As filed with the Securities and Exchange Commission on April 19, 1996
Registration No. 2-93214
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 26 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY [ ]
ACT OF 1940
AMENDMENT NO. 27 [X]
-----------------------------
COREFUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
680 East Swedesford Road
Wayne, PA 19087
(Address of Principal Executive Offices)
Registrant's Telephone Number: 1-(800)355-CORE
JAMES W. JENNINGS, ESQUIRE
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
(Name and Address of Agent for Service)
-----------------------------
It is proposed that this filing will become effective on April 22, 1996 after
filing pursuant to paragraph (b) of Rule 485.
The Registrant has registered an indefinite number of its Common Shares under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The Registrant filed a Rule 24f-2 notice covering the fiscal year
ended June 30, 1995 on August 25, 1995.
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<PAGE>
CROSS REFERENCE SHEET
April 19, 1996
<TABLE>
<CAPTION>
Prospectus
Form N-1A Item No. Caption
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<S> <C>
PART A - Institutional Shares: Growth Equity Fund, Equity Fund, Special
Equity Fund, Equity Index Fund, International Growth Fund, Balanced Fund, Short
Intermediate Bond Fund, Bond Fund, Short-Term Income Fund, Government Income
Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, Global Bond Fund, Cash Reserve, Treasury Reserve and
Tax-Free Reserve Portfolios
Item 1. Cover Page ...............................................................Cover Page
Item 2. Synopsis .................................................................Transaction and
Operating Expense
Tables
Item 3. Condensed Financial Information...........................................Financial Highlights
Item 4. General Description of Registrant.........................................Cover Page; Highlights;
Investment Objectives;
Investment Restrictions;
General Information
Item 5. Management of the Fund....................................................Cover Page; Management;
General Information;
Back Cover
Item 5A. Management Discussions
of Fund Performance ......................................................Disclosure in Annual and
and Semi-Annual Reports
Item 6. Capital Stock and Other Securities. ......................................Cover Page;
Distributions; Taxes;
Description of Shares;
General Information; How
to Purchase and Redeem
Shares
Item 7. Purchase of Securities Being Offered......................................Valuation of Shares; How
to Purchase and Redeem
Shares
Item 8. Redemption or Repurchase .................................................How to Purchase and
Redeem Shares
Item 9. Pending Legal Proceedings.................................................*
PART A - Individual Shares: Growth Equity Fund, Equity Fund, Special Equity Fund,
International Growth Fund, Balanced Fund, Short Intermediate Bond Fund, Bond
Fund, Short-Term Income Fund, Government Income Fund, Intermediate Municipal
Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund,
Global Bond Fund, Cash Reserve, Treasury Reserve and Tax-Free Reserve Portfolios
<PAGE>
Item 1. Cover Page ...............................................................Cover Page
Item 2. Synopsis .................................................................Transaction and
Operating Expense
Tables
Item 3. Condensed Financial Information...........................................Financial Highlights
Item 4. General Description of Registrant.........................................Cover Page; Highlights;
Investment Objectives;
Investment Restrictions;
General Information
Item 5. Management of the Fund....................................................Cover Page; Management;
General Information;
Back Cover
Item 5A. Management Discussions
of Fund Performance ......................................................Disclosure in Annual
and Semi-Annual Reports
Item 6. Capital Stock and Other Securities. ......................................Cover Page;
Distributions; Taxes;
Description of Shares;
General Information;
Opening an Account and
Purchasing Shares;
Selling Shares
Item 7. Purchase of Securities Being Offered......................................Valuation of Shares;
Opening an Account and
Purchasing Shares;
Exchanging Shares
Item 8. Redemption or Repurchase .................................................Selling Shares;
Redeeming Shares
Item 9. Pending Legal Proceedings.................................................*
PART A - Class A: Equity Index Fund
Item 1. Cover Page ...............................................................Cover Page
Item 2. Synopsis .................................................................Transaction and
Operating Expense
Tables
Item 3. Condensed Financial Information...........................................Financial Highlights
Item 4. General Description of Registrant.........................................Cover Page; Highlights;
Investment Objectives;
Investment Restrictions;
General Information
Item 5. Management of the Fund....................................................Cover Page; Management;
General Information;
Back Cover
Item 5A. Management Discussions
of Fund Performance ......................................................Disclosure in Annual
and Semi-Annual Reports
Item 6. Capital Stock and Other Securities. ......................................Cover Page;
Distributions; Taxes;
Description of Shares;
General Information;
Opening an Account and
Purchasing Shares;
Selling Shares
<PAGE>
Item 7. Purchase of Securities Being Offered......................................Valuation of Shares;
Opening an Account and
Purchasing Shares;
Exchanging Shares
Item 8. Redemption or Repurchase .................................................Selling Shares;
Redeeming Shares
Item 9. Pending Legal Proceedings.................................................*
PART A - CoreFund Elite Cash Reserve, CoreFund
Elite Government Reserve and CoreFund Elite
Treasury Reserve Portfolios
Item 1. Cover Page ...............................................................Cover Page
Item 2. Synopsis .................................................................Transaction and
Operating Expense
Tables
Item 3. Condensed Financial Information...........................................Financial Highlights
Item 4. General Description of Registrant.........................................Cover Page; Highlights;
Investment Objectives;
Investment Restrictions;
General Information
Item 5. Management of the Fund....................................................Cover Page; Management;
General Information;
Back Cover
Item 5A. Management Discussions
of Fund Performance ......................................................*
Item 6. Capital Stock and Other Securities. ......................................Cover Page;
Distributions; Taxes;
Description of Shares;
General Information;
Opening an Account and
Purchasing Shares;
Selling Shares
Item 7. Purchase of Securities Being Offered......................................Valuation of Shares;
Opening an Account and
Purchasing Shares;
Exchanging Shares
Item 8. Redemption or Repurchase .................................................Selling Shares;
Redeeming Shares
Item 9. Pending Legal Proceedings.................................................*
PART A - Fiduciary Reserve Portfolio
Item 1. Cover Page ...............................................................Cover Page
Item 2. Synopsis .................................................................Fund Expenses
Item 3. Condensed Financial Information...........................................Financial Highlights
Item 4. General Description of Registrant.........................................Cover Page;
Introduction; Investment
Objective and Policies;
Investment Restrictions;
General Information
Item 5. Management of the Fund....................................................Cover Page; Management
of the Fund;
General Information
<PAGE>
Item 5A. Management Discussions
of Fund Performance ......................................................Disclosure in Annual
and Semi-Annual Reports
Item 6. Capital Stock and Other Securities. ......................................Cover Page; Dividends
and Taxes; Description
of Shares; General
Information; How to
Purchase and Redeem
Shares
Item 7. Purchase of Securities Being Offered......................................Valuation of Shares; How
to Purchase and Redeem
Shares
Item 8. Redemption or Repurchase .................................................How to Purchase and
Redeem Shares
Item 9. Pending Legal Proceedings.................................................*
PART A - Fiduciary Treasury Portfolio
Item 1. Cover Page ...............................................................Cover Page
Item 2. Synopsis .................................................................Fund Expenses
Item 3. Condensed Financial Information...........................................Financial Highlights
Item 4. General Description of Registrant.........................................Cover Page;
Introduction; Investment
Objective and Policies;
Investment Restrictions;
General Information
Item 5. Management of the Fund....................................................Cover Page; Management
of the Fund;
General Information
Item 5A. Management Discussions
of Fund Performance ......................................................Disclosure in Annual
and Semi-Annual Reports
Item 6. Capital Stock and Other Securities. ......................................Cover Page; Dividends
and Taxes; Description
of Shares; General
Information; How to
Purchase and Redeem
Shares
Item 7. Purchase of Securities Being Offered......................................Valuation of Shares; How
to Purchase and Redeem
Shares
Item 8. Redemption or Repurchase .................................................How to Purchase and
Redeem Shares
Item 9. Pending Legal Proceedings.................................................*
PART A - Fiduciary Tax-Free Portfolio
Item 1. Cover Page ...............................................................Cover Page
Item 2. Synopsis .................................................................Fund Expenses
Item 3. Condensed Financial Information...........................................Financial Highlights
<PAGE>
Item 4. General Description of Registrant.........................................Cover Page;
Introduction; Investment
Objective and Policies;
Investment Restrictions;
General Information
Item 5. Management of the Fund....................................................Cover Page; Management
of the Fund;
General Information
Item 5A. Management Discussions
of Fund Performance ......................................................Disclosure in Annual
and Semi-Annual Reports
Item 6. Capital Stock and Other Securities. ......................................Cover Page; Dividends
and Taxes; Description
of Shares; General
Information; How to
Purchase and Redeem
Shares
Item 7. Purchase of Securities Being Offered......................................Valuation of Shares; How
to Purchase and Redeem
Shares
Item 8. Redemption or Repurchase .................................................How to Purchase and
Redeem Shares
Item 9. Pending Legal Proceedings.................................................*
Part B
Item 10. Cover Page................................................................Cover Page
Item 11. Table of Contents.........................................................Table of Contents
Item 12. General Information and History...........................................The Fund
Item 13. Investment Objectives and Investment
Policies..................................................................Objective and
Policies
Item 14. Management of the Registrant..............................................Directors
and Officers; the
Investment Adviser,
Manager and Distributor
Item 15. Control Persons and Principal
Holders of Securities.....................................................Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services..................................................................The Investment Adviser,
Administrator and
Distributor
Item 17. Brokerage Allocation and Other
Practices.................................................................Portfolio Transactions
Item 18. Capital Stock and Other
Securities................................................................Description of Shares
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered...............................................Included in Part A
Item 20. Tax Status................................................................Included in Part A
Item 21. Underwriters..............................................................*
Item 22. Calculation of Performance Data...........................................Yield
Item 23. Financial Statements......................................................Financial Statements
</TABLE>
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration
Statement.
- -------------
* Omitted since the answer is negative or the Item is inapplicable.
<PAGE>
The prospectus for the CoreFund Elite Cash Reserve, CoreFund
Elite Government Reserve and CoreFund Elite Treasury Reserve
Portfolios, included as part of Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A of CoreFunds, Inc. (File
No. 2-93214) filed with the Securities and Exchange Commission on January 2,
1996 is hereby incorporated by reference as if set forth herein.
<PAGE>
COREFUNDS, INC.
FAMILY OF
MUTUAL FUNDS
PROSPECTUS
COREFUNDS, INC.
APRIL 22, 1996
INSTITUTIONAL SHARES
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CoreFunds, Inc. is an open-end management investment company presently
offering shares in twenty-three diversified and non-diversified portfolios
that offer a variety of investment opportunities. These portfolios are managed
by CoreStates Investment Advisers, Inc. This Prospectus relates to Class Y
Shares in seventeen portfolios, including equity, fixed income, and money
market portfolios (the "Funds").
- --------------------------------------------------------------------------------
This Prospectus gives you information about the Funds that you should
be aware of before investing. Additional information about the Funds,
contained in a Statement of Additional Information dated April 22, 1996, has
been filed with the Securities and Exchange Commission. It is incorporated in
this Prospectus by reference. To obtain a copy without charge, call or write:
CoreFunds, Inc.
680 East Swedesford Road
Wayne, PA 19087
1-800-355-CORE
Keep this Prospectus for future reference.
- --------------------------------------------------------------------------------
SHARES IN THE FUNDS ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR
GUARANTEED OR ENDORSED BY, CORESTATES BANK, N.A., THE
PARENT CORPORATION OF EACH FUND'S INVESTMENT ADVISER, OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE CASH RESERVE, TREASURY RESERVE AND/OR TAX-FREE RESERVE IS
NEITHER INSURED NOR 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 PER SHARE.
- --------------------------------------------------------------------------------
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE>
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TABLE OF CONTENTS /X/ COREFUND
<TABLE>
<S> <C>
Transaction and Operating
Expense Tables...................................... 3
Financial Highlights.................................. 7
Highlights............................................ 12
</TABLE>
_____________________ FUNDAMENTALS OF MUTUAL FUND INVESTING ____________________
<TABLE>
<S> <C>
Types of investment vehicles.......................... 15
How to invest in stocks, bonds, and money market
instruments......................................... 17
Developing your investment strategy................... 22
</TABLE>
___________________________ INFORMATION ON THE FUNDS ___________________________
<TABLE>
<S> <C>
Investment Objectives of the Funds.................... 26
Equity Funds..................................... 26
Fixed Income Funds............................... 26
Money Market Funds............................... 27
Investment Policies................................... 27
Equity Funds..................................... 27
Fixed Income Funds............................... 32
Money Market Funds............................... 36
Other Investment Practices
of the Funds.................................. 37
Types of Securities in Which the Funds Invest......... 45
Equity Funds..................................... 45
Taxable Fixed Income Funds....................... 45
Taxable Money Market Funds....................... 47
Tax-Free Fixed Income and Money
Market Funds.................................. 48
Temporary Investments............................ 50
Investment Restrictions............................... 51
Investor Considerations............................... 53
Investment Suitability........................... 53
Investment Risks................................. 55
Distributions......................................... 58
Taxes................................................. 60
Valuation of Shares................................... 63
Net Asset Value.................................. 63
Portfolio Pricing................................ 63
Management............................................ 64
Investment Adviser, Sub-Advisers................. 64
Fund Managers.................................... 67
Administrator.................................... 69
Distributor...................................... 69
Performance Information............................... 70
Total Return and Yield........................... 70
In General....................................... 71
How to Purchase and Redeem Shares..................... 71
Purchase of Shares............................... 71
Redemption of Shares............................. 72
Description of Shares................................. 73
General Information................................... 74
Description of Ratings................................ 75
Description of Municipal and Corporate Bond
Ratings....................................... 75
Description of Municipal
Note Ratings.................................. 76
</TABLE>
No person is authorized by CoreFunds, Inc. to give
any information or make any representation other
than those contained in this Prospectus or in other
printed or written material issued by CoreFunds,
- ---- Inc., and you should not rely on any other
2 Table of Contents information or representation.
<PAGE>
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TRANSACTION AND OPERATING EXPENSE TABLES /X/ COREFUND
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Funds.
THE INFORMATION CONTAINED IN THE TABLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<TABLE>
<CAPTION>
--------------- ------------- ------------- ------------- ---------------------
SPECIAL
Equity Funds GROWTH EQUITY EQUITY6 EQUITY EQUITY INDEX INTERNATIONAL GROWTH
- ------------------------------------------- --------------- ------------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C> <C>
Class Y Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases none none none none none
Maximum Sales Load Imposed on
Reinvested Dividends none none none none none
Deferred Sales Load none none none none none
Redemption Fee none none none none none
Exchange Fee none none none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee
Waivers1 .72% .74% .10% .12% .80%
12b-1 Fees none none none none none
Administrative Fees After Fee Waivers2 .16% .16% .16% .16% .16%
Other Expenses3 .08% .10% .05% .09% .18%
Net Annual Fund Operating Expenses4 .96% 1.00% .31% .37% 1.14%
</TABLE>
<TABLE>
<CAPTION>
-----------------
Equity Funds BALANCED
- ------------------------------------------- -----------------
<S> <C>
Class Y Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases none
Maximum Sales Load Imposed on
Reinvested Dividends none
Deferred Sales Load none
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee
Waivers1 .56%
12b-1 Fees none
Administrative Fees After Fee Waivers2 .16%
Other Expenses3 .08%
Net Annual Fund Operating Expenses4 .80%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EXAMPLE
You would pay the following
expenses on a $1,000
investment, 1 year $10 $10 $3 $4 $12
assuming (1) a 5% annual
return 3 years 31 32 10 12 36
and (2) redemption at the end 5 years 53 55 17 21 63
of each time period.5 10 years 118 122 39 47 139
</TABLE>
<TABLE>
EXAMPLE
<S> <C>
You would pay the following
expenses on a $1,000
investment, $8
assuming (1) a 5% annual
return 26
and (2) redemption at the end 44
of each time period.5 99
</TABLE>
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(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .75%, .74%, 1.50%, .40%, .80%, and .70% of
the average net assets of Growth Equity Fund, Equity Fund, Special Equity
Fund, Equity Index Fund, International Growth Fund, and Balanced Fund,
respectively.
(2) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(3) Includes (among others) custodial, legal and auditing fees.
(4) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein (except for Special Equity) are net
of investment advisory and administrative fee waivers expected to be in
effect during the fiscal period ending June 30, 1996. Absent any fee
waivers, such expense ratios would have been 1.08%, 1.09%, 0.74%, 1.23% and
1.03% for Growth Equity Fund, Equity Index Fund, International Growth Fund
and Balanced Fund, respectively. The expense ratios for the Equity Fund and
Special Equity Fund are net of investment advisory and administrative fee
waivers expected to be in effect during the fiscal period ending October 31,
1996. Absent any fee waivers, such expense ratio would have been 1.09% and
1.80%, respectively. The service providers of all the Funds have been
voluntarily waiving a portion of their fees since inception. However, these
providers may change this waiver so that a Fund's expense ratio will
approach the contractually mandated ratio.
(5) Absent the voluntary waiver of fees by the Adviser and Administrator, the
amounts for this example, for one year, three years, five years and ten
years, would be $11, $34, $60 and $132 for Growth Equity Fund; $11, $35, $60
and $133 for Equity Fund; $18, $57, $97, and $212 for Special Equity Fund;
$8, $24, $41 and $92 for Equity Index Fund; $13, $39, $68 and $149 for
International Growth Fund; and $11, $33, $57 and $126 for Balanced Fund.
(6) Prior to the date of this Prospectus, this Fund's name was Value Equity
Fund.
Transaction and Operating Expense Tables ----
3
<PAGE>
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TRANSACTION AND OPERATING EXPENSE TABLES (CONTINUED)
<TABLE>
<CAPTION>
---------------- ---------- -------------- --------------- ----------------
SHORT-
INTERMEDIATE SHORT TERM GOVERNMENT INTERMEDIATE
Fixed Income Funds BOND(6) BOND INCOME INCOME MUNICIPAL BOND
- ---------------------------------------- ---------------- ---------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Class Y Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases none none none none none
Maximum Sales Load Imposed on
Reinvested Dividends none none none none none
Deferred Sales Load none none none none none
Redemption Fee none none none none none
Exchange Fee none none none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee
Waivers1 .25% .35% .25% .37% .37%
12b-1 Fees none none none none none
Administrative Fees After Fee
Waivers2 .16% .16% .16% .16% .16%
Other Expenses3 .10% .05% .05% .05% .21%
Net Annual Fund Operating Expenses4 .51% .56% .46% .74% .59%
EXAMPLE
You would pay the following
expenses on a $1,000 investment, 1 year $ 5 $ 6 $ 5 $ 8 $ 6
assuming (1) a 5% annual return 3 years 16 18 15 24 19
and (2) redemption at the end 5 years 29 31 N/A 41 33
of each time period.5 10 years 64 70 N/A 92 74
</TABLE>
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(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .50%, .74%, .74%, .50% and .50% of the
average net assets of Short-Intermediate Bond Fund, Bond Fund, Short Term
Income Fund, Government Income Fund and Intermediate Municipal Bond Fund,
respectively.
(2) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(3) Includes (among others) legal, auditing and printing fees.
(4) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein (except for Bond Fund and Short Term
Income Fund) are net of investment advisory and administrative fee waivers
expected to be in effect during the fiscal period ending June 30, 1996.
Absent fee waivers, such expense ratios would have been 0.85%, 0.96% and
0.81% for Short-Intermediate Bond Fund, Government Income Fund and
Intermediate Municipal Bond Fund, respectively. The expense ratios for the
Bond Fund and Short Term Income Fund are net of investment advisory and
administrative fee waivers expected to be in effect during the fiscal period
ending October 31, 1996. Absent any fee waivers, such expense ratio would
have been 1.04% for each of the Bond Fund and Short Term Income Fund. The
service providers of all the Funds have been waiving all or a portion of
their fees since inception. However, these providers may change the waiver
so that a Fund's expense ratio will approach the contractually mandated
ratio.
