits as a lump-sum payment or if the
participant's vested accrued benefit exceeds $3,500, the participant may elect
to receive equal annual installments over a period not exceeding ten years.
Also, participants may elect to receive a distribution from their investments in
the CoreStates Common Stock Fund in the form of CoreStates Financial Corp common
stock.
8
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Included in assets available for plan benefits at December 31, 1997 is
approximately $17 million which represents the amount due to participants who
have requested withdrawals.
Loans
Active participants, terminated participants and beneficiaries with accrued
benefits under the Plan, may borrow funds from the Plan subject to requirements
of the Plan. Loans advanced against employees' vested benefits in the Plan are
deducted from the amount of any benefits which are payable to the participant
upon termination.
Withdrawals
A participant shall be permitted to withdraw all or a portion of the amount in
the participant's after-tax contribution account subject to the restrictions or
penalties as set forth in the Plan.
Participants who apply for a hardship withdrawal under IRS regulations, or who
cease to be a participant in the Plan, may receive their deferred account
balance in full.
Investment Options
CoreStates Bank, N.A. (CBNA) serves as Trustee for the Plan. Nine investment
funds, as of December 31, 1997, are maintained under the Plan for accumulation
and investment of the participants' accounts. The funds are as follows:
A. CoreStates Financial Corp Common Stock Fund invests primarily in common
stock of CoreStates Financial Corp;
B. CoreStates Growth Equity Fund invests principally in the CoreFund Growth
Equity Fund Class Y, a mutual fund of CoreFunds, Inc. which seeks growth
of capital and an increasing flow of dividends from a diversified
portfolio of common stocks;
C. CoreStates Short-Intermediate Bond Fund invests principally in the
CoreFund Short-Intermediate Bond Fund Class Y, a mutual fund of
CoreFunds, Inc. which seeks consistent income by investing principally in
a diversified portfolio of debt securities with an expected average
weighted maturity of two to five years;
D. CoreStates Equity Index Fund invests principally in the CoreFund Equity
Index Fund Class Y, a mutual fund of CoreFunds, Inc. which seeks to
achieve price and yield performance similar to the S&P 500 Composite
Index;
9
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
E. CoreStates Liquidity Fund invests in the CoreFund Cash Reserve Fund Class
Y, a mutual fund of CoreFunds, Inc. which seeks current income with
liquidity and stability of principal;
F. CoreStates Balanced Fund invests principally in the CoreFund Balanced
Fund Class Y, a mutual fund of CoreFunds, Inc. which seeks to provide
total return while preserving capital by investing in a combination of
common stocks and fixed income securities;
G. CoreStates International Growth Fund invests principally in the CoreFund
International Growth Fund Class Y, a mutual fund of CoreFunds, Inc. which
seeks long-term growth of capital by investing in a portfolio of common
stocks diversified by country and industry;
H. CoreStates Core Equity Fund invests principally in the CoreFund
CoreEquity Fund which seeks growth of capital and an increasing flow of
dividends from a diversified portfolio of common stocks of companies with
large, medium, or small capitalization, this option was not available in
1996;
I. CoreStates Bond Fund invests principally in the CoreFund Bond fund which
seeks consistent income by investing in a diversified portfolio of debt
securities, this option was not available in 1996.
At December 31, 1996, seven funds were maintained under the Plan for
accumulation and investment of participant accounts. The Funds were as follows:
CoreStates Financial Corp Common Stock Fund
CoreStates Growth Equity Fund
CoreStates Short-Intermediate Bond Fund
CoreStates Equity Index Fund
CoreStates Liquidity Fund
CoreStates Balanced Fund
CoreStates International Growth Fund
See above for a description of each fund.
Meridian Fund B which invested in short-term securities and Meridian Fund C
which invested in CoreStates Financial Corp common stock along with the Meridian
Loan Fund, Segregated Payment Fund, and Rollover Fund were funds of the former
Meridian Bancorp, Inc. Savings Plan, which merged with the Plan in 1997. The
assets of these funds were transferred to funds of the plan with similar
investment objectives or activities.
10
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
CoreStates Financial Corp provides investment advisory and custodial services
for the above mutual funds.
2. Summary of Significant Accounting Policies
Investment Valuation
Investments are stated at fair value. Securities transactions are recorded on
the trade date. The cost of investments sold is determined on an average
historical cost basis. Loans are carried at the unpaid principal balance.
Dividends are recorded on the ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Reclassification
Certain prior year amounts were reclassified to conform to current year format.