(5) Absent the voluntary waiver of fees by the Adviser and the Administrator,
the amounts in this Example, for one year, three years, five years and ten
years, would be $9, $27, $47 and $105 for Short Intermediate Bond Fund; $11,
$33, $57 and $127 for Bond Fund; $11, $33, $57 and $127 for Short-Term
Income Fund; $10, $31, $53 and $118 for Government Income Fund; and $8, $26,
$45 and $100 for Intermediate Municipal Bond Fund.
(6) Prior to the date of this Prospectus, this Fund's name was Intermediate Bond
Fund.
4 Transaction and Operating Expense Tables
<PAGE>
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/X/ COREFUND
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<TABLE>
<CAPTION>
------------------- ----------------- -----------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL GLOBAL
Fixed Income Funds BOND BOND BOND
- -------------------------------------------------------------------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C>
Class Y Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases none none none
Maximum Sales Load Imposed on Reinvested Dividends none none none
Deferred Sales Load none none none
Redemption Fee none none none
Exchange Fee none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee Waivers1 0% 0% .52%
12b-1 Fees none none none
Administrative Fees After Fee Waivers2 0% 0% .16%
Other Expenses3 .14% .40% .40%
Net Annual Fund Operating Expenses4 .14% .40% .89%
EXAMPLE
You would pay the following
expenses on a $1,000 investment, 1 year $ 1 $ 4 $ 9
assuming (1) a 5% annual return 3 years 5 13 28
and (2) redemption at the end 5 years 8 22 49
of each time period.5 10 years 18 51 110
</TABLE>
- --------------------------------------------------------------------------------
(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .50%, .50% and .60% of the average net
assets of Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund
and Global Bond Fund, respectively.
(2) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(3) Includes (among others) legal, auditing and printing fees.
(4) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein are net of investment advisory and
administrative fee waivers expected to be in effect during the fiscal period
ending June 30, 1996. Absent fee waivers, such expense ratios would have
been 0.89%, 1.15% and 1.06% for Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund and Global Bond Fund, respectively. The service
providers of all the Funds have been waiving all or a portion of their fees
since inception. However, these providers may change the waiver so that a
Fund's expense ratio will approach the contractually mandated ratio.
(5) Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one year, three years, five years and ten
years, would be $9, $28, $49, and $110 for Pennsylvania Municipal Bond Fund;
$12, $37, $63, and $140 for New Jersey Municipal Bond Fund; and $11, $34,
$58, and $129 for Global Bond Fund.
Transaction and Operating Expense Tables ----
5
<PAGE>
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TRANSACTION AND OPERATING EXPENSE TABLES (CONTINUED) /X/ COREFUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------- ------------- -------------
TREASURY TAX-FREE
Money Market Funds CASH RESERVE RESERVE RESERVE
- ------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Class Y Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases none none none
Maximum Sales Load Imposed on Reinvested
Dividends none none none
Deferred Sales Load none none none
Redemption Fee none none none
Exchange Fee none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee Waivers1 .28% .28% .28%
12b-1 Fees none none none
Administrative Fees After Fee Waivers2 .16% .16% .16%
Other Expenses3 .07% .07% .07%
Net Annual Fund Operating Expenses4 .51% .51% .51%
EXAMPLE
You would pay the following
expenses on a $1,000 investment, 1 year $ 5 $ 5 $ 5
assuming (1) a 5% annual return 3 years 16 16 16
and (2) redemption at the end 5 years 29 29 29
of each time period.5 10 years 64 64 64
</TABLE>
- --------------------------------------------------------------------------------
(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .40%, .40%, and .40% of the average net
assets of Cash Reserve, Treasury Reserve, and Tax-Free Reserve,
respectively.
(2) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(3) Includes (among others) legal, auditing, and printing fees.
(4) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein are net of investment advisory and
administrative fee waivers expected to be in effect during the fiscal period
ended June 30, 1996. Absent any fee waivers, such expense ratios would have
been 0.72%, 0.72% and 0.72%, for Cash Reserve, Treasury Reserve, and
Tax-Free Reserve, respectively. The service providers of all the Funds have
been waiving all or a portion of their fees since inception. However, these
providers may change the waiver so that a Fund's expense ratio will approach
the contractually mandated ratio.
(5) Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one year, three years, five years and ten
years, would be $7, $23, $40 and $89 for Cash Reserve; $7, $23, $40 and $89
for Treasury Reserve; $7, $23, $40 and $89 for Tax-Free Reserve.
6 Transaction and Operating Expense Tables
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS /X/ COREFUND
- --------------------------------------------------------------------------------
The tables that follow present information about the investment results of
the shares of the Funds. The financial highlights for each of the Growth Equity
Fund, Equity Index Fund, International Growth Fund, Balanced Fund, Government
Income Fund, Short-Intermediate Bond Fund, Intermediate Municipal Bond Fund,
Global Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Cash Reserve Fund, Treasury Reserve Fund and Tax-Free Reserve Fund have
been audited by Ernst & Young LLP, independent accountants, for the period
presented, whose report thereon appears in CoreFunds' annual report which
accompanies the Statement of Additional Information. The financial highlights
for each of the Equity Fund, Special Equity Fund, Bond Fund and Short Term
Income Fund have been audited by Coopers & Lybrand, independent accountants, for
the periods presented, whose report thereon appears in the Conestoga Funds
annual report which accompanies the Statement of Additional Information.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30,
Equity Funds
______________
<TABLE>
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
- -----------------
GROWTH EQUITY
- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $11.18 $0.04 $ 1.54 $(0.04) $ (0.35) $12.37 14.14%+ $102,288
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777
19921 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418
CLASS A
(INDIVIDUAL)
1995** (unaudited) $11.17 $0.02 $ 1.53 $(0.02) $ (0.35) $12.35 13.93%+ $ 2,297
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,730
1993* 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224
- ----------------------
INTERNATIONAL GROWTH
- ----------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $12.29 $0.05 $ 1.02 $(0.29) $ (0.06) $13.01 8.69%+ $111,921
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582
19902 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513
CLASS A
(INDIVIDUAL)
1995** (unaudited) $12.27 $0.03 $ 1.02 $(0.25) $ (0.06) $13.01 8.61%+ $ 1,977
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019
1993* 10.07 0.05 1.59 -- -- 11.71 16.29+ 344
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Ratio of Net Average Net to Average
Expenses to Income to Assets Net Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ----------- -----------
- -----------------
GROWTH EQUITY
- -----------------
<S> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) 0.84% 0.61% 1.11% 0.34% 43%
1995 0.76 0.84 1.10 0.50 113
1994 0.69 0.48 1.11 0.06 127
1993 0.43 0.85 1.11 0.17 103
19921 0.14 1.38 1.12 0.40 66
CLASS A
(INDIVIDUAL)
1995** (unaudited) 1.09% 0.36 1.36 0.09% 43%
1995 1.01 0.59 1.35 0.25 113
1994 0.94 0.23 1.36 (0.19) 127
1993* 0.80 0.39 1.48 (0.29) 103
- ------------------
INTERNATIONAL GROW
- ------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) 1.17% 0.73% 1.29% 0.61% 15%
1995 1.05 0.98 1.19 0.84 59
1994 0.99 0.23 1.18 0.04 67
1993 0.99 1.22 1.28 0.93 59
1992 0.96 1.67 1.40 1.23 87
1991 0.99 1.80 1.56 1.23 49
19902 1.22 2.57 1.99 1.80 20
CLASS A
(INDIVIDUAL)
1995** (unaudited) 1.42% 0.48% 1.54% 0.36% 15%
1995 1.30 0.73 1.44 0.59 59
1994 1.24 0.05 1.43 (0.14) 67
1993* 1.15 1.51 1.44 1.22 59
</TABLE>
Financial Highlights ----
7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, (CONTINUED)
Equity Funds (continued)
______________
<TABLE>
<CAPTION>
Realized and Net Net Assets,
Net Asset Unrealized Dividends Distribution Asset End of Ratio of
Value, Net Net Gains from net from Value Period Expenses
Beginning Investment or (Losses) Investment Capital End of Total (000 to Average
of Period Income on Securities Income Gains Period Return omitted) Net Assets
--------- ---------- ------------- ---------- ------------ ------ ------ ---------- ----------
- ---------
BALANCED
- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS
(INSTITUTIONAL)
1995**
(unaudited) $11.06 $0.17 $ 1.23 $(0.17) $(0.15) $12.14 12.66% $68,283 0.80%
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
19933 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45
CLASS A
(INDIVIDUAL)
1995**
(unaudited) $11.06 $0.15 $ 1.23 $(0.15) $(0.15) $12.14 12.53%+ $ 2,687 1.05%
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
1993* 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Net Average Net to Average
Income to Assets Net Assets Portfolio
Average Net (Excluding (Excluding Turnover
Assets Waivers) Waivers) Rate
------------- ------------- ----------- -----------
- -----------
BALANCED
- -----------
<S> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995**
(unaudited) 2.85% 1.06% 2.59% 32%
1995 3.51 1.07 3.17 46
1994 3.46 1.08 3.00 56
19933 3.38 1.39 2.45 21
CLASS A
(INDIVIDUAL)
1995**
(unaudited) 2.60% 1.31% 2.34% 32%
1995 3.27 1.32 2.93 46
1994 3.21 1.33 2.75 56
1993* 5.76 1.48 4.83 21
</TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31,(4)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------
EQUITY
- -------
CLASS Y
(INSTITUTIONAL)
1995(5) $15.00 $0.19 $ 2.87 $(0.19) $(0.80) $17.07 22.00% $78,352 1.05%
CLASS A
(INDIVIDUAL)
1991(5) $15.00 $0.18 $ 2.87 $(0.17) $(0.80) $17.08 24.94% $ 6.591 1.34%
PRIOR CLASS
1994 $15.39 $0.11 $ 0.22 $(0.11) $(0.61) $15.00 2.21% $50,128 1.40%
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) 13.03 9.27 28,103 0.92
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37 12.830 0.54
1990(6) 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.55
- ---------------
SPECIAL EQUITY
- ---------------
CLASS Y
(INSTITUTIONAL)
1995(5) $ 9.37 $0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $57,306 0.32%
CLASS A
(INDIVIDUAL)
1995(5) $ 9.37 $0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $ 7.34 0.27%
PRIOR CLASS
1994(7) $10.00 $0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $10,069 0.15%
</TABLE>
- ---------------
CLASS Y
(INSTITUTIONAL)
1995(5) 1.44% 1.10% 1.44% 119%
CLASS A
(INDIVIDUAL)
1991(5) 1.23% 1.53% 1.04% 119%
PRIOR CLASS
1994 0.75% 1.51% 0.73% 35%
1993 0.94 1.41 0.73 24
1992 1.47 1.23 1.17 39
1991 2.30 1.48 1.36 68
1990(6) 2.29 1.59 1.35 43
- ---------------
SPECIAL EQUITY
- ---------------
CLASS Y
(INSTITUTIONAL)
1995(5) 1.14% 1.97% (0.51)% 129%
CLASS A
(INDIVIDUAL)
1995(5) 1.29% 2.24% (0.68)% 129%
PRIOR CLASS
1994(7) 1.06% 2.10% (0.80)% 39%
- --------------------------------------------------------------------------------
+ Returns are for the period indicated and have not been annualized.
* Class A has been offered since January 4, 1993. Balanced has offered Class A
since March 16, 1993.
** Ratios for the six-month period ended December 31, 1995, have been
annualized.
(1) Growth Equity commenced operations on February 3, 1992. All ratios for the
period have been annualized.
(2) International Growth commenced operations on February 12, 1990. All the
ratios for the period have been annualized.
(3) Balanced commenced operations on January 4, 1993. All ratios for the period
have been annualized.
(4) The performance results of the Equity and Special Equity Funds prior to the
merger of CoreFunds and Conestoga Family of Funds ('Conestoga') are based
on the performance of the respective Conestoga portfolios and employ an
October 31st fiscal year.
(5) On February 21, 1995 the shares of the Fund (formerly a portfolio of
Conestoga) were redesignated as either Retail (Class A) or Institutional
(Class Y) shares. For the year ended October 31, 1995, the Financial
Highlights' ratios of expenses, ratios of net investment income, total
return, and the per share investment activities and distributions are
presented on a basis whereby 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 based upon the relative net assets
of each class of shares as of February 21, 1995 and the results combined
therewith the results of operations and distributions for each applicable
class for the period February 21, 1995 through October 31, 1995.
(6) Equity Fund (formerly Value Equity Fund) commenced operations on February
28, 1990. All ratios for the period have been annualized.
(7) Special Equity Fund commenced operations on March 15, 1994. All ratios have
been annualized.
8 Financial Highlights
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS /X/ COREFUND
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, (CONTINUED)
Fixed Income Funds
______________________
<TABLE>
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distributions End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value, End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
- --------------------
GOVERNMENT INCOME
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.83 $0.31 $ 0.27 $(0.31) $ ___ $10.10 6.02%+ $13,426
1995 9.52 0.62 0.31 (0.62) ___ 9.83 10.26 11,305
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089
1993(1) 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323
CLASS A (INDIVIDUAL)
1995** (unaudited) $ 9.84 $0.30 $ 0.26 $(0.30) $ ___ $10.10 5.78%+ $ 1,344
1995 9.51 0.61 0.33 (0.61) ___ 9.84 10.23 1,374
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536
1993* 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Ratio of Ratio of Net Average Net Average Net
Expenses to Income to Assets Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.57% 6.28% 0.90% 5.95% 77%
1995 0.59 6.53 0.98 6.14 368
1994 0.50 4.93 1.00 4.43 157
1993(1) 0.44 5.41 1.10 4.75 93
CLASS A (INDIVIDUAL)
1995** (unaudited) 0.82% 6.03% 1.15% 5.70% 77%
1995 0.85 6.25 1.24 5.86 368
1994 0.75 4.68 1.25 4.18 157
1993* 0.63 5.35 1.29 4.69 93
</TABLE>
- -------------------------
SHORT-INTERMEDIATE BOND
- -------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.84 $0.29 $ 0.13 $(0.29) $ ___ $ 9.97 4.33%+ $55,290
1995 9.63 0.53 0.21 (0.53) ___ 9.84 8.22 55,128
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692
1992(2) 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623
CLASS A (INDIVIDUAL)
1995** (unaudited) $ 9.84 $0.28 $ 0.13 $(0.28) $ ___ $ 9.97 4.20%+ $ 2,052
1995 9.63 0.54 0.20 (0.53) ___ 9.84 7.95 1,961
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365
1993* 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.62% 5.81% 0.85% 5.58% 109%
1995 0.60 5.76 0.84 5.52 405
1994 0.58 4.30 0.86 4.02 299
1993 0.42 4.62 0.86 4.18 188
1992(2) 0.11 5.73 0.84 5.00 51
CLASS A (INDIVIDUAL)
1995** (unaudited) 0.87% 5.56% 1.10% 5.33% 109%
1995 0.85 5.27 1.09 5.03 405
1994 0.83 4.05 1.11 3.77 299
1993* 0.75 3.78 1.19 3.34 188
</TABLE>
- -------------------------------
INTERMEDIATE MUNICIPAL BOND
- -------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.83 $0.18 $ 0.28 $(0.18) $ -- $10.11 4.71%+ $ 236
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088
1993(3) 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009
CLASS A (INDIVIDUAL)
1995** (unaudited) $ 9.83 $0.17 $ 0.27 $(0.17) $ -- $10.10 4.47%+ $1,032
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311
1993* 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.97% 3.57% 1.34% 3.20% 0%
1995 0.82 3.91 1.26 3.47 9
1994 0.63 3.91 1.17 3.37 43
1993(3) 0.58 2.74 1.45 1.87 10
CLASS A (INDIVIDUAL)
1995** (unaudited) 1.22% 3.32% 1.59% 2.95% 0%
1995 1.08 3.65 1.52 3.21 9%
1994 0.88 3.66 1.42 3.12 43
1993* 0.81 2.51 1.68 1.64 10
</TABLE>
- --------------
GLOBAL BOND
- --------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.62 $0.24 $ 0.42 $(0.38) $ -- $9.90 6.96%+ $33,237
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898
1994(4) 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957
CLASS A (INDIVIDUAL)
1995** (unaudited) $ 9.61 $0.29 $ 0.36 $(0.37) $ -- $9.89 6.83%+ $ 172
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170
1994(4) 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.70% 5.96% 1.00% 5.66% 24%
1995 0.64 6.84 1.03 6.45 133
1994(4) 0.73 5.04 1.12 4.65 161
CLASS A (INDIVIDUAL)
1995** (unaudited) 0.95% 5.71% 1.25% 5.41% 24%
1995 0.89 6.59 1.28 6.20 133
1994(4) 0.98 4.79 1.37 4.40 161
</TABLE>
Financial Highlights ----
9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, (CONTINUED)
Fixed Income Funds (continued)
__________________
<TABLE>
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------
PENNSYLVANIA MUNICIPAL BOND
- ------------------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $10.16 $0.27 $ 0.45 $(0.27) $ -- $10.61 7.22%+ $2,870
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434
CLASS A
(INDIVIDUAL)
1995** (unaudited) $10.16 $0.26 $ 0.45 $(0.26) $ -- $10.61 7.08%+ $ 217
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Ratio of Net Average Net to Average
Expenses to Income to Assets Net Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.35% 5.26% 1.10% 4.51% 5%
1995 0.39 5.26 1.14 4.51 18
1994(5) 0.42 5.09 1.17 4.34 3
CLASS A
(INDIVIDUAL)
1995** (unaudited) 0.60% 5.01% 1.35% 4.26% 5%
1995 0.64 4.95 1.39 4.20 18
1994(5) 0.67 4.84 1.42 4.09 3
</TABLE>
<TABLE>
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------
NEW JERSEY MUNICIPAL BOND
- ----------------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $10.12 $0.26 $ 0.44 $(0.26) $(0.06) $10.50 7.02%+ $1,564
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550
1994(5) 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432
CLASS A
(INDIVIDUAL)
1995** (unaudited) $10.12 $0.25 $ 0.43 $(0.25) $(0.06) $10.49 6.79%+ $ 100
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.40% 4.96% 1.16% 4.20% 13%
1995 0.42 5.21 1.17 4.46 32
1994(5) 0.43 5.07 1.35 4.15 13
CLASS A
(INDIVIDUAL)
1995** (unaudited) 0.65% 4.71% 1.41% 3.95% 13%
1995 0.68 4.97 1.44 4.21 32
1994(5) 0.68 4.82 1.60 3.90 13
</TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31,(6)
- ------
BOND
- ------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995(7) $ 9.81 $0.61 $ 0.71 $(0.58) $ -- $10.55 13.87% $194,442
CLASS A
(INDIVIDUAL)
1995(7) $ 9.81 $0.60 $ 0.72 $(0.57) $ -- $10.56 13.83% $ 1,373
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 0.82 15,180
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255
1990(8) 10.00 0.50 (0.04) (0.50) -- 9.96 4.64 4.593
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CLASS Y
1995(7) 0.71% 6.09% 1.12% 5.61% 352%
CLASS A
(INDIVIDUAL)
1995(7) 0.97% 6.02% 1.44% 5.55% 352%
PRIOR CLASS
1994 1.01% 5.07% 1.60% 4.41% 232%
1993 0.88 5.16 1.49 4.55 158
1992 0.46 6.78 1.24 6.01 99
1991 0.47 7.71 1.41 6.78 47
1990(8) 0.68 7.75 1.62 6.81 23
</TABLE>
<TABLE>
<CAPTION>
- -------------------
SHORT TERM INCOME
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995(9) $10.00 $0.25 $0.03 $(0.23) $ -- $10.05 2.87% $36,099
CLASS A
(INDIVIDUAL)
199510 $10.01 $0.23 $0.02 $(0.22) $ -- $10.04 2.57% $ 11
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS Y
1995(9) 0.63% 5.43% 1.08% 4.98% 40%
CLASS A
(INDIVIDUAL)
199510 0.88% 5.05% 1.33% 4.60% 40%
</TABLE>
- --------------------------------------------------------------------------------
+ Returns are for the period indicated and have not been annualized.
* Class A has been offered since January 4, 1993. Government Income and
Intermediate Municipal Bond have offered Class A since May 3, 1993. Ratios
for this period have been annualized.
** Ratios for the six-month period ended December 31, 1995, have been
annualized.