3. Investments
Investments are comprised of the following:
<TABLE>
<CAPTION>
Shares Average Fair
or Units Cost Value
----------------------------------------------------------
<S> <C> <C> <C>
December 31, 1997
CoreStates Financial Corp
Common Stock Fund:
Common Stock+ 5,265,692 $ 229,320,359 $ 423,944,610
CoreFund Cash Reserve Fund Class Y 690,193 690,193 690,193
----------------------------------------
230,010,552 424,634,803
CoreStates Growth Equity Fund:
CoreFund Cash Reserve Fund Class Y 470,967 470,967 470,967
CoreFund Growth Equity Fund
Class Y+ 5,510,279 65,715,751 89,982,855
----------------------------------------
66,186,718 90,453,822
</TABLE>
11
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
<TABLE>
<CAPTION>
Shares Average Fair
or Units Cost Value
----------------------------------------------------------
December 31, 1997 (continued)
<S> <C> <C> <C>
CoreStates Short-Intermediate Bond Fund:
CoreFund Cash Reserve Fund Class Y 196,687 $ 196,687 $ 196,687
CoreFund Short-Intermediate Bond
Fund Class Y 1,971,930 19,417,715 19,620,703
----------------------------------------
19,614,402 19,817,390
CoreStates Equity Index Fund:
CoreFund Cash Reserve Fund Class Y 429,461 429,461 429,461
CoreFund Equity Index Fund Class Y 880,809 28,046,057 34,924,077
----------------------------------------
28,475,518 35,353,538
CoreStates Liquidity Fund:
CoreFund Cash Reserve Fund Class Y+ 70,057,461 70,057,461 70,057,461
CoreStates Balanced Fund:
CoreFund Cash Reserve Fund Class Y 380,986 380,986 380,986
CoreFund Balanced Fund Class Y+ 4,456,412 50,879,063 60,607,228
----------------------------------------
51,260,049 60,988,214
CoreStates International Growth Fund:
CoreFund Cash Reserve Fund Class Y 138,682 138,682 138,682
CoreFund International Growth 665,625
Fund Class Y 8,987,086 8,839,510
----------------------------------------
9,125,768 8,978,192
CoreStates Core Equity Fund:
CoreFund Cash Reserve Fund Class Y 789,344 789,344 789,344
CoreFund Core Equity Fund Class Y+ 3,323,353 58,696,483 68,499,478
----------------------------------------
59,485,827 69,288,822
CoreStates Bond Fund:
CoreFund Cash Reserve Fund Class Y 916,898 916,898 916,898
CoreFund Bond Fund Class Y 894,866 9,087,269 9,468,302
----------------------------------------
10,004,167 10,385,200
</TABLE>
12
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
<TABLE>
<CAPTION>
Shares Average Fair
or Units Cost Value
-----------------------------------------------------------
December 31, 1997 (continued)
<S> <C> <C> <C>
CoreStates Employee Loan Fund:
CoreFund Cash Reserve Fund Class Y 103,612 $ 103,612 $ 103,612
Participant Notes Receivable, with
interest rates ranging from 5.5% to 11% 25,390,070 25,390,070
-----------------------------------------
25,493,682 25,493,682
CoreStates Contribution Fund
CoreFund Cash Reserve Fund Class Y 61,113 61,113 61,113
CoreStates ESOP-Allocated:
CoreStates Common Stock 332,566 9,225,830 26,806,758
CoreFund Cash Reserve Fund Class Y 62 62 62
-----------------------------------------
9,225,892 26,806,820
CoreStates ESOP-Unallocated:
CoreStates Common Stock 2,158,183 51,578,292 173,734,031
CoreFund Cash Reserve Fund Class Y 3,544 3,544 3,544
-----------------------------------------
51,581,836 173,737,575
-----------------------------------------
Total investments $ 630,582,985 $ 1,016,056,632
=========================================
</TABLE>
<TABLE>
<CAPTION>
Shares Average Fair
or Units Cost Value
-----------------------------------------------------------
December 31, 1996
<S> <C> <C> <C>
CoreStates Financial Corp
Common Stock Fund:
Common Stock+ 4,042,040 $ 103,656,676 $ 210,426,578
CoreFund Cash Reserve Fund Class Y 652,433 652,433 652,433
-----------------------------------------
104,309,109 211,079,011
CoreStates Growth Equity Fund:
CoreFund Cash Reserve Fund Class Y 272,372 272,372 272,372
CoreFund Growth Equity Fund Class Y+ 5,020,631 54,046,127 67,477,281
-----------------------------------------
54,318,499 67,749,653
</TABLE>
13
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
<TABLE>
<CAPTION>
Shares Average Fair
or Units Cost Value
--------------------------------------------------------------
December 31, 1996 (continued)
<S> <C> <C> <C>
CoreStates Short-Intermediate Bond Fund:
CoreFund Cash Reserve Fund Class Y 78,555 $ 78,555 $ 78,555
CoreFund Short-Intermediate Bond
Fund Class Y 1,872,959 18,435,305 18,467,382
-----------------------------------------
18,513,860 18,545,937
CoreStates Equity Index Fund:
CoreFund Cash Reserve Fund Class Y 91,149 91,149 91,149