(1) Government Income commenced operations on April 1, 1993. Ratios for this
period have been annualized.
(2) Short-Intermediate Bond commenced operations on February 3, 1992. Ratios
for this period have been annualized.
(3) Intermediate Municipal Bond commenced operations on May 3, 1993. Ratios for
this period have been annualized.
(4) Global Bond commenced operations on December 15, 1993. Ratios for this
period have been annualized.
(5) Pennsylvania Municipal Bond and New Jersey Municipal Bond commenced
operations on May 16, 1994. Ratios for this period have been annualized.
(6) The performance results of the Bond and Short Term Income Funds prior to
the merger of CoreFunds and Conestoga are based on the performance of the
respective Conestoga portfolios and employ an October 31st fiscal year.
(7) On February 21, 1995 the shares of the Fund (formerly a portfolio of
Conestoga) were redesignated as either Retail or Institutional shares. For
the year ended October 31, 1995, the Financial Highlights' ratios of
expenses, ratios of net investment income, total return, and the per share
investment activities and distributions are presented on a basis whereby
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 based upon the relative net assets of each class of shares
as of February 21, 1995 and the results combined therewith the results of
operations and distributions for each applicable class for the period
February 21, 1995 through October 31, 1995.
(8) Bond Fund commenced operations on February 28, 1990. All ratios for the
period have been annualized.
(9) Class Y Shares of the Short Term Income Fund commenced operations on May
15, 1995. All ratios for the period have been annualized.
(10) Class A Shares of the Short-Term Income Fund commenced operations on May
17, 1995. All ratios for the period have been annualized.
10 Financial Highlights
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, (CONTINUED)
Money Market Funds
_______________________
<TABLE>
<CAPTION>
Net
Net Asset Dividends Net Assets Ratio of Ratio of
Value Net from Net Asset Value End of Expenses to Net Income
Beginning Investment Investment End of Total Period Average Net to Average
of Period Income Income Period Return (000) Assets Net Assets
----------- ----------- ----------- ----------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------
CASH RESERVE
- ---------------
CLASS Y (INSTITUTIONAL)
1995**
(unaudited) $1.00 $0.03 $(0.03) $1.00 2.72%+ $ 551,429 0.50% 5.33%
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54
1987 1.00 0.06 (0.06) 1.00 5.85 35,054 0.54 5.60
19861 1.00 0.06 (0.06) 1.00 3.36+ 56,416 0.59 6.93
CLASS C (INDIVIDUAL)
1995**
(unaudited) $1.00 $0.03 $(0.03) $1.00 2.59%+ $18,064 0.75% 5.08%
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86
1994 1.00 0.03 (0.03) 1.00 2.74+ 11,451 0.72 2.70
1993* 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52
- --------------------
TREASURY RESERVE
- --------------------
CLASS Y (INSTITUTIONAL)
1995**
(unaudited) $1.00 $0.03 $(0.03) $1.00 2.96% $ 526,081 0.50% 5.28%
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26
CLASS C (INDIVIDUAL)
1995 (unaudited) $1.00 $0.03 $(0.03) $1.00 2.56%+ $ 22,023 0.75% 5.03%
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62
1993* 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46
- --------------------
TAX-FREE RESERVE
- --------------------
CLASS Y (INSTITUTIONAL)
1995**
(unaudited) $1.00 $0.02 $(0.02) $1.00 1.66%+ $59,109 0.50% 3.27%
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20
CLASS C (INDIVIDUAL)
1995**
(unaudited) $1.00 $0.02 $(0.02) $1.00 1.53%+ $ 2,264 0.75% 3.02%
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75
1993* 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Expenses Income
Average Net Average Net
Assets Assets
(Excluding (Excluding
Waivers) Waivers)
------------- -------------
- ---------------
CASH RESERVE
- ---------------
<S> <C> <C>
CLASS Y (INSTITUTIONAL)
1995**
(unaudited) 0.85% 4.98%
1995 0.85 4.67
1994 0.85 2.57
1993 0.85 2.58
1992 0.82 4.24
1991 0.82 6.49
1990 0.80 7.82
1989 0.90 8.05
1988 1.14 5.96
1987 1.01 5.13
19861 1.21 6.31
CLASS C (INDIVIDUAL)
1995**
(unaudited) 1.10% 4.73%
1995 1.10 4.49
1994 1.10 2.32
1993* 1.15 2.13
- -----------------
TREASURY RESERVE
- -----------------
CLASS Y (INSTITUTIONAL)
1995**
(unaudited) 0.85% 4.93%
1995 0.85 4.54
1994 0.86 2.49
1993 0.85 2.50
1992 0.82 4.14
1991 0.82 6.35
1990 0.84 7.56
19892 0.84 8.62
CLASS C (INDIVIDUAL)
1995 (unaudited) 1.10% 4.68%
1995 1.10 4.44
1994 1.11 2.24
1993* 1.14 2.07
- -----------------
TAX-FREE RESERVE
- -----------------
CLASS Y (INSTITUTIONAL)
1995**
(unaudited) 0.85% 2.92%
1995 0.85 2.72
1994 0.87 1.62
1993 0.89 1.82
1992 0.88 2.88
19913 0.81 3.45
CLASS C (INDIVIDUAL)
1995**
(unaudited) 1.10% 2.67%
1995 1.10 2.43
1994 1.12 1.37
1993* 1.14 1.33
</TABLE>
- --------------------------------------------------------------------------------
+ Returns are for the period indicated and have not been annualized.
* Class C has been offered since January 4, 1993. Ratios for this period have
been annualized.
** Ratios for the six-month period ended March 31, 1995, have been annualized.
(1) Cash Reserve commenced operations on August 16, 1985. Ratios for this
period have been annualized.
(2) Treasury Reserve commenced operations on November 21, 1988. Ratios for this
period have been annualized.
(3) Tax-Free Reserve commenced operations on April 16, 1991. Ratios for this
period have been annualized.
Financial Highlights ----
11
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
COREFUNDS CoreFunds, Inc. ('CoreFunds') is an open-end management investment company presently offering shares
in twenty-three diversified and non-diversified portfolios. This Prospectus offers Class Y Shares of
seventeen portfolios. Class Y Shares are primarily offered to various types of institutional
investors, which may include CoreStates Bank and its affiliate and corresponding banks, for the
investment of their own funds or for funds for which they serve in a fiduciary, agency or custodial
capacity. The shares offered in this Prospectus are not subject to a sales load or 12b-1 charges.
Materials relating to Class A and Class C Shares of the Funds may be obtained by calling
1-800-355-CORE or by writing to CoreFunds, Inc., 680 E. Swedesford Road, Wayne PA 19087. Prior to the
date of this Prospectus, all Class A Shares were known as Series B -- Individual for all portfolios
other than Money Market Funds; Class C Shares were known as Series B -- Individual for the Money
Market Funds; and Class Y Shares were known as Series A -- Institutional. CoreFunds has changed their
designation to conform to the standard designations suggested by the Investment Company Institute.
- --------------------------------------------------------------------------------------------------------------------------------
FUNDAMENTALS OF MUTUAL This section will assist you in appreciating investments generally. It describes the three basic types
FUND INVESTING of investments--stocks, bonds, and money market investments-- as well as mutual funds which employ one
or more of these instruments. The various types of mutual funds available and the advantages of mutual
fund investing are also discussed.
PAGE 13
- --------------------------------------------------------------------------------------------------------------------------------
MULTIPLE PORTFOLIOS Investors may choose to invest in any of the seventeen funds of CoreFunds offered in this Prospectus.
EQUITY FUNDS FIXED INCOME FUNDS MONEY MARKET FUNDS
Growth Equity Fund Short-Intermediate Bond Cash Reserve
Equity Fund Fund Treasury Reserve
Special Equity Fund Bond Fund Tax-Free Reserve
Equity Index Fund Short Term Income Fund
International Growth Fund Government Income Fund
Balanced Fund Intermediate Municipal
Bond Fund
Pennsylvania Municipal
Bond Fund
New Jersey Municipal Bond Fund
Global Bond Fund
PAGE 24
- --------------------------------------------------------------------------------------------------------------------------------
RISK CHARACTERISTICS Investment in the Funds involves a number of risks, including possible loss of principal. The Funds
differ significantly in terms of specific risks. Certain risk factors applicable to the Funds are
described below.
EQUITY FUNDS
The Equity Funds are subject to market risk and fund risk. Market risk is the possibility that stock
prices in general will decline over short or even extended periods of time. Stock markets tend to be
cyclical, with periods when stock prices generally rise and periods when stock prices generally
decline. Fund risk is the
</TABLE>
12 Highlights
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
- --------------------------------------------------------------------------------
possibility that a Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
Therefore, investors should consider their holdings in equity
mutual funds to be long-term investments.
In addition to market and fund risks, International
Growth Fund is also subject to foreign market and currency
risk. Investments in foreign stock markets can be as volatile,
if not more volatile, than investments in U.S. markets.
Currency risk is the risk that changes in foreign exchange
rates will affect, favorably or unfavorably, the value of
foreign securities held by the Fund.
FIXED INCOME FUNDS
Securities held by the Fixed Income Funds may be subject to
several types of investment risk, including market risk,
credit risk, and call risk. With respect to these Funds,
market risk (or interest rate risk) is the potential for a
decline in the price of fixed income securities due to rising
interest rates. Credit risk is the possibility that a bond
issuer will be unable to make timely payments of either
principal or interest. Call risk (or income risk) relates to
corporate bonds during periods of falling interest rates, and
involves the possibility that securities with high interest
rates will be prepaid (or 'called') by the issuer prior to
maturity. Such an event would require a Fund to invest the
resulting proceeds elsewhere, at generally lower interest
rates, which would cause fluctuations in the Fund's net
income.
Short-Intermediate Bond Fund, Bond Fund and Short Term
Income Fund may also be exposed to event risk, the possibility
that corporate fixed income securities held by these Funds may
suffer a substantial decline in credit quality and market
value due to a corporate restructuring. While event risk may
be high for certain corporate securities held by these Funds,
event risk in the aggregate should be low because of the
Funds' diversified holdings.
An investment in either the Pennsylvania Municipal Bond
Fund or the New Jersey Municipal Bond Fund involves special
risk considerations. The concentration of investments in
Pennsylvania municipal securities by the Pennsylvania
Municipal Bond Fund and the concentration of investments in
New Jersey municipal securities by the New Jersey Municipal
Bond Fund raises certain investment considerations, including
the possibility that changes in the economic condition and
governmental policies of either state or its municipalities
could adversely affect the value of the corresponding Fund and
the portfolio securities held by it.
Global Bond Fund is also subject to foreign market and
currency risks, as discussed above.
MONEY MARKET FUNDS
Securities held by Cash Reserve and Treasury Reserve may be
subject, on a limited basis, to credit risk. The credit risk
of a money market investment portfolio is similar to that of a
fixed income portfolio.
Securities held by Tax-Free Reserve may be subject, on a
limited basis, to several types of investment risk, including
market risk (or interest rate risk), credit risk and call risk
(or income risk).
PAGE 48
- --------------------------------------------------------------------------------
Highlights ----
13
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS (CONTINUED) /X/ COREFUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT CoreStates Investment Advisers, Inc. ('CoreStates Advisers') serves as the investment adviser for
ADVISER each Fund. The International Growth Fund and Global Bond Fund also retain investment sub-advisers.
CoreStates Advisers has extensive experience in the management of money market, tax-free, fixed
income, equity, and international investments. It currently manages discretionary and
non-discretionary client security portfolios with a total aggregate market value exceeding $16
billion, for individuals, corporations, institutions and municipalities.
PAGE 62
- ------------------------------------------------------------------------------------------------------------------------------
DIVIDEND Shareholders of a Fund are entitled to dividends and distributions arising from the net investment
POLICY income and capital gains, if any, earned on investments held by the Fund.
PAGE 56
- ------------------------------------------------------------------------------------------------------------------------------
TAXES The sale or redemption of shares of a mutual fund is a taxable event to the selling or redeeming
shareholder. In addition, any receipt of dividends which represent capital gain distributions will
be subject to federal and state income taxes. However, receipt of other dividends will generally not
be subject to federal income taxes. Ordinary dividends also will be subject to state income taxes,
except as to Pennsylvania residents for the Pennsylvania Municipal Bond Fund and New Jersey
residents for the New Jersey Municipal Bond Fund.
There will be no federal income tax consequences to shareholders as a result of the Merger of the
Conestoga Funds into the CoreFunds family of mutual funds. Shareholders of the Conestoga portfolios
will recognize no gain or loss on receipt of shares of the CoreFunds portfolio and shareholders of
the CoreFunds portfolios will have no tax consequences as a result of the Merger.
PAGE 57
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASING Institutional investors may acquire Class Y Shares of the Funds for their own account or as a record
SHARES holder on behalf of fiduciary, agency or custody accounts by placing orders with the Funds'
distributor. The minimum initial investment is $1,000,000 for each Fund which amount may be waived
at the discretion of the distributor. However, the minimum initial investment amount for retail
investors investing in Equity Index Fund is $500. There is no minimum for subsequent investments.
PAGE 69
- ------------------------------------------------------------------------------------------------------------------------------
SELLING With respect to shares held by institutional investors on behalf of their customer accounts, all or
SHARES part of the shares beneficially owned by a customer may be redeemed in accordance with instructions
and limitations pertaining to their account at the institution. The share price of each Fund except
for the Money Market Funds is expected to fluctuate and may at redemption be more or less than at
the time of initial purchase, resulting in a gain or loss.
PAGE 70
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14 Highlights
<PAGE>
AN INTRODUCTORY
GUIDE FOR INVESTORS
This section is devoted to those who are unfamiliar or uncomfortable with the
concepts of mutual fund investing, as well as those who are interested in
developing a coordinated strategy which can help them reach their financial
goals.
It describes the three basic types of investment vehicles--stocks,
bonds, and money market instruments--as well as mutual funds which employ one
or more of these investments.
Of course, no guide alone can help you determine how or when to
invest. That's why we recommend that you work closely with an investment
representative to develop a solid program which is designed specifically
for your goals and risk tolerance.
- --------------------------------------------------------------------------------
/ /
PART I:
TYPES OF INVESTMENT VEHICLES
For details on how each of these instruments is used in mutual funds, please
see the section entitled, "What types of mutual funds are available?"
The three most popular types of investments are stocks, bonds, and money
market instruments. The following is an introduction to what they are and how
they work.
WHAT IS A STOCK?
Also known as equities, stocks represent an ownership position in a business
entity, such as a company or corporation. Each share of stock represents a
proportionate "share" of ownership in the business entity. As a result,
stocks offer individual investors the opportunity to take part in the
economic future of business.
Stocks are bought and sold on the open market, through a variety of
stock exchanges in the U.S. and around the world. This system allows any
individual to purchase and sell shares through stock brokers, who are licensed
to participate in the exchange.
The price for a share of stock is established by an "auction" system,
in which the broker for the buyer negotiates with the broker for the seller.
When the demand for a stock is low, its price will most likely fall; when
demand is high, the stock's price will most likely rise.
Because each share of stock represents a share in the company's
earnings, one of the most common factors affecting the price of the stock is
the direction of the company's earnings. In theory, the more a company earns,
or is expected to earn, the higher the price of its shares.
ALSO SEE: "Equity Mutual Funds" and "What are balanced funds?"
However, a number of other factors can cause a stock's price to go
up or down, including events which will positively or negatively affect the
company's future, changes in the overall economy, changes in the mood of the
market, and the market's perceptions of the company or its stock.
Fundamentals 15
<PAGE>
For definitions of investment terms,
please see the glossary following
this section.
WHAT IS A BOND?
When a corporation, government or government agency needs money for a
certain project, it often borrows money by issuing bonds to investors. So, in
the simplest terms, a bond is an IOU. The investor who purchases a bond is
acting as the lender.
Rather than offering an ownership share in business, as stocks do,
bonds are simply an agreement to repay the investor the amount loaned, also
known as principal, on a certain date. In addition, the issuer commits to
making periodic fixed interest payments to the lender until the loan is repaid.
When the bond is issued by a state or municipality, the interest paid
to investors is generally free of federal income taxes.
Like stocks, bonds are also traded in the open market. The value of a
bond can fluctuate due to changing market conditions. For example, when
interest rates in the market fall, the prices of bonds tend to rise. On the
other hand, when interest rates rise, the value of bonds falls.
ALSO SEE: "Fixed Income Mutual Funds"
Generally, the longer the maturity of a bond, the higher its yield
and the greater its price volatility. The shorter the maturity, the lower
the yield and the greater its price stability.
- --------------------------------------------------------------------------------
Price of the
same bond if
Price of a 7% the yield
coupon bond increases to 8%
Years to now trading to to keep pace with Percent change
maturity yield 7% rising interest rates in price
- --------------------------------------------------------------------------------
1 year $100.00 $99.06 - 0.94%
3 years 100.00 97.38 - 2.62%
10 years 100.00 93.20 - 6.80%
30 years 100.00 88.69 - 11.31%
- --------------------------------------------------------------------------------
During times when overall interest rates are falling, fixed-income investors
generally enjoy higher prices for their bonds. Conversely, rising interest
rates tend to reduce the value of bonds. Longer maturity bonds experience a
greater change in price, as shown above.
WHAT IS A MONEY MARKET INSTRUMENT
Simply put, money market instruments are short-term bonds, with maturities
typically ranging from overnight to 13 months. They pay investors a rate of
interest which is generally lower than that of longer-term bonds.
Money market securities are issued by a number of sources, including
the U.S. Government, its agencies and large, reputable banks and corporations.
ALSO SEE: "Money Market Mutual Funds"
Money market instruments are generally quite stable, due to their
short maturities. Therefore, they are chosen by investors who wish to maintain
the safety of their investment.
16 Fundamentals
<PAGE>
/ /
PART II:
HOW TO INVEST IN STOCKS, BONDS, AND MONEY
MARKET INSTRUMENTS
Now that you've reviewed the basic types of investment vehicles
available, here's a discussion of how mutual funds can help you invest in
stocks, bonds, and money market securities.
WHAT IS A MUTUAL FUND?
Simply defined, a mutual fund pools the money of many investors and invests
it toward a specific goal, such as stability of principal, regular income, or
long-term growth. The fund's professional managers choose investments that,
in their judgment, will help the fund achieve its goal. As an investor, you
share in the fund's gains, losses, income, and expenses on a proportional
basis.
An equity fund pools its money to purchase stocks, a fixed-income
fund purchases bonds, and a money market fund purchases short-term debt
instruments.
ADVANTAGES OF MUTUAL FUND INVESTING.
While many investors enjoy excellent results by purchasing individual stocks
or bonds, most investors find that mutual funds offer a more viable
alternative, for the following reasons:
PROFESSIONAL MANAGEMENT: With individual securities, you or your
broker must do the extensive research necessary to choose from among the
thousands of securities available. With mutual funds, you enjoy having a
professional money manager uncover opportunities and research them to make
sure the investment is appropriate for the needs of the fund.
LOW COSTS: With mutual funds, trading costs are modest because they
are shared by all investors in the fund.
DIVERSIFICATION: When investing, it's important to not put all your
eggs in one basket, so that you will be protected against an excessive loss in
any one investment. But only the wealthiest investors can afford to purchase
the wide range of individual securities to achieve true diversification. With
mutual funds, however, you can enjoy immediate diversification with even a very
limited amount of money, because investment risk is spread over many different
securities for greater stability and safety of your investment.
LIQUIDITY: With individual securities, it can sometimes be difficult
to redeem your investment due to market conditions and other factors. Mutual
fund shares, however, are easily redeemed at their current market value.
- --------------------------------------------------------------------------------
WHAT TYPES OF MUTUAL FUNDS ARE AVAILABLE?
The three basic categories of mutual funds are as follows:
EQUITY (STOCK) MUTUAL FUNDS A stock fund consists of selected
securities traded on the stock market. The fund changes in value as the prices
of the stocks in the fund change. Although these funds tend to rise or fall in
price more than other types of mutual funds, they have traditionally rewarded
investors with higher returns over the long run.
Fundamentals 17
<PAGE>
FIXED INCOME (BOND) MUTUAL FUNDS A fixed income fund is a mutual
fund which invests in a pool of bonds. Bonds generally pay a fixed rate of
interest. While fixed income mutual funds buy bonds, it's important to note
that the income paid by a bond fund will fluctuate as individual securities
are added to or subtracted from the pool.
In addition, fixed income funds are subject to changes in net
asset value due to changing market conditions. Like individual bonds,
fixed income funds will tend to increase in value during times of decreasing
interest rates, and will generally decrease in value when interest rates rise.
There are a wide range of fixed-income funds to choose from,
each with its own investment objectives. These objectives range from
stability of principal, to maximum yield, to tax-free income.
MONEY MARKET FUNDS Of the basic mutual fund categories, money
market funds are managed to maintain the greatest stability of principal.
They are managed to maintain a value of $1 per share.
Money market funds invest in short-term money market securities,
such as U.S. Treasury Bills, certificates of deposit from large banks,
and commercial paper. Because the interest rates paid on these securities
fluctuate with market conditions, the yield for money market
funds will also change.
- --------------------------------------------------------------------------------
WHAT ARE TAX-FREE FUNDS?
Tax-free funds, which include both fixed income (bond) and money market
funds, invest in securities which are issued by state, county, and local
governments and their agencies. The proceeds from these securities are used
to finance a variety of public-works projects, such as the building of
roads, schools, and sewers.
Under current tax laws, the interest paid to investors in these
securities is generally exempt from Federal income taxes. Therefore,
they are frequently purchased by investors who wish to shelter their
investment income from taxes. However, Congress from time to time reviews
this aspect of the tax code and may at any time repeal the exemption on
any or all of these securities. If this were to occur, it would have a
negative impact on any affected securities, as well as the mutual funds
in which they were held.
- --------------------------------------------------------------------------------
It's Easy to Compare Tax-Free and Taxable Yields:
Tax-Free Yield
--------------- = Taxable Yield
1 - Tax Rate
- --------------------------------------------------------------------------------
18 Fundamentals
<PAGE>
WHAT ARE BALANCED FUNDS?
In addition to the types of mutual funds already described, there are also
funds which blend investments in stock, bond, and money market securities.
These are commonly known as balanced funds.
The returns for balanced funds are typically greater than those
of bond and money market funds, but lower than those of pure stock funds.
Investing in all three types of securities means the value of your
principal should fluctuate less than it would in a stock or bond fund
alone.
Typically, the fund's professional manager has the flexibility
to change the investment mix based on current economic conditions.
- --------------------------------------------------------------------------------
COMPARING THE PERFORMANCE OF STOCK, BOND, AND MONEY MARKET INVESTMENTS
In order to balance risks and rewards, it's helpful to see how stocks,
bonds, and money market investments have performed over time.
Mutual fund performance is stated in terms of total return.
The total return of a mutual fund or any other investment consists of
the combination of capital appreciation (or loss) and investment income.
Capital appreciation (or loss) is a change in the market
value. Income is made up of dividends earned on stocks, and
interest paid on bonds or money market investments. In general, stocks
have the highest total return, because over long periods
of time they have achieved the greatest capital appreciation.
Bonds have provided the greatest income or interest, but
because their prices are more stable they have less potential
than stocks for capital appreciation. Therefore, they have a lower
total return potential over time than stocks.
Of course, past returns are no guarantee of future results.
But historical data tells a story which surprises many investors.
As the chart on the right shows, for the forty-year period
between January 1956 and December 1995, stocks have averaged
annual returns of 10.8%, while long-term bonds have averaged 6.4%,
intermediate-term bonds have averaged 7.0%, and money market instruments
have averaged 5.7%. During this same period, inflation
averaged 4.5%. Therefore, bonds and money market investments actually
delivered very little growth in excess of inflation.
Stocks, on the other hand, averaged more than double the rate
of inflation. What about the price fluctuations? Well, it's true that
stocks do fluctuate and probably always will. But as the accompanying
chart shows, stocks have consistently rewarded long-term
investors.
Since money market funds are managed to have a constant $1 share
price, their total return consists only of the interest earned on their
investments.
Fundamentals 19
<PAGE>
GROWTH
OF $1,000
(Historical
Performance
of Stocks,
Bonds and
Cash)
In the printed version, a line graph depicting the historical performance of
stocks, bonds and cash based on total dollars in thousands related to year ends
ranging from 1956 to 1991 broken into the following categories: Large Stocks,
Long-Term Gov't Bonds, Intermediate-Term Gov't Bonds, T-Bills and Inflation. The
figures below are the plot points.
Dollars in Thousands
<TABLE>
<S> <C> <C> <C> <C> <C>
1965 3.77 1.34 1.19 1.19 1.35
1967 3.39 1.4 1.23 1.23 1.41
1968 4.2 1.46 1.27 1.12 1.42
1969 4.66 1.54 1.33 1.12 1.49
1970 4.27 1.64 1.41 1.06 1.48
1971 4.44 1.75 1.49 1.19 1.73
1972 5.07 1.82 1.54 1.35 1.88
1973 6.04 1.89 1.59 1.42 1.97
1974 5.15 2.02 1.73 1.41 2.07
1975 3.79 2.19 1.94 1.47 2.18
1976 5.19 2.31 2.08 1.6 2.35
1977 6.43 2.43 2.18 1.87 2.66
1978 5.97 2.56 2.32 1.86 2.69
1979 6.36 2.74 2.53 1.84 2.79
1980 7.53 3.02 2.87 1.82 2.9
1981 9.97 3.36 3.23 1.74 3.02
1982 9.48 3.86 3.51 1.78 3.3
1983 11.51 4.26 3.65 2.49 4.26
1984 14.1 4.64 3.79 2.51 4.58
1985 14.99 5.09 3.94 2.9 5.22
1986 19.82 5.48 4.09 3.8 6.28
1987 23.48 5.82 4.14 4.73 7.23
1988 24.7 6.14 4.32 4.6 7.44
1989 28.85 6.53 4.51 5.04 7.89
1990 37.94 7.08 4.72 5.96 8.94
1991 36.73 7.63 5 6.33 9.81
1992 47.93 8.06 5.16 7.55 11.33
1993 51.62 8.34 5.31 8.15 12.14
1994 56.78 8.58 5.45 9.64 13.51
1995 57.52 8.92 5.6 8.89 12.81
1996 60.013 11.862 5.719 9.289 15.062
This chart shows how the major types of investments have performed over the past
40 years. More stable money market investments have produced the lowest annual
returns, while stocks have produced the greatest growth even though their value
fluctuates more.
HISTORICAL
ANNUALIZED
RETURN
(January 1956-December 1995)
Stocks 10.8%
Long-Term Government Bonds 6.4
Intermediate-Term Government Bonds 7.0
Cash 5.7
Inflation 4.5
Assumptions for the table and charts shown on this page: Returns based on
historical performance, which is no guarantee of future results. Stock
returns represent total return of the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500 Index"). Fixed income, or bonds, is composed of
intermediate- and long-term Government Bonds. Cash represents 30-day Treasury
Bills. Source: SEI Financial Services Company.
RANGE OF STOCK RATES OF RETURN FOR ONE AND FIVE YEAR ROLLING PERIODS (1956-
1995)
In the printed version a bar graph depicting annual (one year) returns and
rolling five-year periods rates of return for stock rates is plotted using the
following percentages.
Percent
Annual Returns Rolling Five-Year Periods
37.2% 17.9%
-10.9% 1.4%
Many individuals are concerned about the risks associated with investing in
stocks. Many do not realize, however, that despite the fluctuation of annual
returns, investors who held stocks for a full five years historically earned a
positive return in more than ninety-five percent of the cases. Best and worst
case scenarios presented in this illustration represent the fifth and
ninety-fifth percentile of the historical return distribution. Source: SEI
Financial Services Company.
20 Fundamentals
<PAGE>
WHAT ARE INTERNATIONAL FUNDS?
International funds invest primarily in stock, bond and money market securities
issued by corporations, governments and banks worldwide.
International equity funds invest in the equity (stock) securities of
companies based outside the United States. Today, international markets account
for over 62% of the world's equity capitalization, as measured by the Morgan
Stanley World Index in February, 1996. This indicates that many investment
opportunities now exist globally. Likewise, international bond funds may invest
in government and corporate debt obligations from around the world with the aim
of providing income and the potential for capital appreciation. Investing in
international equity (stock) and fixed income (bond) funds provides investors
with a way to participate in a diversified portfolio of many international
securities of many countries.
GROWTH
OF $1,000
(Performance
of International and
Domestic
Stocks)
In the printed version a line graph depicting the performance of international
and domestic stocks based on total dollars in thousands related to year ends
ranging from 1976 to 1994 broken into the following categories: S&P 500 and MSCI
EAFE (the Morgan Stanley Capital International Europe, Australia and Far East
Index) indexes. The plot points are indicated below.
Dollars in Thousands
1976 1.4223 1.6985
1977 1.6986 1.5762
1978 2.2812 1.6803
1979 2.4222 1.9894
1980 3.014 2.634
1981 2.9829 2.505
1982 2.9573 3.041
1983 3.6851 3.7252
1984 3.9749 3.9599
1985 6.2296 5.235
1986 10.586 6.2035
1987 13.226 6.5291
1988 17.007 7.6225
1989 18.843 10.024
1990 14.473 9.7028
1991 16.281 12.662
1992 14.352 13.637
1993 19.08 15.001
1994 20.618 15.196
1995 16.775 15.229
Growth of $1,000 in international and domestic stocks. MSCI EAFE (the Morgan
Stanley Capital International Europe Australia And Far East Index) represents
the growth of an investment in international stocks, and the S&P 500 Index
represents an investment in domestic stocks.
A
COMPARISON OF FOREIGN
GOV'T
BOND
RETURN
PERFORMANCE
1995
In the printed version a bar graph comparing the total return in U.S. dollars
for foreign government bonds broken into the following categories; Japan, United
Kingdom, Australia, France, Canada, United States and Germany. The plot points
are indicated by the following table.
Total Return in U.S. Dollars
Japan 9.57%
U.K. 15.62%
Australia 14.94%
France 27.69%
Canada 23.45%
U.S. 18.3%
Germany 25.91%
Source: SEI Financial services company
Although investing internationally can reward investors (see graphs
above), there is an added dimension to the risks involved in investing in
domestic securities. Currency fluctuations in the countries in which
international stock and bond securities are issued can negatively impact the
value of these securities, as well as the mutual funds in which they are held.
Fundatmentals 21
<PAGE>
/ /
PART III:
DEVELOPING YOUR
INVESTMENT STRATEGY
Now that you have a basic understanding of the investments available to you,
let's look at how these investments can be used to help you achieve your
goals.
Everyone, whatever their income level, has financial goals.
Perhaps yours include a comfortable retirement, education for your
children or grandchildren, a new home, or simply the accumulation
of wealth.
Whatever your personal goals, the best way to achieve them is to
take control of your financial future. And one of the best ways to do that
is through a coordinated program of saving and investing.
Saving money provides the foundation for reaching your goals,
while investing builds on that foundation by using the money you save
to make even more money.
Mutual funds provide one of the most convenient and rewarding
means of saving and investing.
Mutual funds are particularly well-suited to long-term goals such
as education and retirement, because they offer a convenient way to invest
regularly in a diversified portfolio of securities.
Once you've decided to use mutual funds to help reach your
goals, here are some very simple steps to follow:
STEP 1:
SET WELL-DEFINED GOALS.
Whether you're investing for retirement, education, wealth accumulation, or
regular income, start by determining how much you will need to satisfy your
goals. When making this assessment, you may want to seek the guidance of an
investment professional. Also take into account the effects of inflation,
which historically has reduced purchasing power by an average of 4.5% per year.
Short-term goals will require a greater initial investment and
a more conservative investment approach. Longer-term goals will require
a smaller initial investment and a more aggressive approach, including
investments in stock and bond funds which are expected to yield higher
returns over the long run.
Once you determine your primary and secondary goals, you'll
then need to calculate how soon you will need your money.
STEP 2:
ESTABLISH YOUR TIME HORIZON.
For each of your goals, determine how soon you will need the money you're
investing. If it's a shorter-term goal, such as a new home in a few
years, you'll want investments that offer fairly predictable
results in a short time. If it is a longer-term goal, such as education for
young children, you can plan for longer-term results. Accordingly, the type
of investments you choose for retirement will depend on whether your
retirement is a few years away, or a few decades.
22 Fundamentals
<PAGE>
STEP 3:
UNDERSTAND THE REAL RISKS.
Most people think of an investment as "risky" or "safe" based only on how
much the value of their principal can fluctuate. But in the long run, there
is more to risk than whether your principal goes up or down. It's just as
important to consider the following risks:
THE RISK OF INFLATION. To achieve any real increase in your
wealth, your investment return must outstrip inflation, or
you may end up actually losing purchasing power in the long run. To beat
inflation, consider investing some of your money where values and return are
not fixed, but grow with the economy. Experience shows that stock-based
investments such as equity mutual funds offer this type
of performance potential.
THE RISK OF NOT REACHING YOUR GOAL. Another potential risk
that many investors tend to overlook is the risk that an investment
strategy will not enable them to reach their goal. To properly
assess this risk, you first need to define your goals, and then strike a
balance between the risk of principal volatility and the risk of failing
to reach your goals.
For example, statistics show that at age 70 you can expect to
live another 20 years. To achieve the many years of comfortable retirement
you want, you must have the discipline to set aside enough money during
your working years and invest it wisely.
STEP 4:
DECIDE ON AN INVESTMENT MIX.
When you are selecting specific investments, choose those which offer the
greatest potential for reaching your short-term and long-term goals, and
which are within your risk tolerance.
Many investors find that they are most comfortable with a mix of
investments, including stocks, bonds, and money market funds. This approach
offers the advantage of not putting all your eggs in one basket, and also
allows you to enjoy the distinct advantages of each type of investment.
If you use this approach, known as "asset allocation", the key
is deciding how much to allocate to each type of investment. To make this
decision easier, you can select a balanced fund, which combines stock,
bond, and money market investments under the guidance of professional
investment managers.
As this chart below suggests, bonds and money markets fluctuate
less in the short term, and there is less chance of experiencing a loss.
History has shown, however, that the longer you stay invested, the more
stocks have provided a higher return, with a decreasing
potential for loss.
Fundamentals 23
<PAGE>
REDUCTION OF
RISK OVER TIME
A bar graph depicting the average annual return of stocks, long-term bonds,
intermediate-term bonds, cash and inflation for one year, five year, ten year
and twenty year period.
1 Year
Stocks 43.36 -26.5
LT 40.36 -9.18
Int 29.1 -5.14
Cash 14.71 1.5
Inflation 13.31 0.4
5 Years
Stocks 20.4 -2.36
LT 21.62 -2.14
Int 16.98 0.96
Cash 11.12 2.33
Inflation 10.06 1.24
10 Years
Stocks 17.59 1.24
LT 15.56 1.13
Int 13.13 2.92
Cash 9.17 2.58
Inflation 8.67 1.57
20 Years
Stocks 14.59 6.53
LT 10.45 1.94
Int 9.85 3.98
Cash 7.72 4
Inflation 6.36 3.37
The longer you hold any particular asset class (stocks, bonds, money market
instruments), the less the variation in return. While stocks have fluctuated
in value much more than other investments, they have also delivered higher
returns over the long run. In addition, the longer an investor remains
invested in stocks, the less the chance there is for a capital loss. The
best- and worst-case scenarios presented in this illustration represent the
absolute highest and lowest reruns from january 1956 to 1995. Source: based
on historical data on the S&P 500 Index, intermediate- and long-term
Government bonds, and 30-Day Treasury Bills for rolling one-, five-, 10-, and
20-year periods between 1956 and 1995. past results do not guarantee future
performance.
STEP 5:
GET STARTED.
Don't make the mistake of waiting until tomorrow. With mutual funds, you
don't need a large investment to start your program. All it takes is a small
amount of money, and a strong desire to reach your goals.
For full details on how the principles of mutual fund investing can
work for you, please contact your investment representative.
STEP 6:
BE DISCIPLINED.
Once you have a good strategy, stay with it. Avoid sudden changes in reaction
to temporary market trends. Remember, you're interested in long-term
performance.
In mutual fund investing, particularly with equity funds, one of
the surest ways to maximize the value of your investment is through a regular
program of monthly contributions. By adding to your account each month,
you'll be purchasing shares during both "up" markets and "down" markets. This
technique, known as dollar cost averaging", has been shown to yield optimum
results over the long run.
24 Fundamentals
<PAGE>
GLOSSARY
OF KEY INVESTMENT TERMS
CAPITAL GAIN: The profit made from the sale of securities due to an increase
in share value.
CURRENT YIELD: The income paid annually on mutual fund shares, expressed
as a percentage of the current price per share.
DISTRIBUTION: Payment of capital gains to shareholders of a mutual fund.
For tax purposes, distributions are separate from interest income or dividends.
DOLLAR COST AVERAGING: Investing a fixed dollar amount at regular intervals
over a long period of time to reduce the average cost per share of a mutual
fund.
INCOME DIVIDENDS: Regular payments from mutual funds to their shareholders,
made up of dividends, interest, and short-term capital gains earned from the
fund's portfolio of securities. May be distributed annually, bi-annually,
quarterly, or monthly, with operating expenses deducted.
MATURITY: The date on which the issuer is scheduled to return the amount
borrowed to the lender, or investor.
MUNICIPAL BOND: A debt obligation issued by a city, state, or municipality.
Interest from these bonds is generally exempt from federal income tax.
NET ASSET VALUE: The dollar value of one share of a mutual fund. This value
is generally calculated at least once each day, and is the price at which the
fund will redeem its shares from investors.
PRINCIPAL, OR PAR VALUE: Also known as face value, this is the amount loaned
to the issuer of a bond.
PROSPECTUS: A booklet distributed by the issuer of a security or mutual fund,
in compliance with SEC regulations. A mutual fund prospectus must include the
fund's investment objectives, all expenses and fees including management and
sales fees, a description of shareholder services offered, and information on
how to buy shares.
REDEMPTION PRICE: Also known as "bid price", this is the price at which
mutual funds buy back their shares. It is usually the net asset price of the
fund.
TOTAL RETURN: The combined return of capital appreciation and income
(interest and dividends) that an investment earns. (See page 66).
Fundamentals 25
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS
- --------------------------------------------------------------------------------
/X/
INVESTMENT
OBJECTIVES
OF THE FUNDS
The descriptions that follow are designed to help you choose the Fund that best
fits your investment objectives. The objectives of each Fund are fundamental and
may only be changed by the affirmative vote of a majority of the outstanding
shares of such Fund. You may want to pursue more than one objective by investing
in more than one of these Funds.
As investment adviser of each Fund, CoreStates Advisers manages each
Fund's portfolio of investments in a manner which it believes will best
accomplish the Fund's stated objective. However, there can be no assurance that
a Fund will meet its objective.
EQUITY FUNDS ___________________________________________________________________
GROWTH EQUITY FUND Growth Equity Fund's investment objective is to provide
growth of capital and an increasing flow of dividends from the diversified
portfolio of common stocks comprising the Fund.
EQUITY FUND Equity Fund's investment objective is to provide maximum total
return, including capital appreciation and investment income, in excess of stock
market indices such as the S&P 500 Index, as measured over a period of time.
SPECIAL EQUITY FUND Special Equity Fund's investment objective is to seek
capital growth by investing principally in a diversified portfolio of common
stocks.
EQUITY INDEX FUND Equity Index Fund's investment objective is to provide its
shareholders with investment results that achieve price and yield performance
similar to the S&P 500 Index, thereby tracking with reasonable accuracy the
performance of the stock market as a whole.
INTERNATIONAL GROWTH FUND International Growth Fund's investment objective is to
provide its shareholders with long-term capital appreciation, consistent with
reasonable risk, by investing primarily in a diversified portfolio of
appreciation-oriented equity securities of companies located outside the United
States.
BALANCED FUND Balanced Fund's investment objective is to provide total return
while preserving capital. This Fund pursues its objective by investing in a
combination of common stocks and fixed income securities. Under normal
conditions, Balanced Fund will invest a minimum of 25% of its assets in senior
fixed income securities and between 30% and 70% of its assets in common stocks.