CoreFund Equity Index Fund Class Y 520,734 13,590,931 15,972,193
-----------------------------------------
13,682,080 16,063,342
CoreStates Liquidity Fund:
CoreFund Cash Reserve Fund Class Y+ 43,178,687 43,178,687 43,178,687
-----------------------------------------
43,178,687 43,178,687
CoreStates Balanced Fund:
CoreFund Cash Reserve Fund Class Y 333,016 333,016 333,016
CoreFund Balanced Fund Class Y+ 3,892,692 41,653,831 48,113,675
-----------------------------------------
41,986,847 48,446,691
CoreStates International Growth Fund:
CoreFund Cash Reserve Fund Class Y 35,190 35,190 35,190
CoreFund International Growth
Fund Class Y 370,476 4,742,304 4,774,783
-----------------------------------------
4,777,494 4,809,973
CoreStates Employee Loan Fund:
Participant Notes Receivable, with interest
rates ranging from 5.5% to 11%
15,760,146 15,760,146
=========================================
Total investments $ 296,526,722 $ 425,633,440
=========================================
+ Represents greater than 5% of net assets available for benefits at the end of the year.
</TABLE>
14
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Fair values are determined as follows: (1) CoreStates Financial Corp Common
Stock - on the basis of the last reported sale price on the last business day of
the year; and (2) Mutual funds - at net asset value at the close of business on
the last business day of the year.
The Plan's investments are held by a bank-administered trust fund. During 1997,
the Plan's investments (including investments bought, sold, as well as held
during the year) appreciated in fair value as follows:
Net Appreciation in Fair
Value During 1997
-------------------------
Fair value as determined by quoted market prices:
CoreStates Financial Corp common stock $ 188,982,004
Mutual funds 71,756,079
=========================
Total $ 260,738,083
=========================
4. Loans Payable
The Plan has a term loan from an affiliate that was used to finance the purchase
of shares of the Company's common stock. The loan repayment term is 20 years,
and bears interest at 8.85%. The principal payments due for the next five years
are as follows:
1998 $ 1,496,814
1999 1,634,838
2000 1,774,383
2001 1,947,631
2002 2,125,802
The Company is obligated to make contributions in cash to the Plan which, when
aggregated with the Plan's dividends on unallocated shares and interest
earnings, equal the amount necessary to enable the Plan to make its regularly
scheduled payments of principal and interest due on its term loan.
15
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Notes to Financial Statements (continued)
5. Plan Termination
Although the Company has expressed no intention to do so, the Company has the
authority to terminate the Plan at any time. If the Plan were to be terminated,
each participant would remain fully entitled to the value of his or her account.
Upon termination of the Plan, the Trustee will pay all liabilities and expense
of the trust fund and sell shares of unallocated stock to the extent it
determines such sale to be necessary in order to repay the loan.
6. Income Tax Status
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) of the Internal Revenue Code (IRC) and, therefore, the related trust is
not subject to tax under present income tax law. Once qualified, the Plan is
required to operate in conformity with the IRC to maintain its qualification.
The Plan has subsequently been amended. Management is not aware of any course of
action or series of events that have occurred that might adversely affect the
Plan's qualified status.
7. Year 2000 (Unaudited)
The Plan is reliant on CoreStates and third parties for data processing.
CoreStates has undertaken a program to prepare and convert its computer systems
and applications to enable them to function properly with respect to dates in
the year 2000 and thereafter (the "Program"). Although management intends to
merge the Plan with the First Union Corporation Savings Plan and Trust, if the
merger is not consummated, the Program will need to be completed. CoreStates is
in discussions with third parties to determine the extent to which the Plan's
systems are vulnerable. The Plan does not expect that its results of operations
will be significantly affected, as CoreStates and its third-party processors do
not intend to charge the Plan for the costs of converting their computer
systems. However, to the extent that the Program is not completed timely, the
Year 2000 issue could have a material impact on the operations of the Plan.