FIXED INCOME FUNDS _____________________________________________________________
SHORT-INTERMEDIATE BOND FUND Short-Intermediate Bond Fund's investment objective
is to provide a moderate level of current income consistent with conservation of
capital, by investing substantially all of its assets in a diversified portfolio
of intermediate-term, fixed income obligations which will have an expected
average weighted maturity of two to five years.
BOND FUND Bond Fund's investment objective is to seek to maximize long-term
total return by investing principally in a diversified portfolio of debt
securities.
SHORT TERM INCOME FUND Short Term Income Fund's investment objective is to seek
consistent current income with relative stability of principal by investing
principally in a diversified portfolio of investment grade debt securities.
- ----
26 Investment Objectives
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND Government Income Fund's investment objective is to
provide current income while preserving principal value and maintaining
liquidity.
INTERMEDIATE MUNICIPAL BOND FUND Intermediate Municipal Bond Fund's investment
objective is to seek the highest level of income exempt from federal income
taxes that can be obtained, consistent with the preservation of capital, from a
diversified portfolio of high quality, intermediate-term municipal securities.
This Fund has a fundamental policy to invest, under normal circumstances, at
least 80% of its assets in municipal securities the interest of which is exempt
from federal income taxes, based on opinions from bond counsel for the issuers.
PENNSYLVANIA MUNICIPAL BOND FUND Pennsylvania Municipal Bond Fund seeks current
income exempt from federal and Pennsylvania income taxation with preservation of
capital by investing primarily in a non-diversified portfolio of municipal
securities.
NEW JERSEY MUNICIPAL BOND FUND New Jersey Municipal Bond Fund seeks current
income exempt from federal and New Jersey income taxation with preservation of
capital by investing primarily in a non-diversified portfolio of municipal
securities.
GLOBAL BOND FUND Global Bond Fund's investment objective is to provide capital
appreciation and current income through investment primarily in fixed income
securities of United States and foreign issuers denominated in United States
dollars and in other currencies.
MONEY MARKET FUNDS _____________________________________________________________
CASH RESERVE Cash Reserve's investment objective is to provide as high a level
of current income as is consistent with liquidity and relative stability of
principal.
TREASURY RESERVE Treasury Reserve's investment objective is to provide current
interest income, liquidity and safety of principal.
TAX-FREE RESERVE Tax-Free Reserve's investment objective is to provide as high a
level of current interest income that is exempt from federal income taxes as is
consistent with liquidity and relative stability of principal. This Fund
intends, under normal market conditions, to invest at least 80% of its assets in
tax-free securities.
/X/
INVESTMENT
POLICIES
The policies which the Funds follow to achieve their investment objectives
are described below. These are non-fundamental policies which may be changed
without a shareholder vote.
Descriptions of the securities in which the Funds invest are contained
below in 'Types of Securities in Which the Funds Invest.'
EQUITY FUNDS ___________________________________________________________________
The CoreFund Equity Funds cover a range of investment styles. CoreStates
Advisers, specialists in the management of growth portfolios, manages the Growth
Equity, Equity, Special Equity, Equity Index and Balanced Funds. CoreStates
Advisers has selected Martin Currie, Inc. ('Martin Currie') and Aberdeen Fund
Managers, Inc. ('Aberdeen Managers') to each manage a portion of the
International Growth Fund. These firms are specialists in their investment
styles.
GROWTH EQUITY FUND Growth Equity Fund strives to provide a return in excess of
stock market indices such as the Russell 1000 Index and the S&P 500 Index.
Growth Equity Fund pursues its investment objective by investing primarily in
common
----
Investment Policies 27
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS (CONTINUED)
stocks, preferred stocks, convertible securities, and other equity securities of
companies which CoreStates Advisers believes show the potential for growth of
earnings over time. Stock selection is guided by a top-down approach that
places heavy emphasis on fundamental research to uncover companies with proven
earnings growth records, high reinvestment rates, high returns on equity, and
strong balance sheets showing low debt to total capital. The adviser makes
qualitative judgments on such elements as the company's competitive position,
the quality of its management and the potential for future growth.
This Fund intends, under normal market conditions, to hold at least 75% of
its total assets in the equity securities described above. Over the long term,
continued earnings growth tends to lead to both higher dividends and capital
appreciation.
EQUITY FUND The Equity Fund pursues its investment objective by investing
principally in a diversified portfolio of common stocks of companies with large,
medium or small capitalizations. The Equity Fund will normally invest at least
80% of the value of its total assets in common stocks. The Fund may also invest
up to 20% of the value of its total assets in securities convertible into common
stocks, preferred stocks, corporate bonds, notes, warrants, and short-term
obligations (with maturities of 18 months or less) such as commercial paper
(including variable amount master demand notes), banker's acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. During
temporary defensive periods, the Fund has the ability to hold up to 100% of its
total assets in short-term obligations including domestic bank certificates of
deposit, banker's acceptances and repurchase agreements secured by U.S.
Government securities.
Stocks held by the Equity Fund may be listed on a national securities
exchange or may be unlisted securities with an established over-the-counter
market. CoreStates Advisers has developed a quantitative process which evaluates
stocks in a number of ways, including the ratios of market price to book value,
recent changes in market price, return on equity, price to earnings ratios,
dividend paying abilities, and liquidity. CoreStates Advisers believe that its
quantitative approach reduces subjectivity in the stock selection process.
Equity securities such as those in which the Equity Fund may invest are
more volatile and carry more risk than some other forms of investment. Depending
upon the performance of the Fund's investments, the net asset value per share of
the Fund may decrease instead of increase.
SPECIAL EQUITY FUND The investment objective of the Special Equity Fund is to
seek capital growth by investing principally in a diversified portfolio of
common stocks. The Special Equity Fund will normally invest in common stocks of
domestic companies that CoreStates Advisers expect will experience growth in
earnings and price. The Special Equity Fund will invest primarily in equity
securities, including common stocks, both debt securities and preferred stocks
convertible into common stocks and foreign securities (up to 35% of the Fund's
net assets). The Fund may also purchase securities convertible into common
stocks, preferred stocks, notes, warrants, and, for daily cash management
purposes, short-term obligations (with maturities of 18 months or less) such as
commercial paper (including variable amount
- ----
28 Investment Policies
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
master demand notes), banker's acceptances, certificates of deposit, repurchase
agreements, obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations. During temporary defensive
periods, the Fund has the ability to hold up to 100% of its total assets in
short-term obligations, including domestic bank certificates of deposit,
banker's acceptances and repurchase agreements secured by U.S. Government
securities. CoreStates Advisers' quantitative process described above under 'The
Equity Fund' will be utilized for the Special Equity Fund.
Many of the companies in which the Special Equity Fund invests will be
small and medium capitalized companies. Small capitalized companies are those
organizations with 'stock market capitalizations' between $100 million and $1
billion and medium capitalized companies are those organizations with stock
market capitalizations between $1 billion and $5 billion. 'Stock market
capitalizations' means the total number of common shares outstanding multiplied
by the market price per share.
The Special Equity Fund will normally purchase the securities of small and
medium capitalized companies across a wide range of industry sectors. These
securities may be traded over-the-counter or listed on an exchange and may or
may not pay dividends. Small and medium capitalized companies may be more
vulnerable than larger, more established organizations to adverse business or
economic developments. In particular, small capitalized companies may have
limited product lines, markets and financial resources and may be dependent upon
a relatively small management group. Accordingly, equity securities such as
those in which the Fund may invest are more volatile and carry more risk than
some other forms of investment. Depending upon the performance of the Fund's
investments, the net asset value per Share of the Fund may decrease instead of
increase.
EQUITY INDEX FUND Equity Index Fund intends, under normal market conditions, to
hold at least 90% of its total assets in equity securities that as a group
reflect a composite of those represented in the S&P 500 Index. To mirror and
confine the holdings to relatively large, well-known companies within the S&P
500 Index, CoreStates Advisers utilizes a computer model that closely monitors
industry weightings of the S&P 500 Index. While common stocks represented in the
S&P 500 Index are the primary securities utilized to achieve Equity Index Fund's
objective, CoreStates Advisers may also invest in other types of securities,
consistent with the objective and policies described herein. Equity Index Fund
is not sponsored by nor affiliated with Standard & Poor's Corporation ('S&P').
The S&P 500 Index consists of 500 common stocks, most of which are listed
on the New York Stock Exchange. In choosing the 500 stocks which are included in
the S&P 500 Index, S&P considers market values and industry diversification.
Most of the stocks in the S&P 500 Index are issued by companies which are among
the largest, in terms of the aggregate market value of their outstanding stock,
measured by the market price per share multiplied by the number of shares
outstanding. Stocks that are not among the five hundred largest are included in
the S&P 500 Index for diversification purposes.
Traditional methods of mutual fund investment management typically involve
----
Investment Policies 29
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS (CONTINUED)
frequent changes in a portfolio of securities on the basis of economic,
financial, and market analyses. Index funds such as Equity Index Fund are not
managed in this manner, however. Instead, CoreStates Advisers only purchases and
sells securities with respect to the Fund in an attempt to duplicate the total
return of the S&P 500 Index, taking into account redemptions, sales of
additional Fund shares, and other adjustments as described below.
Consistent with its investment objective, Equity Index Fund's investment
portfolio will at any time consist of common stocks of as many issuers listed in
the S&P 500 Index as is feasible, consistent with the policies stated herein.
Accordingly, the Fund invests in both dividend-paying and non-dividend-paying
securities that are not included in the S&P 500 Index. While Equity Index Fund
may own about 350 names, the largest 50 companies within the S&P 500 Index
generally represent nearly 85% of the value of the S&P 500 Index, and the
largest 200 companies represent nearly 95%. The number of companies owned by the
Fund is determined in an effort to minimize the impact of transaction costs and
balance these costs with tracking error.
Generally, Equity Index Fund only trades securities to reflect changes in
the S&P 500 Index, to carry out appropriate rebalancing for diversification
purposes, or to more closely track the return of the S&P 500 Index. This Fund
invests in equity securities that, as a group, reflect the composite performance
of the S&P 500 Index based on a computer-based financial model that tracks the
performance of the various stocks in the S&P 500 Index. As the Fund grows in
total assets, its portfolio may eventually include all 500 stocks in the S&P 500
Index. This decision would be made by CoreStates Advisers, based on its
financial model.
Although CoreStates Advisers does not screen securities for investment by
this Fund by traditional methods of financial and market analyses, it monitors
the Fund's investments with a view toward removing stocks of companies which
exhibit extreme financial distress or which may impair for any reason the Fund's
ability to achieve its investment objective. Therefore, an investor
participating in the Fund bears the risk of such adverse market conditions. The
Fund expects that its return will match the S&P 500 Index, prior to the
deduction of brokerage and other transaction costs, other Fund expenses, and
tracking errors.
Common stocks purchased by the Fund are initially selected in accordance
with their market capitalizations. Market capitalization is calculated by
multiplying the market price of an issuer's stock by the number of outstanding
shares of its common stock. The issues selected for this Fund are then ranked
and weighted according to their respective market capitalizations. The weighted
market capitalization of each issuer selected is determined by dividing the
issuer's market capitalization by the total market capitalizations of all
issuers listed.
The industry sector diversification of the issuers selected for inclusion
in Equity Index Fund according to their weighted market capitalizations is then
compared with the industry sector diversification of the issuers of all common
stocks publicly traded in the United States.
CoreStates Advisers will include in the Fund certain 'balancing
securities,' which are common stocks of companies with smaller market
capitalizations which are added to complete the portfolio to provide broad
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30 Investment Policies
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industry representation. As indicated, 'balancing securities' are issued by
issuers whose market capitalizations are such that they would not otherwise be
eligible for inclusion in the Fund, and replace the securities of issuers in
over-represented sectors in the fund.
INTERNATIONAL GROWTH FUND International Growth Fund pursues its investment
objective by investing in foreign equity securities which offer favorable
prospects for capital return. This Fund seeks to diversify its assets by
investing in appreciation-oriented equity securities of companies located
outside the United States, which may include, but not be limited to, Australia,
Canada, France, Hong Kong, Japan, Mexico, Singapore, Sweden, Switzerland,
Germany, the Netherlands, and the United Kingdom. In general,
'appreciation-oriented' securities are equity securities of companies that
CoreStates Advisers and the sub-advisers, Martin Currie and Aberdeen Managers,
believe have the greatest potential for long-term growth, and which exhibit
operating characteristics that may enable such companies to compete successfully
in their marketplace.
International Growth Fund offers increased diversification through
investment in foreign markets. This Fund's advisers believe that both the
selection of individual securities and the allocation of International Growth
Fund's assets across foreign markets are important in managing an international
equity fund. Most foreign equity securities are purchased in over-the-counter
markets or on stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located. Under
normal market conditions, International Growth Fund will invest an aggregate of
at least 65% of its total assets in the equity securities of at least three
different countries.
In determining the distribution of International Growth Fund's investments
among various countries and geographic regions, the advisers consider many
factors, such as: prospects for relative economic growth between countries;
government policies affecting business conditions; outlook for local currency;
and the range of available, attractive investment opportunities. For the
selection of securities, the advisers' criteria includes: earnings growth;
return on capital; quality of management; cash flow; and strength of balance
sheet.
While foreign stocks are the primary securities utilized to achieve
International Growth Fund's objective, the advisers may also invest in other
types of foreign equity securities, consistent with the objective and policies
described herein.
The net asset value of this Fund will fluctuate, and investments are
expected to yield little, if any, current income.
BALANCED FUND In managing Balanced Fund, CoreStates Advisers uses a balanced
portfolio philosophy which combines separate equity, fixed income, and asset
allocation strategies. This produces a portfolio of stocks of companies
exhibiting growth in revenues and earnings and strong balance sheet
characteristics. All of the common stocks in which Balanced Fund invests are
traded on registered exchanges or in the 'over-the-counter' market.
The fixed income strategy values bonds using historical yield
differentials. U.S. Government securities and corporate bonds are used
exclusively to implement Balanced Fund's fixed income strategy. The asset
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Investment Policies 31
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INFORMATION ON THE FUNDS (CONTINUED)
allocation strategy shifts the stock-fixed income-money market instrument mix
based on the investment adviser's judgment of the relative attractiveness of
these markets and securities given its view of economic conditions, the level of
interest rates, and the outlook for corporate profits. The strategy uses present
and historical economic and market data to reach these conclusions.
Balanced Fund seeks strong total return in all market conditions, with a
special emphasis on minimizing interim declines during falling equity markets.
Long-term growth is pursued through equity holdings, and current income through
fixed income securities and common stock dividends.
The strategy focuses on controlling downside risk, both through holdings
in relatively high-dividend-yielding stocks and convertible securities, and
through diversification between stocks and bonds. To employ this strategy, the
Fund's adviser uses present and historical economic and market data.
This Fund will, under normal conditions, invest between 30% and 70% of
total assets in common stocks, depending on the investment adviser's assessment
of market conditions. When CoreStates Advisers believes that equity markets are
overvalued, the common stock exposure will be at the low end of this range.
CoreStates Advisers expects that equity exposure will average 60% over time.
Balanced Fund may also invest in U.S. dollar denominated securities of foreign
issuers (including American Depositary Receipts that are traded on registered
exchanges or listed on NASDAQ).
FIXED INCOME FUNDS _____________________________________________________________
CoreFund Fixed Income Funds employ an investment process that attempts to manage
large swings in interest rates within the maturity parameters of each Fund to
reduce an investor's risk of principal. Significant effort is put forth to
identify value along the yield curve, taking into account the economic outlook,
fiscal and monetary policies, and the inflation trend. Developments that can
significantly impact the supply and demand of securities within the various
sectors of the bond market are also carefully considered. By identifying these
opportunities, and acting upon them in a timely manner, the Funds' advisers seek
to enhance overall value.
SHORT-INTERMEDIATE BOND FUND This Fund pursues its investment objective by
investing primarily in corporate debt securities such as bonds and commercial
paper, as well as securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Fund intends, under normal market conditions,
to invest at least 65% of its total assets in bonds and 35% or less in other
fixed income securities.
Short-Intermediate Bond Fund maintains a maximum average maturity of no
more than five years, pursuant to a fundamental policy of the Fund. By
maintaining an average maturity of not more than five years, CoreStates Advisers
expects the Fund's net asset value to be relatively stable while providing
higher income than money market funds.
Should a security held by this Fund be downgraded below the minimum
required ratings, CoreStates Advisers will reassess the creditworthiness of the
security and will consider such an event in determining whether the Fund should
continue to hold the security in question. Securities that are unrated at the
time of purchase may only be purchased by the Fund if they are determined by
CoreStates Advisers to be of comparable quality to securities rated BBB or
better (investment-grade securities) as set forth in 'Types of Securities in
Which the Funds Invest.'
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See 'Description of Ratings' in this Prospectus and the 'Appendix' to the
Statement of Additional Information for a description of applicable ratings.
BOND FUND The investment objective of the Bond Fund is to seek to maximize long-
term total return by investing principally in a diversified portfolio of debt
securities. The Bond Fund will normally invest at least 80% of the value of its
total assets in debt securities of all types. Debt securities include domestic
and foreign bonds, debentures, notes, equipment lease and trust certificates,
asset-backed and mortgage-backed securities, and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
A portion of the Fund also may from time to time be invested in first
mortgage loans and participation certificates in pools of mortgages issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, preferred
stocks, convertible debt securities, common stock obtained upon the conversion
or exchange of such securities, and short-term money market instruments.
Securities in which the Fund invests may have warrants or options attached. The
Fund anticipates investing no more than 5% of its net assets in below Investment
Grade debt securities.
SHORT TERM INCOME FUND The investment objective of the Short Term Income Fund is
to seek consistent current income with relative stability of principal by
investing principally in a diversified portfolio of investment grade debt
securities. Under normal conditions, the Fund's portfolio securities will have
maximum expected or remaining maturities of three years or less. The Fund will
normally have an average dollar weighted portfolio maturity of approximately one
year.
The Fund will invest principally in debt securities, including bonds,
debentures, notes, equipment lease and trust certificates, asset-backed and
mortgage-backed securities, and obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. The Fund may invest up to 35%
of its total assets in U.S. dollar denominated international debt securities for
which the primary trading market is in the United States ('Yankee Bonds').
GOVERNMENT INCOME FUND Government Income Fund invests exclusively in obligations
issued or guaranteed as to principal and interest by the agencies and
instrumentalities of the U.S. Government and repurchase agreements involving any
of such obligations. Although there are no restrictions on maturity, Government
Income Fund generally strives to maintain an average maturity of about seven
years. This Fund intends to invest at least 65% of its total assets in
instruments issued or guaranteed as to principal and interest by the agencies
and instrumentalities of the U.S. Government and mortgage-backed securities.
INTERMEDIATE MUNICIPAL BOND FUND Intermediate Municipal Bond Fund invests
substantially all of its assets in a diversified portfolio consisting of
short-term obligations issued by or on behalf of states, territories and
possessions of the United States, the District of Columbia and their political
subdivisions, agencies, instrumentalities and authorities, the interest on
which, in the opinion of counsel to the issuer, is exempt from federal income
tax. The municipal securities in which this Fund invests are described in 'Types
of Securities in Which the Funds Invest.'
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Investment Policies 33
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INFORMATION ON THE FUNDS (CONTINUED)
Although CoreStates Advisers has no present intention of doing so, up to
20% of all assets in this Fund can be invested in taxable debt securities for
defensive purposes or when sufficient tax-exempt securities considered
appropriate by CoreStates Advisers are not available for purchase.
Intermediate Municipal Bond Fund will maintain an average weighted
maturity of three to ten years. However, when the investment adviser determines
that market conditions so warrant, the Fund can maintain an average weighted
maturity of less than three years. CoreStates Advisers may, at times, elect to
adjust the average maturity upwards, between seven and ten years, in order to
pick up incremental yield, while avoiding the risks associated with long-term
bonds.
PENNSYLVANIA MUNICIPAL BOND FUND At least 80% of this Fund's assets will be
invested in municipal securities, the interest on which is exempt from federal
income tax. Under normal circumstances, at least 65% of the Fund's assets will
be invested in municipal securities, the interest on which is exempt from
Pennsylvania personal income tax ('Pennsylvania Municipal Securities').
This Fund will primarily purchase (i) municipal bonds rated in one of the
three highest rating categories; (ii) municipal notes rated in one of the two
highest rating categories; (iii) commercial paper rated in one of the two
highest short-term categories; or (iv) any of the foregoing determined by
CoreStates Advisers to be of comparable quality at the time of investment.
However, CoreStates Advisers has discretion to invest up to 20% of the Fund's
assets in municipal bonds rated BBB by Standard & Poor's Corporation ('S&P') or
Baa by Moody's Investors Service, Inc. ('Moody's'). See 'Description of
Ratings.'
Pennsylvania Municipal Bond Fund will invest more than 25% of its net
assets in municipal securities whose issuers are located in Pennsylvania. This
Fund may also invest up to 20% of its assets in Taxable Obligations. Taxable
Obligations may include obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, certificates of deposit and demand and
time deposits of domestic banks and savings and loan associations, bankers'
acceptances issued by domestic banks, commercial paper issued by U.S.
corporations (including variable amount master demand notes) meeting the Fund's
quality standards, and securities subject to Federal Alternative Minimum Tax.
Pennsylvania Municipal Bond Fund may also hold a portion of its assets in
cash. To the extent that the Fund's assets are invested in cash, they will not
be invested so as to meet such Fund's investment objective. There are no
restrictions on the average maturity of Pennsylvania Municipal Bond Fund or the
maturity of a single instrument.
Pennsylvania Municipal Bond Fund is a non-diversified investment portfolio
which means that more than 5% of its assets may be invested in each of one or
more issuers. Since a relatively high percentage of assets of the Fund may be
invested in the obligations of a limited number of issuers, the value of the
shares of the Fund may be more susceptible to any single economic, political or
regulatory occurrence than the shares of a diversified investment portfolio
would be. The Fund intends to satisfy the diversification requirements necessary
to comply with Subchapter M of the Internal Revenue Code of 1986, as amended
(the 'Code'). In part, Subchapter M requires that, at the close of each quarter
of the taxable year, those issues which represent more than 5% of the Fund's
assets be limited in aggregate to 50% of the
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Fund and that no one issue exceed 25% of the Fund's total assets.
NEW JERSEY MUNICIPAL BOND FUND At least 80% of this Fund's assets will be
invested in municipal securities, the interest on which is exempt from federal
income tax. Under normal circumstances, at least 65% of the Fund's assets will
be invested in municipal securities, the interest on which is exempt from New
Jersey personal income tax ('New Jersey Municipal Securities').
This Fund will primarily purchase (i) municipal bonds rated in one of the
three highest rating categories; (ii) municipal notes rated in one of the two
highest rating categories; (iii) commercial paper rated in one of the two
highest short-term categories; or (iv) any of the foregoing determined by
CoreStates Advisers to be of comparable quality at the time of investment.
However, CoreStates Advisers has discretion to invest up to 20% of the Fund's
assets in municipal bonds rated BBB or better by S&P or Baa or better by
Moody's. See 'Description of Ratings.'
New Jersey Municipal Bond Fund will invest more than 25% of its net assets
in municipal securities whose issuers are located in New Jersey. This Fund may
also invest up to 20% of its assets in Taxable Obligations, as described above.
New Jersey Municipal Bond Fund may also hold a portion of its assets in
cash. To the extent that the Fund's assets are invested in cash, they will not
be invested so as to meet such Fund's investment objective. There are no
restrictions on the average maturity of New Jersey Municipal Bond Fund or the
maturity of a single instrument.
New Jersey Municipal Bond Fund is a non-diversified investment portfolio,
as described above. The Fund intends to satisfy the diversification requirements
necessary to comply with Subchapter M of the Code.
GLOBAL BOND FUND Global Bond Fund will invest, under normal circumstances, at
least 65% of its total assets in high quality fixed income securities or debt
obligations of foreign or domestic government entities, corporations or
supranational agencies. The Fund will invest in at least three supranational
agencies or countries. Supranational agencies will include, but not be limited
to, the International Bank of Reconstruction and Development, the InterAmerican
Development Bank, and the Asian Development Bank. Countries will include, but
not be limited to, Austria, Australia, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, New
Zealand, Norway, Spain, Sweden, Switzerland, the United Kingdom, and the United
States. Although this Fund will concentrate its investments in the developed
countries listed above, it may invest up to 5% of its assets in similar
securities or debt obligations that are denominated in the currencies of
developing countries and that are of comparable quality to such securities and
debt obligations at the time of purchase as determined by CoreStates Advisers
and the sub-adviser, Alpha Global Fixed Income Managers, Inc.
Global Bond Fund is a non-diversified investment portfolio, as described
above. The Fund intends to satisfy the diversification requirements necessary to
comply with Subchapter M of the Code.
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Investment Policies 35
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INFORMATION ON THE FUNDS (CONTINUED)
Global Bond Fund will strive to take maximum advantage of financial and
economic developments and currency fluctuations. All of its investments will be
in quality securities denominated in various currencies, including the European
Currency Unit, and will be rated in one of the highest four rating categories by
a nationally recognized statistical rating agency or of comparable quality at
the time of purchase as determined by the advisers.
There are no restrictions on the average maturity of Global Bond Fund or
the maturity of any single instrument. Maturities may vary widely depending on
the advisers' assessment of interest rate trends and other economic and market
factors. In the event a security owned by Global Bond Fund is downgraded below
rating categories discussed above, the advisers will review the situation and
take appropriate action with regard to the security.
MONEY MARKET FUNDS _____________________________________________________________
Investments by money market funds such as Cash Reserve, Treasury Reserve and
Tax-Free Reserve are subject to limitations imposed under regulations adopted by
the Securities and Exchange Commission (the 'SEC'). These regulations generally
require money market funds to acquire only U.S. dollar denominated obligations
maturing in 397 days or less, although securities subject to repurchase
agreements, securities with optional and mandatory tender provisions, variable
rate demand obligations and certain other securities may bear longer maturities.
Money market funds also must maintain a dollar-weighted average portfolio
maturity of 90 days or less.
In addition, money market funds may acquire only obligations that
represent minimal credit risks and that are 'eligible securities' which means
they are (i) rated, at the time of investment, by at least two nationally
recognized statistical rating organizations (one if it is the only organization
rating such obligation) in the highest short-term rating category or, if
unrated, determined to be of comparable quality (a 'first tier security'), or
(ii) rated according to the foregoing criteria in the second highest short-term
rating category, or, if unrated, determined to be of comparable quality (a
'second tier security'). A security is not considered to be unrated if its
issuer has outstanding obligations of comparable priority and security that have
a short-term rating. CoreStates Advisers will determine that an obligation
presents minimal credit risks or that unrated instruments are of comparable
quality in accordance with guidelines established by CoreFunds' Board of
Directors. The Directors must also approve or ratify the acquisition of unrated
securities or securities rated by only one rating organization. Investments in
second tier securities are subject to the further constraints that (i) no more
than 5% of a Fund's assets may be invested in such securities in the aggregate,
and (ii) any investment in such securities of one issuer is limited to the
greater of 1% of the Fund's total assets or $1 million. In addition, a Fund may
only invest up to 25% of its total assets in the first tier securities of a
single issuer for three business days.
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CASH RESERVE Cash Reserve intends to achieve its objective by investing in a
diversified portfolio of money market instruments of the highest quality,
including a broad range of U.S. dollar-denominated government, bank, and
commercial paper obligations. By investing only in high quality money market
instruments with remaining maturities of 13 months or less, Cash Reserve strives
to capture the highest yield possible within safety, compliance, and liquidity
parameters.
TREASURY RESERVE Treasury Reserve intends to invest in direct obligations of the
U.S. Treasury, such as bills, bonds, and notes and separately traded interest
and principal component parts of such obligations that are transferable through
the Federal book-entry system known as Separately Traded Registered Investment
and Principal Securities ('STRIPS') and in repurchase agreements relating to
direct U.S. Treasury obligations.
TAX-FREE RESERVE Tax-Free Reserve invests substantially all of its assets in a
diversified portfolio consisting of short-term obligations issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their political subdivisions, agencies, instrumentalities and
authorities, the interest on which, in the opinion of counsel to the issuer, is
exempt from federal income tax. The municipal securities in which this Fund
invests are described in 'Types of Securities in Which the Funds Invest.' In
managing Tax-Free Reserve, the investment adviser uses a strategy that aims to
take advantage of key seasonal supply and demand factors that govern short-term
rates.
Although CoreStates Advisers has no present intention of doing so, up to
20% of all assets in this Fund can be invested in taxable debt securities for
defensive purposes or when sufficient tax-exempt securities considered
appropriate by CoreStates Advisers are not available for purchase.
OTHER INVESTMENT PRACTICES OF THE FUNDS ________________________________________
In addition to the investments described above, the Funds may engage in a number
of additional investment practices, as discussed below:
REPURCHASE AGREEMENTS-- All Funds Under certain circumstances, the 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 Fund's 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 the 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 CoreFunds' custodian
in the Federal Reserve book-entry system. Default by the seller could, however,
expose a Fund to loss
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Investment Policies 37
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INFORMATION ON THE FUNDS (CONTINUED)
in the event of adverse market action or delay in connection with the
disposition of the underlying securities. Repurchase agreements are considered
to be loans by a Fund under the Investment Company Act of 1940 (the 'Investment
Company Act').
REVERSE REPURCHASE AGREEMENTS--
All Funds
Each of the Funds may borrow funds 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
the Fund enters into a reverse repurchase agreement, it places in a segregated
custodial account liquid assets such as U.S. Government securities or other
liquid high-grade debt securities 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 a Fund under
the Investment Company Act.
OTHER INVESTMENT COMPANIES-- All Funds The Funds may invest in the securities
of other investment companies. Such shares will be purchased by the Funds within
the limits prescribed by the Investment Company Act. Such investments will be
limited to amounts not in excess of 5% of a Fund's total assets at the time of
purchase.
PUT TRANSACTIONS-- Intermediate Municipal Bond Fund, Short-Intermediate Bond
Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund, Global
Bond Fund, Tax-Free Reserves
These Funds may purchase securities subject to a put. A 'put' feature permits a
Fund to sell a security at a fixed price prior to maturity. The underlying
municipal securities subject to a put may be sold at any time at the market
rates. However, unless the put was an integral part of the security as
originally issued, it may not be marketable or assignable; therefore, the put
would only have value to the Fund. In certain cases a premium may be paid for
put features. A premium paid will have the effect of reducing the yield
otherwise payable on the underlying security. The purpose of engaging in
transactions involving puts is to maintain flexibility and liquidity to permit
the Fund to meet redemption requests and remain as fully invested as possible in
municipal securities. These Funds will limit their put transactions to
institutions which their advisers believe present minimal credit risk.
There is no limit to the percentage of portfolio securities that each Fund
may purchase subject to a put, but the amount paid directly or indirectly for
puts which are not integral parts of the security as originally issued held in
the Fund will not exceed 1/2 of 1% of the value of the total assets of the Fund
calculated immediately after any such put is acquired.
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WHEN-ISSUED SECURITIES-- Equity Fund, Special Equity Fund, Intermediate
Municipal Bond Fund, Short-Intermediate Bond Fund, Bond Fund, Short Term Income
Fund, Government Income Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund, Global Bond Fund, Tax-Free Reserve
These Funds may purchase securities on a 'when-issued' basis. When-issued
securities are subject to settlement on a future date. The interest rate
realized on these securities is fixed as of the purchase date and no interest
accrues to the Fund before settlement. These securities are subject to market
fluctuation due to changes in market interest rates and will have the effect of
leveraging a Fund's assets. Each Fund will establish one or more segregated
accounts with the custodian and will maintain liquid assets in such accounts in
an amount at least equal to the value of its commitments to purchase when-issued
securities.
MUNICIPAL LEASE OBLIGATIONS--
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund,
New Jersey Municipal Bond Fund, Tax-Free Reserve
Municipal lease obligations are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the municipality's credit, and
their interest may become taxable if the lease is assigned. If funds are not
appropriated for the following year's lease payments, the lease may terminate,
with the possibility of default on the lease obligation and significant loss to
a Fund. Certificates of participation in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest in
the lease-purchase payments made.
FOREIGN CURRENCY TRANSACTIONS--
International Growth Fund and Global Bond Fund
The value of the assets of the Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversions between various currencies. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, of through forward
contracts to purchase or sell foreign currencies. A forward foreign currency
exchange contract ('forward currency contracts') involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These forward currency contracts are
traded directly between currency traders (usually large commercial banks) and
their customers. The Fund may enter into forward currency contracts in order to
hedge against adverse movements in exchange rates between currencies.
For example, when the Fund enters into a contract for the purchase or sale
of a security denominated in a foreign currency, it may want to establish the
U.S. dollar cost or proceeds, as the case may be. By entering into a forward
currency contract in U.S. dollars for the purchase or sale of the amount of
foreign currency involved in an underlying security transaction, the Fund can
help to protect itself from a possible
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Investment Policies 39
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INFORMATION ON THE FUNDS (CONTINUED)
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loss between trade and settlement dates resulting from an adverse change in the
relationship between the U.S. dollar and such foreign currency. Additionally,
for example, when the Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
currency sale contract to sell an amount of that foreign currency approximating
the value of some or all of the Fund's portfolio securities or other assets
denominated in such foreign currency or when the Fund believes that the U.S.
dollar may suffer a substantial decline against a foreign currency, it may enter
into a forward currency purchase contract to buy that foreign currency for a
fixed U.S. dollar amount. However, these contracts tend to limit potential gains
which might result from positive changes in currency relationships. The Fund may
also hedge its foreign currency exchange rate risk by engaging in currency
financial futures and options transactions. The forecasting of short-term
currency market movement is extremely difficult and whether short-term hedging
strategies would be successful is highly uncertain.
FORWARD CURRENCY CONTRACTS--
International Growth Fund, Global Bond Fund
International Growth Fund and Global Bond Fund may enter into forward foreign
currency exchange contracts in order to protect against uncertainty in the level
of future foreign exchange rates in the purchase and sale of investment
securities. These Funds will not enter into such contracts for speculative
purposes.
A forward foreign currency exchange contract is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. In addition, International Growth Fund and Global Bond
Fund may be required to segregate certain assets when entering into such
contracts, in order to complete the settlement transactions in the future. The
contracts may be bought or sold in amounts up to 100% of exposure to protect a
Fund to a limited extent against adverse changes in exchange rates between
foreign currencies and the U.S. dollar. 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.
FUTURES CONTRACTS OR OPTIONS TRANSACTIONS-- International Growth Fund, Global
Bond Fund, Equity Fund and Special Equity Fund
International Growth Fund and Global Bond Fund may purchase futures contracts
and may purchase, sell, and write options on securities (including puts and
calls) to a limited extent. Specifically, these Funds may purchase futures
contracts provided that not more than 5% of its total assets are acquired as a
futures contract; in addition, such Funds may purchase futures contracts or
enter into options transactions only to the extent that obligations under such
contracts or transactions represent not more than 20% of its total assets.
International Growth Fund and Global Bond Fund do not intend to use options on
futures contracts. The risk of loss from investing in futures contracts is
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potentially unlimited based largely on whether the advisers of these Funds
correctly assess the direction of stock prices.
The Equity Fund and Special Equity Fund may purchase, sell and write
options on securities for the purpose of hedging against market risks related to
their portfolio securities. These Funds will only write covered call options
(options on securities owned by the Funds as deemed appropriate by CoreStates
Advisers. Each Fund may purchase options in an amount not exceeding 5% of its
total assets. Under normal conditions, it is not expected that the underlying
value of portfolio securities subject to options transactions would exceed 50%
of the net assets of a Fund.
Futures contracts or options transactions may be used for several reasons:
to maintain cash reserves while remaining fully invested; to facilitate trading;
to reduce transactions costs; or to seek higher investment returns when a
futures contract is priced more attractively than the underlying equity security
or index. The Funds may not use futures contracts or options transactions to
leverage their net assets, or for speculative purposes.
For example, in order to remain fully invested in stocks while maintaining
liquidity to meet potential shareholder redemptions, the Funds may invest a
portion of their assets in futures contracts or options transactions as
applicable. Because futures contracts only require a small marginal deposit and
options contracts a small premium payment, these Funds would then be able to
maintain a cash reserve for potential redemptions, while at the same time
remaining fully exposed to markets. Also, because transaction costs of futures
and options may be lower than the costs of investing in securities directly, it
is expected that the use of futures contracts and options transactions may
reduce the total transaction costs of such Funds.
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 these 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.
DERIVATIVES--
Derivatives are securities that derive their value from other securities. The
following are considered derivative securities: options on futures, futures,
options (e.g., puts and calls), swap agreements, mortgage-backed securities
(CMDs, REMICs, IOs, and POs), when-issued securities and forward commitments,
floating and variable rate securities, convertible securities, 'stripped' U.S.
Treasury securities (e.g., Receipts and STRIPS), privately-issued stripped
securities (e.g., TGRs, TRs, and CATs). See elsewhere
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in 'Other Investment Practices of the Funds' for discussion of these various
instruments, and see 'Types of Securities in which the Funds Invest' for more
information about any investment policies and limitations applicable to their
use.
ILLIQUID SECURITIES-- All Funds
The Funds may invest up to 10% of their assets in illiquid securities except for
the Equity Fund, Special Equity Fund, Balanced Fund, Bond Fund, Short Term
Income Fund, Government Income Fund, Intermediate Municipal Bond Fund,
Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund and Global Bond
Fund which may invest up to 15% of their assets in illiquid securities. Under
the supervision of CoreFunds' Board of Directors, each Fund's advisers determine
the liquidity of the Fund's investments. The absence of a trading market can
make it difficult to ascertain a market value for illiquid investments.
Disposing of illiquid investments may 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.
LENDING OF SECURITIES-- All Funds
The Funds may lend their portfolio securities to qualified brokers, dealers,
banks, and other financial institutions for the purpose of realizing additional
net investment income through the receipt of interest on the loan. Each Fund may
lend portfolio securities with a value of up to 33 1/3% of its total assets.
Such loans may be terminated at any time. These Funds will receive 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
dividends, interest or other distributions on the loaned securities. Voting
rights pass with the lending. The Funds will call loans to vote proxies if a
material issue affecting the investment is to be voted upon. Loans will be made
only to borrowers deemed by CoreStates Advisers to be of good standing.
Such loans would involve risk of delay in receiving additional collateral
in the event the value of the collateral decreased below the value of the
securities loaned, or risk of delay in recovering the securities loaned or even
loss of rights in the collateral should the borrower of the securities fail
financially.
ASSET-BACKED SECURITIES-- Bond Fund, Short Term Income Fund
These Funds will invest only in privately-issued asset-backed securities, which
are readily marketable and rated at the time of purchase in the two highest
rating categories assigned by a Rating Organization. For a description of rating
symbols see the Appendix to the Statement of Additional Information.
MORTGAGE-BACKED SECURITIES-- Bond Fund, Short Term Income Fund
These Funds will invest only in privately-issued mortgage-backed securities
which are readily marketable and rated at the time of purchase in the two
highest rating categories assigned by a Rating Organization. For a description
of rating symbols see the Appendix to the Statement of Additional Information.
SWAPS-- Global Bond Fund
Global Bond Fund may enter into interest rate swaps, currency swaps and other
types of swap agreements such as caps, collars and floors as a way of managing
its exposure to different types of investments. In a typical interest rate swap,
one party agrees to make
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42 Investment Policies
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regular payments equal to a floating interest rate times a 'notional principal
amount,' in return for payments equal to a fixed rate times the same amount, for
a specific period of time. If a swap agreement provides for payment in different
currencies, the parties might agree to exchange the notional principal amount as
well. Swaps may also depend on other prices or rates, such as the value of an
index or mortgage prepayment rates. In a typical cap or floor agreement, one
party agrees to make payments only under specified circumstances, usually in
return for payment of a fee by the other party. For example, the buyer of an
interest rate cap obtains the right to receive payments to the extent that a
specific interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a specified
interest rate falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift the Global Bond 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 on how they are used, swap agreements may increase or
decrease the overall volatility of the Global Bond Fund's investments and its
share price and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
As a result, swaps can be highly volatile and have a considerable impact on a
Fund's performance. Swap agreements are subject to 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 Global Bond Fund may have under
these types of arrangements will be covered by setting aside high quality liquid
securities in a segregated account. Global Bond Fund will enter into swaps only
with counterparties deemed creditworthy by its advisers.