16
<PAGE>
Supplemental Schedules
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Line 27-a--Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Description Shares or Units Average Cost Fair Value
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CoreStates Financial Corp*
Common Stock 7,756,441 $ 290,124,481 $ 624,485,399
CoreFund* Cash Reserve Fund
Class Y 74,239,010 74,239,010 74,239,010
CoreFund* Growth Equity
Fund Class Y 5,510,279 65,715,751 89,982,855
CoreFund* Short-Intermediate Bond
Fund Class Y 1,971,930 19,417,715 19,620,703
CoreFund* Equity Index Fund
Class Y 880,809 28,046,057 34,924,077
CoreFund* Balanced Fund
Class Y 4,456,412 50,879,063 60,607,228
CoreFund* International Growth
Fund Class Y 665,625 8,987,086 8,839,510
CoreFund* Core Equity Fund
Class Y 3,323,353 58,696,483 68,499,478
CoreFund* Bond Fund
Class Y 894,866 9,087,269 9,468,302
Participant Notes Receivable, with
interest rates ranging from 5.5%
to 11.0% 25,390,070 25,390,070
===========================================
Total investments $ 630,582,985 $ 1,016,056,632
===========================================
</TABLE>
*Indicates a party-in-interest to the Plan.
17
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Line 27-d--Reportable Transactions
Year ended December 31, 1997
<TABLE>
<CAPTION>
(A) (A)
Purchase Selling
Identity of Parties Involved Description of Assets Price Price Gain
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Category I--A single transaction is excess of 5% of plan assets
CoreFund Cash Reserve Class Y Sold 30,164,693 units $ 30,164,693 $ -
CoreFund Cash Reserve Class Y Purchased 30,993,000 units $30,993,000 -
CoreFund Cash Reserve Class Y Sold 33,565,515 units 33,565,515 -
Category III--A series of transactions in a security issue aggregating in excess of 5% of plan assets
CoreStates Financial Corp Purchased 701,226 units in 214 transactions; 41,285,678 64,032,268 4,536,761
sold 1,145,815 units in 151 transactions
CoreFund Growth Equity Fund Purchased 1,429,030 units in 145 transactions; 18,105,421 18,065,402 1,829,520
Class Y sold 807,852 units in 42 transactions
CoreFund Equity Index Fund Purchased 542,379 units in 122 transactions; 18,968,430 5,255,101 555,220
sold 111,231 units in 47 transactions
CoreFund Cash Reserve Fund Class Y Purchased 206,517,642 units in 965 transactions; 206,517,642 216,297,748 -
sold 216,297,748 units in 1,252 transactions
CoreFund Balanced Fund Y Purchased 1,122,343 units in 138 transactions; 17,230,513 8,693,966 733,118
sold 665,414 units in 42 transactions
</TABLE>
18
<PAGE>
CoreStates Employee Stock Ownership and Savings Plan
Line 27-d--Reportable Transactions (continued)
Year ended December 31, 1997
<TABLE>
<CAPTION>
(A) (A)
Purchase Selling
Identity of Parties Involved Description of Assets Price Price Gain
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CoreFunds Core Equity Fund Purchased 1,311,499 units in 115 transactions;
sold 658,031 units in 34 transactions. $27,244,541 $13,621,987 $1,517,426
Morgan Stanley Repurchase Agreement Purchased 10,984,000 units in 2 transactions;
5.15%, matured 2/11/97 sold 10,984,000 units in 1 transaction. 10,984,000 10,984,000 -
Morgan Stanley Repurchase Agreement Purchased 10,898,000 units in 2 transactions;
5.15%, 2/11/97 sold 10,898,00 units in 1 transaction. 10,898,000 10,898,000 -
Republic of New York Repurchase Agreement 5.3%, Purchased 15,000,000 units in 1 transaction;
matured 1/31/97 sold 15,000,000 units in 1 transaction. 15,000,000 15,000,000 -
HSBC Repurchase Agreement Purchased 15,164,000 units in 2 transactions;
5.29%, matured 1/31/97 sold 15,164,000 units in 1 transaction. 15,164,000 15,164,000 -
</TABLE>
There were no Category II or IV transactions during the year ended
December 31, 1997.
(A) Commissions and fees related to purchases and sales of
investments are included in the cost of the investment or the
proceeds from the sale and are not separately identified.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the plan administrator has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
CORESTATES EMPLOYEE STOCK OWNERSHIP
AND SAVINGS PLAN
By: ______________________________________
Name: Vikram H. Dewan
Title: Director of Human Resources
Date: June 29, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Location
- ----------- ----------- --------
(23) Consent of Ernst & Young LLP Filed herewith
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-4 No. 333-44015) pertaining to the CoreStates Employee Stock Ownership and
Savings Plan of First Union Corporation of our report dated April 28, 1998,
with respect to the financial statements and schedules of the CoreStates
Employee Stock Ownership and Savings Plan included in this Annual Report (Form
11-K) for the year ended December 31, 1997.
\s\ Ernst & Young LLP
Philadelphia, Pennsylvania
June 26, 1998