FOREIGN SECURITIES --
Equity Fund, Special Equity Fund, International Growth Fund, Bond Fund and Short
Term Income Fund
The Special Equity Fund and the International Growth Fund may invest in
securities of foreign issuers by acquiring both sponsored and unsponsored
American Depositary Receipts ('ADR's'). ADRs are receipts issued by a bank or
trust company in the United States evidencing ownership of underlying securities
of a foreign issuer. Unsponsored ADRs are organized independently and without
the cooperation of the issuer of the underlying securities. As a result,
available information concerning the issuer may not be as current as for
sponsored ADRs, and the prices of unsponsored ADRs any be more volatile than if
such instruments were sponsored by the issuer. The Funds may also invest in
securities issued by foreign branches of U.S. banks and foreign banks, in
Canadian commercial paper, and in Europaper (U.S. dollar-denominated commercial
paper of a foreign issuer). The Funds may also invest in ECDs, ETDs, CTDs, and
Yankee CDs.
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Investment Policies 43
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The Bond Fund and the Short Term Income Fund may invest in Yankee Bonds.
For many foreign securities, U.S. dollar-denominated American Depositary
Receipts, or ADRs, which are traded in the United States on exchanges or
over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in the stock of foreign issuers, the Fund can avoid currency risks
during the settlement period for either purchases or sales. In general, there is
a large, liquid market in the United States for many ADRs. The information
available for ADRs is subject to the accounting, auditing and financial
reporting standards of the domestic market or exchange on which they are traded,
which standards are more uniform and exacting than those to which many foreign
issuers may be subject. The Special Equity and International Growth Fund may
also invest in European Depositary Receipts, or EDRs, which are receipts
evidencing an arrangement similar to that for ADRs and are designed for use in
the European securities markets. EDRs are not necessarily denominated in the
currency of the underlying security.
Certain ADRs and EDRs, typically those denominated as unsponsored require
the holders thereof to bear most of the costs of such facilities while issuers
of sponsored facilities normally pay more of the costs thereof. The depositary
of an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited securities
or to pass through voting rights to facility holders in respect to the deposited
securities, whereas the depositary of a sponsored facility typically distributes
shareholder communications and passes through the voting rights.
Investment in securities of foreign issuers involves certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, difficulties in predicting
international trade patterns, political, social and economic instability in the
country of the issuer, foreign trading practices (including higher trading
commissions, custodial charges and delayed settlements), foreign withholding and
income taxation, the possible establishment of exchange controls or the adoption
of other foreign governmental restrictions (which may adversely affect the
payment of principal and interest), difficulty in obtaining and enforcing
judgments against foreign issuers, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. With respect to
certain countries, there is also the possibility of expropriation of assets,
nationalization of assets, limits on removal of currency or other assets,
confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.
Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies abroad than in the U.S.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries. In addition, foreign branches of U.S. banks, foreign banks and
foreign issuers may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting and recordkeeping
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44 Investment Policies
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standards than those applicable to domestic branches of U.S. banks and U.S.
domestic issuers.
/X/
TYPES OF
SECURITIES IN
WHICH THE
FUNDS
INVEST
The various types of securities in which the Funds invest are described below.
EQUITY FUNDS ___________________________________________________________________
GROWTH EQUITY FUND
EQUITY FUND
SPECIAL EQUITY FUND
EQUITY INDEX FUND
INTERNATIONAL GROWTH FUND
The types of equity securities in which these Funds invest generally include
common stocks, preferred stocks and convertible securities.
BALANCED FUND In addition to equity securities, Balanced Fund may invest in
fixed income securities. The fixed income securities in which this Fund will
invest consist of bonds, debentures, notes and similar obligations or
instruments which constitute a security and evidence indebtedness, including
U.S. Government obligations, mortgage-backed securities and bank obligations (as
described below). Balanced Fund may also invest in corporate bonds which are
rated, at time of purchase, A or higher by S&P or Moody's.
TAXABLE FIXED INCOME FUNDS _____________________________________________________
SHORT-INTERMEDIATE BOND FUND
BOND FUND
SHORT TERM INCOME FUND
The various types of securities which may be purchased by these Funds include
the following:
U.S. Government Obligations--
1. U.S. Treasury Securities--includes bills, notes, bonds, and other debt
securities issued by the U.S. Treasury. These are direct obligations of the U.S.
Government and are supported by the full faith and credit of the United States.
They differ mainly in interest rates, maturities, and dates of issue.
2. U.S. Government Agency Securities--issued or guaranteed by U.S.
Government-sponsored instrumentalities and federal agencies. These include
obligations supported by the right of the issuer to borrow from the Treasury,
such as those of the Export-Import Bank of the United States; obligations
supported by the discretionary authority of the U.S. Treasury to purchase the
agency's obligations, such as those of the Federal National Mortgage Association
('FNMA'); and obligations supported only by the credit of the agency or
instrumentality, such as those of the Student Loan Marketing Association
('SLMA'). However, 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.
Bank Obligations--
1. Certificates of Deposit-negotiable certificates representing a
commercial bank's obligation to repay funds deposited with it,
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Types of Securities 45
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earning specified rates of interest over given periods.
2. Bankers' Acceptances-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.
Each of Short-Intermediate Bond Fund and Intermediate Municipal Bond Fund,
as well as Balanced Fund, will limit its 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 as shown on their last published financial statements at
the time of investment.
Mortgage-Backed Securities--
These securities may be issued or guaranteed by U.S. Government agencies such as
the Government National Mortgage Association ('GNMA'), FNMA, or the Federal Home
Loan Mortgage Corporation ('FHLMC'). GNMA mortgage-backed certificates are
mortgage-backed securities of the modified pass-through type, which means that
both interest and principal payments (including prepayments) are passed through
monthly to the holder of the certificate. The National Housing Act provides that
the full faith and credit of the United States is pledged to the timely payment
of principal and interest by GNMA of amounts due on these GNMA certificates.
Each GNMA certificate evidences an interest in a specific pool of mortgage loans
insured by the Federal Housing Administration or the Farmers Home Administration
or guaranteed by the Veterans Administration. FNMA, a federally chartered and
stockholder-owned corporation, issues pass-through certificates which are
guaranteed as to principal and interest by FNMA. FHLMC, a corporate
instrumentality of the United States, issues participation certificates which
represent an interest in mortgages held in FHLMC's portfolio. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal.
Securities issued or guaranteed by FNMA and FHLMC are not backed by the full
faith and credit of the United States. There can be no assurance that the United
States Government would provide financial support to FNMA or FHLMC if necessary
in the future.
Mortgage-backed securities also include collateralized mortgage
obligations ('CMOs') or real estate mortgage investment conduits ('REMICs'), a
type of CMO. CMOs or REMICs are mortgage pass-throughs issued in multiple
classes. In a CMO, a series of bonds or certificates are usually issued in
multiple classes. Each class of CMOs is issued with a specific fixed or floating
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgage assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates,
resulting in a loss of all or part of any premium paid. Interest typically is
paid or accrues on all classes of the CMOs on a monthly, quarterly or semiannual
basis. The principal of and interest on the underlying mortgage assets may be
allocated among the several classes of a series of a CMO in a variety of ways.
In a common structure, payments of principal, including any principal payments,
on the underlying mortgage assets are applied to the classes of the series of a
CMO in the order of their respective stated maturities or final distribution
dates, so that no payment of principal will be made on any class of CMOs until
all other classes having an earlier stated maturity or final distribution date
have been paid in full.
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Asset-backed Securities--
Asset-backed securities consist of securities secured by company receivables,
truck and auto loans, leases and credit card receivables. These issues are
normally traded over-the-counter and typically have a short-intermediate
maturity structure depending on the paydown characteristics of the underlying
financial assets which are passed through to the security holder.
Corporate Securities--
Corporate securities include corporate bonds, convertible and non-convertible
debt securities, and preferred stocks, as well as commercial paper. Corporate
securities in which these Funds may invest must satisfy certain minimum ratings
at the time of purchase by Moody's or S&P. Corporate bonds must be rated A or
better by S&P or Moody's.
GOVERNMENT INCOME FUND Government Income Fund may invest in U.S. Government
obligations, mortgage-backed securities, and asset-backed securities, as defined
above.
GLOBAL BOND FUND Global Bond Fund may invest in fixed income or debt obligations
issued or guaranteed by the U.S. Government or a foreign government, or by one
of its agencies, authorities, instrumentalities or political subdivisions; fixed
income or debt obligations issued or guaranteed by supranational entities; and
corporate securities and bank obligations, as described above.
TAXABLE MONEY MARKET FUNDS _____________________________________________________
CASH RESERVE The various types of securities invested in by Cash Reserve include
U.S. Government obligations, bank obligations, and asset-backed securities, as
described above.
With respect to U.S. Government obligations, in addition to bills, notes
and bonds issued by U.S. government agencies, Cash Reserve may invest in STRIPS
as defined below in 'Investment Policies-Treasury Reserve.' STRIPS may be sold
as zero coupon securities, which means that they are sold at a substantial
discount and redeemed at face value at their maturity date without interim cash
payments of interest or principal. This discount is amortized over the life of
the security, and such amortization will constitute the income earned on the
security for both accounting and tax purposes. See also 'Taxes.'
With respect to bank obligations, in addition to certificates of deposit
and bankers' acceptances, Cash Reserve may invest in foreign securities and time
deposits. Time deposits are non-negotiable deposits in a banking institution
earning a specified interest rate over a given period of time. Such deposits
cannot be withdrawn before the date specified at the time of deposit.
With respect to asset-backed securities, the asset-backed securities in
which Cash Reserve invests must have final maturities of 13 months or less.
Cash Reserve may also invest in the following types of securities:
Commercial Paper--
Commercial paper are short-term promissory notes issued by corporations,
including variable amount master demand notes, having short-term ratings at the
time of purchase of 'Prime-1' by Moody's and/or 'A-1' or better by S&P.
Variable amount master demand notes in which Cash Reserve may invest are
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Types of Securities 47
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INFORMATION ON THE FUNDS (CONTINUED)
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unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. 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. Although there is no secondary market in the notes, the Fund may demand
payment of principal and accrued interest at any time. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes (which are normally manufacturing, retail, financial, and other
business concerns) must satisfy the same criteria as set forth above for issuers
of commercial paper. CoreStates Advisers will consider the earning power, cash
flow, and other liquidity ratios of the issuers of such notes and will
continuously monitor their financial status to meet payment on demand.
Receipts--
Receipts are interests in separately traded interest and principal component
parts of U.S. Treasury obligations that are issued by banks or brokerage firms
and are created by depositing U.S. Treasury obligations into a special account
at a custodian bank. The custodian holds the interest and principal payments for
the benefit of the registered owners of the certificates or receipts. The
custodian arranges for the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts include 'Treasury Receipts'
('TR'S'), 'Treasury Investment Growth Receipts' ('TIGR'S'), and 'Certificates of
Accrual on Treasury Securities' ('CATS').
TREASURY RESERVE Treasury Reserve may invest in U.S. Treasury obligations, such
as bills, notes, and bonds, and separately traded interest and principal
component parts of such obligations, such as STRIPS. Treasury Reserve may also
invest in repurchase agreements fully collateralized by U.S. Treasury
obligations.
TAX-FREE FIXED INCOME AND MONEY MARKET FUNDS ___________________________________
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
TAX-FREE RESERVE These Funds will invest in municipal securities. The two
principal classifications of municipal securities which may be held by these
Funds are 'general obligation' securities and 'revenue' securities. These are
discussed below, along with other municipal securities in which these Funds may
invest.
1. General Obligation Securities
'General obligation' securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
2. Revenue Securities
'Revenue' securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or another specific revenue source such as the user of
the facility being financed. Industrial development and pollution control bonds
held by these Funds are in most cases revenue securities and are not payable
from the unrestricted revenues of the issuer. Consequently, the credit quality
of such revenue bonds is usually directly
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related to the credit standing of the corporate user of the facility involved.
3. Moral Obligation Bonds
The portfolios of these Funds may also include 'moral obligation' bonds, which
are normally issued by special-purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
4. Variable Rate Demand Obligations
Municipal securities purchased by these Funds may include 'variable rate demand
obligations,' which are tax-exempt obligations upon which interest is payable at
a floating or variable rate. While there may be no active secondary market with
respect to a particular variable rate demand obligation purchased by such Funds,
they normally may demand payment of the principal of and accrued interest on the
obligation upon not more than seven days' notice and may resell the obligation
at any time to a third party. The absence of any active secondary market,
however, could make it difficult for such Funds to dispose of a variable rate
demand obligation if the issuer defaulted on its payment obligation, and it
could, for this or other reasons, suffer a loss to the extent of the default.
5. When-Issued Securities
These Funds may purchase municipal securities on a 'when-issued' basis, as
described in 'Other Investment Practices of the Funds.' Each Fund expects that
commitments to purchase when-issued securities will not exceed 25% of the value
of its total assets, absent unusual market conditions, and does not intend to
purchase when-issued securities for speculative purposes, but only in
furtherance of its investment objective. Because each Fund will set aside cash
or liquid assets to satisfy its purchase commitments in the manner described,
its liquidity and ability to manage its portfolio might be affected in the event
its commitments to purchase when-issued securities should ever exceed 25% of the
value of its total assets.
PENNSYLVANIA MUNICIPAL SECURITIES
In managing the portfolios of Intermediate Municipal Bond Fund and Tax-Free
Reserve, CoreStates Advisers intends to invest, when possible, such Funds'
assets in Pennsylvania Municipal Securities, provided the investment is
consistent with the Funds' investment objectives and policies and their status
as diversified investment companies. Because of the relatively limited number of
Pennsylvania municipal issuers and the restricted supply of outstanding
municipal securities issued by them that meet the Funds' investment criteria,
CoreStates Advisers cannot predict precisely what percentage of each Fund's
portfolio will be invested in such issuers.
Except as stated above with respect to Pennsylvania Municipal Securities,
CoreStates Advisers does not intend on a regular basis to invest more than 25%
of either Fund's total assets in (i) municipal securities whose issuers are in
the same state, (ii) municipal securities, the interest on which is paid solely
from revenues of similar projects, and (iii) industrial development bonds,
although it may do so from time to time. To the extent such Funds' assets are so
concentrated, they would be subject to the peculiar risks presented by the laws
and economic
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Types of Securities 49
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conditions relating to such states, projects, and bonds to a greater extent than
it would be if its assets were not so concentrated.
AMT OBLIGATIONS
While Intermediate Municipal Bond Fund and Tax-Free Reserve are permitted to
purchase 'private activity bonds' that are subject to the Alternative Minimum
Tax (the 'AMT') imposed by Section 55 of the Code, these Funds do not currently
hold or anticipate purchasing such bonds. If they did so, however, a portion of
the dividends received would be subject to the AMT. The purchase of such bonds
by these Funds could have a material effect on the AMT liability of their
investors, and hence these Funds do not intend to invest any portion of their
assets in such bonds.
Corporate shareholders, however, should note that all exempt-interest
dividends are includable in the computation of 'adjusted current earnings' for
AMT purposes, regardless of when the bonds from which they are derived were
issued or whether they are derived from 'private activity bonds.' Accordingly,
corporate shareholders should consult their tax advisers regarding the impact
that holding shares of these Funds would have on their own AMT liability.
TEMPORARY INVESTMENTS __________________________________________________________
On occasion, a Fund may be unable to achieve its investment objective due to
market conditions. Under such circumstances, a Fund is permitted to make certain
temporary investments which deviate from the investment policies described
above. Such investments may be used to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions, or to take a temporary
defensive position against potential or serious stock market declines. The
temporary investments the Funds are permitted to make under such circumstances
are described below.
GROWTH EQUITY FUND
EQUITY FUND
SPECIAL EQUITY FUND
EQUITY INDEX FUND
INTERNATIONAL GROWTH FUND
Although these Funds normally seek to remain fully invested in equity
securities, they may invest all or a portion of their assets temporarily in
certain short-term and fixed income vehicles, in accordance with the investment
restrictions described herein. Money market instruments, such as commercial
paper, and fixed income securities, such as bonds, must be assigned, or
determined by the advisers to be equal to, certain minimum ratings in each
category by either Moody's or S&P at the time of purchase by a Fund. Temporary
investments may include the following:
Money Market Instruments
U.S. Government Obligations
Fixed Income Securities
Repurchase Agreements
BALANCED FUND Although Balanced Fund normally seeks to remain fully invested in
a combination of equity, fixed income, and money market securities, when
CoreStates Advisers determines that market conditions warrant, it may invest up
to 100% of its assets in money market instruments, including securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements, certificates of deposit and bankers' acceptances issued
by banks or savings and loan associations having net assets of at least $500
million as of the end of their most recent fiscal year, and commercial paper
rated, at time of purchase, in the top two categories by a national rating
agency or
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50 Types of Securities
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/X/ COREFUND
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determined to be of comparable quality by the investment adviser at time of
purchase, and other long- and short-term debt instruments which are rated A or
higher at time of purchase, and may hold a portion of its assets in cash
reserves.
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
Each of these Funds may increase its investment in Taxable Obligations to over
20% of its total assets if suitable tax-exempt obligations are unavailable or
for temporary defensive purposes.
GLOBAL BOND FUND For temporary defensive purposes, when the advisers determine
that market conditions warrant, Global Bond Fund may invest up to 100% of its
assets in U.S. dollar-denominated fixed income securities or debt obligations
and the following domestic and foreign money market instruments: government
obligations, certificates of deposit, bankers' acceptances, time deposits,
commercial paper, short-term corporate debt issues and repurchase agreements.
This Fund may hold a portion of its assets in cash for liquidity purposes.
TAX-FREE RESERVE Tax-Free Reserve may hold uninvested cash reserves which do not
earn income (pending investment) during temporary defensive periods or if, in
the opinion of CoreStates Advisers, suitable tax-exempt obligations are
unavailable. There is no percentage limitation on the amount of assets which may
be held uninvested. In addition, such Fund may invest from time to time, to the
extent consistent with its investment objective, a portion of its assets on a
temporary basis or for temporary defensive purposes in short-term money market
instruments, the income from which is subject to federal income tax.
Temporary investments will generally not exceed 20% of the total assets of
Tax-Free Reserve except when made for temporary defensive purposes, and may
include obligations of the U.S. Government or its agencies or instrumentalities;
debt securities (including taxable commercial paper) of issuers having been
assigned, at the time of purchase, the highest short-term rating of either
Moody's or S&P; certificates of deposit or bankers' acceptances of domestic
branches of U.S. Banks with total assets at the time of purchase of $1 billion
or more; repurchase agreements with respect to such obligations; or reverse
repurchase agreements.
/X/
INVESTMENT
RESTRICTIONS
Investment policies of the Funds that are not fundamental may be changed by the
Board of Directors without shareholder approval, provided such changes are
deemed to be consistent with a Fund's objective and in the best interests of its
shareholders. However, the investment objectives of each Fund, along with the
restrictions and limitations described herein and in the Statement of Additional
Information, are fundamental and may be changed only by the affirmative vote of
a majority of the outstanding shares of such Fund. See 'Description of Shares.'
A FUND MAY NOT:
1. 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.
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Investment Restrictions 51
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INFORMATION ON THE FUNDS (CONTINUED)
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2. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts not to exceed 10% of the value of its 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 its total assets at the time
of such borrowing. A Fund will not purchase any securities while its borrowings
(including reverse repurchase agreements) are outstanding.
3. Invest more than 10% of its total assets in illiquid securities,
including repurchase agreements maturing in more than seven days or the lending
of securities which provide for settlement more than seven days after notice.
This fundamental restriction does not apply to Balanced Fund, Government Income
Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, Global Bond Fund, Equity Fund, Special Equity Fund,
Bond Fund or Short Term Income Fund. These Funds, as a matter of non-fundamental
investment policy, may invest up to 15% of their assets in illiquid securities.
4. Purchase securities of any one issuer (other than obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities) if, immediately after such purchase, more than 5% of the
value of the Fund's total assets would be invested in such issuer or hold more
than 10% of the outstanding voting securities of such issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation. With respect to the Fixed Income Funds and Cash Reserve,
however, there is no limit to the percentage of assets that may be invested in
U.S. Treasury bills and notes, or other obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. With respect to Global
Bond Fund, there is no limit to the percentage of assets that may be invested in
securities issued by foreign governments. This restriction does not apply to
Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund, Global Bond
Fund or Treasury Reserve.
5. Invest 25% or more of its total assets in any one industry. For
purposes of this limitation, 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 their parents, and utilities will be
divided according to their services-for example, gas, gas transmission, electric
and gas, electric, and telephone will each be considered a separate industry.
This restriction does not apply to Treasury Reserve.
With respect to Intermediate Municipal Bond Fund, Pennsylvania Municipal
Bond Fund, New Jersey Municipal Bond Fund and Tax-Free Reserve, this limitation
does not apply to investments in tax-exempt securities issued by governments or
political sub-divisions of governments.
With respect to Global Bond Fund, there is no limitation with respect to
obligations issued by the U.S. Government, foreign governments, or supranational
agencies.
With respect to Cash Reserve, there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its
instrumentalities.
EQUITY FUNDS In addition, an Equity Fund may not purchase securities of any
one issuer (other than obligations issued or guaranteed as to principal and
interest by the U.S.
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52 Investment Restrictions
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Government, its agencies or instrumentalities) if, as a result thereof, more
than 10% of the voting securities of such issuer would be held by the Fund.
TREASURY RESERVE In addition, Treasury Reserve may not purchase securities other
than direct obligations of the U.S. Treasury, such as Treasury bills and notes,
none of which may be subject to repurchase agreements.
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% rate of turnover 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. With the exception of Global Bond Fund, 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. As a general rule, net gains are distributed to
shareholders and will be taxable at ordinary income tax rates, for federal
income tax purposes, regardless of long- or short-term capital gains status. See
'Distributions' and 'Taxes' for more information on taxation. The tables set
forth in 'Financial Highlights' present the Funds' historical portfolio turnover
rates.
/X/
INVESTOR
CONSIDERATIONS
INVESTMENT SUITABILITY _________________________________________________________
EQUITY FUNDS
The Equity Funds are appropriate for investors seeking long-term growth.
Historically, equities have provided significantly higher returns than fixed
income and money market instruments, yet subject the investor to greater price
fluctuation. The CoreFund Equity Funds offer a range of growth and risk
characteristics, incorporating high grade domestic and international securities.
Growth Equity Fund
Equity Fund
Special Equity Fund
These Funds are appropriate for investors who are seeking long-term income and
capital appreciation, and who do not need to earn current income from their
investments in a Fund. They are suited to those investors who are willing to
hold their investments over a long horizon in anticipation of the returns that
common
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Investor Considerations 53
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stocks may provide. Because these Funds invest in equity securities, investors
should be able to tolerate fluctuations in the principal value of their
investment. Investors should be cognizant of the inherent volatility in the
stock market, and the investment risks discussed below; and understand that all
investments carry a risk factor.
Equity Index Fund
Equity Index Fund is suitable for those who want to participate in the equity
market's superior long-term performance without the near-term commitment and
risks associated with choosing a particular investment style which may or may
not be out of favor during any period of time. Investors generally can expect
returns in line with the S&P 500 Index, which is tracked closely by the Fund.
Balanced Fund
Balanced Fund is appropriate for investors who seek to capture the interest
income of bonds and the capital appreciation of stocks while reducing risk
through diversification among these securities.
International Growth Fund
International Growth Fund is appropriate for investors who are seeking long-term
capital appreciation, and who do not need to earn current income from their
investment in a Fund. International Growth Fund is suited to those investors who
are willing to hold their investment over a long horizon in anticipation of the
returns that foreign stocks may provide. Because the Fund invests in foreign
equity securities, investors should be able to tolerate fluctuations in the
principal value of their investment. Investors should be cognizant of the unique
risks of international investing, including their exposure to currency
fluctuations; and understand that all investments carry a risk factor.
Under the multiple manager structure, CoreStates Advisers has general
oversight responsibility for the investment advisory services provided to the
Fund by Martin Currie and Aberdeen Managers. CoreStates Advisers is also
responsible for managing the allocation of assets among the Fund's sub-advisers.
Accordingly, each sub-adviser will be responsible for the day-to-day investment
management of all or a discrete portion of the assets of the Fund. To the extent
that having multiple sub-advisers responsible for investing separate portions of
the Fund's assets creates the need for coordination among sub-advisers, there is
an increased risk that the Fund may not comply with certain regulatory and tax
requirements.
FIXED INCOME FUNDS
These Funds are appropriate for investors seeking an investment vehicle that
offers a higher level of current income with low to moderate share price
fluctuations. These Funds differ primarily by their average maturity, credit
quality, and tax status.
Short-Intermediate Bond Fund will purchase U.S. Government and corporate
securities rated A or better and is expected to have an average maturity of no
more than five years.
The Bond Fund will normally invest in domestic and foreign corporate debt
securities, U.S. government securities, mortgage-backed securities and
asset-backed securities, without limitation to the average maturity of the Fund.
Short Term Income Fund will invest in a diversified portfolio of
investment-grade debt securities, including corporate debt securities and U.S.
government securities, having an expected or remaining maturity of three years
or less. The Fund is expected to have an average dollar-weighted maturity of
approximately one year.
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54 Investor Considerations
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Government Income Fund will invest only in obligations issued or
guaranteed by the U.S. Government and its agencies. There is no limit to the
average maturity so it is appropriate for investors who seek a higher level of
current income than that which is generally possible with money market funds,
and who can tolerate moderate fluctuations in principal value.
Intermediate Municipal Bond Fund is for investors seeking income exempt
from federal income taxes, generally investors in a high income tax bracket.
This Fund will only purchase securities rated A or better and is expected to
have an average maturity of three to ten years.
Pennsylvania Municipal Bond Fund is appropriate generally for investors
seeking an investment vehicle that offers a higher level of current income
exempt from federal income taxes and (as to Pennsylvania residents) Pennsylvania
income taxes, with low to moderate share price fluctuations.
New Jersey Municipal Bond Fund is appropriate generally for investors
seeking an investment vehicle that offers a higher level of current income
exempt from federal income taxes and (as to New Jersey residents) New Jersey
income taxes, with low to moderate share price fluctuations.
Global Bond Fund is suitable for long-term investors who are looking for
both income and capital appreciation from a portfolio of fixed income securities
denominated in U.S. and foreign currencies. Because the value of the securities
will fluctuate with changes in interest rates and relative currency values,
investors must be willing to invest their money over a longer time horizon in
anticipation of the returns afforded by a diversified portfolio of U.S. and
foreign bonds.
MONEY MARKET FUNDS
As each of these Funds is designed and managed to maintain a stable price per
share of $1.00, they provide liquidity and a high degree of safety for investors
who are unable to tolerate fluctuations in the principal value of their
investments.
Cash Reserve is appropriate for investors who are seeking an investment
vehicle that provides current interest income at competitive rates of return.
By investing in direct obligations of the U.S. Treasury, Treasury Reserve
affords an extra margin of protection for investors for whom a high degree of
safety is a primary concern. Treasury Reserve is considered to be the most
secure of the Money Market Funds. This Fund is appropriate for investors who are
seeking an investment vehicle that provides current interest income at
competitive rates of return.
Tax-Free Reserve is appropriate for conservative investors in higher-level
federal income tax brackets who may benefit from an investment that offers
current interest income that is at least 80% free of federal income taxes.
Therefore, investors contemplating the purchase of this Fund should first
consider their 'taxable equivalent yield.' This is the comparison between the
tax-exempt yield from Tax-Free Reserve and the equivalent yield from a taxable
investment, using a calculation that takes into account the investor's current
tax bracket. Tax-Free Reserve's current taxable equivalent yield may be obtained
by contacting its distributor.
INVESTMENT RISKS _______________________________________________________________
The Funds differ significantly in terms of risk. Because of the concerns listed
below, a Fund should not be considered a complete
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Investor Considerations 55
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INFORMATION ON THE FUNDS (CONTINUED)
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investment program. Most investors should maintain diversified holdings of
securities with different risk characteristics-including common stocks, bonds
and different types of money market instruments. Investors may also wish to
complement an investment in a Fund with other portfolios offered by CoreFunds.
EQUITY FUNDS
The Equity Funds are subject to market risk and fund risk. Market risk is the
possibility that stock prices in general will decline over short or even
extended periods of time. Stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when stock prices generally decline.
Fund risk is the possibility that a Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole. Therefore, investors
should consider their holdings in equity mutual funds to be long-term
investments. In addition to the risks noted above for all equity funds, the
following equity funds are also subject to additional risks as described below.
Balanced Fund
With respect to Balanced Fund, the market value of fixed income securities bears
an inverse relationship to changes in market interest rates. Moreover, changes
by recognized rating agencies in the ratings of any fixed income security and in
the ability of an issuer to make payments of interest and principal may also
affect the market value of these securities. Each of these factors will cause
the net asset value of shares of Balanced Fund to fluctuate over time.
In addition, mortgage-backed securities are subject to prepayment of the
underlying mortgages. During periods of declining interest rates, pre-payment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fund are prepaid, the Fund must reinvest
the proceeds in securities, the yield of which reflects prevailing interest
rates, which may be lower than the yield on the prepaid securities. Thus,
mortgage-backed securities may not be an effective means of locking in long-term
interest rates for Balanced Fund.
International Growth Fund
In addition to market and fund risk, International Growth Fund is also subject
to currency risk. Currency risk is the risk that changes in foreign exchange
rates will affect, favorably or unfavorably, the value of foreign securities
held by the Fund. In a period when the U.S. dollar generally rises against
foreign currencies, the returns on foreign stocks for U.S. investors will
usually be diminished. By contrast, in a period when the U.S. dollar generally
declines, the returns on foreign stocks will usually be enhanced. In addition,
investments in foreign stock markets can be as volatile, if not more volatile,
than investments in U.S. markets.
Investors should also recognize that investing in foreign companies
involves certain special considerations which are not typically associated with
investing in U.S. companies. Since the stocks of foreign companies are
frequently denominated in foreign currencies, and since this Fund may
temporarily hold uninvested reserves in bank deposits in foreign currencies, its
portfolio will be affected favorably or unfavorably by changes in currency rates
and in exchange control regulations, and may incur costs in connection with
conversions between various currencies. The investment policies of International
Growth Fund permit it to enter into forward foreign currency exchange contracts
in order to hedge its holdings and commitments against changes in the level of
future currency rates. Such contracts involve an obligation to
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56 Investor Considerations
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purchase or sell a specific currency at a future date at a price set at the time
of the contract.
In addition, as foreign companies are not generally subject to uniform
accounting, auditing, and financial reporting standards and practices comparable
to those applicable to domestic companies, there may be less publicly available
information about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers, and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although International Growth Fund will endeavor to achieve the most
favorable execution costs in its portfolio transactions, fixed commissions on
many foreign stock exchanges are generally higher than negotiated commissions on
U.S. exchanges. Moreover, transactions executed on foreign exchanges may be
subject to longer settlement periods than transactions executed on U.S.
exchanges. In addition, it is expected that the expenses for custodial
arrangements of the Fund's foreign securities will be somewhat greater than
typical expenses for custodial arrangements for handling U.S. securities of
equal value.
Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the companies comprising International Growth Fund's
portfolio. However, these foreign withholding taxes are not expected to have a
significant impact since this Fund's investment objective is to seek long-term
capital appreciation and any income should be considered incidental.
International Growth Fund attempts to reduce international investment
risks by diversifying among as many foreign economies and currencies as
possible. This includes investments in both developed and selected emerging
markets. In addition, the International Growth Fund offers its shareholders the
ability to diversify their equity investments to reduce the risk of having such
investments affected solely by political and economic events in one country.
FIXED INCOME FUNDS
Securities held by the Fixed Income Funds may be subject to several types of
investment risk, including market risk, credit risk, and call risk. With respect
to these Funds, market risk (or interest rate risk) is the potential for a
decline in the price of fixed income securities due to rising interest rates.
Market risk will be greater for longer term securities than for shorter term
securities. Credit risk is the possibility that a bond issuer will be unable to
make timely payments of either principal or interest. Call risk (or income risk)
relates to corporate bonds during periods of falling interest rates, and
involves the possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity. Such an event would
require a Fund to invest the resulting proceeds elsewhere, at generally lower
interest rates,
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Investor Considerations 57
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INFORMATION ON THE FUNDS (CONTINUED)
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which would cause fluctuations in the Fund's net income.
Short-Intermediate Bond Fund, Bond Fund and Short Term Income Fund may
also be exposed to event risk, the possibility that corporate fixed income
securities held by these Funds may suffer a substantial decline in credit
quality and market value due to a corporate restructuring. Corporate
restructurings (mergers, leveraged buyouts, takeovers or similar events) are
often financed by a significant expansion of corporate debt. As a result, the
credit quality and market value of a firm's existing debt securities may decline
significantly. While event risk may be high for certain corporate securities
held by these Funds, event risk in the aggregate should be low because of the
Funds' diversified holdings.
The Bond Fund, Short Term Income Fund and Government Income Fund may all
acquire mortgage-backed and asset-backed securities, and therefore, may be
subject to the risks associated with these securities, which are described
above.
The concentration of investments in Pennsylvania Municipal Securities by
the Pennsylvania Municipal Bond Fund raises special investment considerations.
In particular, changes in the economic condition and governmental policies of
the Commonwealth of Pennsylvania and its municipalities could adversely affect
the value of the Fund and the portfolio securities held by it. Rising medical
assistance costs, a slow rate of economic recovery, increased costs of union
contracts, rising unemployment and the potential negative impact of pending
litigation may place increased pressures on the tax resources of the
Commonwealth and its municipalities. See 'Special Risk Factors-Pennsylvania
Municipal Securities' in the Statement of Additional Information for further
discussion of the risks associated with Pennsylvania Municipal Securities.
The concentration of investments in New Jersey Municipal Securities by the
New Jersey Municipal Bond Fund raises special investment considerations that are
discussed under the caption 'Special Risk Factors-New Jersey Municipal
Securities' in the Statement of Additional Information. In particular, changes
in economic conditions and governmental policies of the State of New Jersey and
its municipalities could adversely affect the value of the Fund and the
portfolio securities held by it.
Global Bond Fund is also subject to currency risk and other risks
associated with investing in the securities of foreign companies, as described
above with respect to International Growth Fund.
MONEY MARKET FUNDS
Securities held by Cash Reserve and Treasury Reserve may be subject, on a
limited basis, to credit risk. The credit risk of an investment portfolio is a
function of its underlying securities, and in general, securities of somewhat
lower credit quality provide correspondingly higher yields.
Securities held by Tax-Free Reserve may be subject, on a limited basis, to
several types of investment risk, including market risk (or interest rate risk),
credit risk and call risk (or income risk).
/X/
DISTRIBUTIONS
Shareholders of each Fund are entitled to dividends and distributions arising
from the net investment income and capital gains, if any, earned on investments
held by such Fund. Class Y Shares of the Money Market Funds begin earning
dividends on the business day on which the purchase order for
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the shares is executed and continue to earn dividends through, and including,
the day before the redemption order for such shares is executed. Class Y Shares
of the Fixed Income Funds begin earning dividends on the business day following
the day on which the purchase order for the shares is executed and continue to
earn dividends through, and including, the day on which the redemption order for
such shares is executed.
Dividends are paid in the form of additional Class Y Shares of a Fund
unless a shareholder selects one of the following options on the Account
Application Form: Cash Dividend Option-to receive dividends in cash and capital
gains distributions in additional shares of the Fund at net asset value; All
Cash Option-to receive both dividends and capital gains distributions in cash.
In the absence of either of these selections on the Account Application Form,
each purchase of shares is made upon the condition and understanding that the
Fund's agent is automatically appointed to receive the dividends and
distributions upon all shares in the shareholder's account and 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. Dividends and distributions are
automatically paid in cash (along with any redemption proceeds) not later than
seven business days after a shareholder closes an account with the Fund.
The dividends from Class Y Shares are normally higher than those of Class
A or Class C Shares because of the distribution and incremental transfer agent
expenses charged to Class A or Class C Shares.
The Funds maintain different dividend and capital gain distributions
policies. These are:
EQUITY FUNDS
Growth Equity Fund
Equity Fund
Special Equity Fund
Equity Index Fund
Balanced Fund
Dividends from the net investment income of each of these Funds are declared and
paid to shareholders on a quarterly basis. Distributions of any capital gains
will be made at least annually.
International Growth Fund
The net investment income of this Fund is periodically declared and paid as a
dividend. Distributions of any capital gains will be made at least annually.
FIXED INCOME FUNDS
MONEY MARKET FUNDS
The net investment income of each of these Funds except Global Bond Fund is
declared daily as a dividend to its shareholders and paid monthly. Global Bond
Fund will distribute its net investment income in the form of quarterly
dividends. Capital gains distributions, if any, will be made by the Fixed Income
Funds and Money Market Funds at least annually.
If any capital gains are realized from the sale of underlying securities,
the Funds normally distribute such gains with the last dividend for the calendar
year.
In all Funds except the Money Market Funds, undistributed net investment
income is included in the Fund's net assets for the purpose of calculating net
asset value per share. Therefore, on the 'ex-dividend' date, the net asset value
per share excludes the dividend (i.e., is reduced by the per share
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Distributions 59
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amount of the dividend). Dividends paid shortly after the purchase of shares by
an investor, although in effect a return of capital, are taxable as ordinary
income.
/X/
TAXES
The following is only a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. No attempt
has been made to present a detailed explanation of the federal, state or local
income tax treatment of the Funds or their shareholders, and this discussion is
not intended as a substitute for careful tax planning. Potential investors in
the Funds are urged to consult their tax advisers with specific reference to
their own tax situations.
The following summary is based on current tax laws and regulations which
may be changed by legislative, judicial or administrative action.
ALL FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with any of CoreFunds' other portfolios. Each Fund intends to
qualify for the favorable tax treatment afforded a 'regulated investment
company' under the Code. This requires, among other things, that a Fund
distribute to its shareholders at least 90% of its net investment income.
Provided a Fund meets this 90% distribution and other requirements, it will be
relieved of federal income tax on that part of its net investment income and any
net capital gains (the excess of net long-term capital gain over net short-term
capital loss) distributed to shareholders.
Whether paid in cash or in additional shares, dividends attributable to a
Fund's net investment income (including ordinary income and net short-term
capital gains), including any dividends attributable to taxable net investment
income of Tax-Free Reserve or Intermediate Municipal Bond Fund, will be taxable
to shareholders as ordinary income. Capital gains distributions of all Funds
will be taxable as long-term capital gain, regardless of how long a shareholder
has held shares.
Dividends declared by a Fund in October, November, or December of any year
and payable to shareholders of record on a date in such a month will be deemed
to have been paid by the Fund and received by the shareholders on December 31 of
that year, if paid by the Fund during the following January.
INTERNATIONAL GROWTH FUND
GLOBAL BOND FUND
International Growth Fund and Global Bond Fund will receive dividends and
interest paid by foreign issuers which are frequently subject to withholding
taxes by foreign governments. Provided that more than 50% of the value of the
total assets of either International Growth Fund or Global Bond Fund at the
close of any taxable year consists of equity or debt securities of foreign
corporations, such Fund may elect (for U.S. federal income tax purposes) to
treat each shareholder as having additional income equal to a proportionate
amount of such foreign taxes paid by the Fund and as having directly paid such
foreign taxes. In addition, if a Fund makes such an election, shareholders will
be treated as having directly earned a portion of the Fund's gross income from
foreign sources. The Fund will make such an election only if it deems it to be
in the best interests of its shareholders and will notify shareholders
accordingly.
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TAX-FREE RESERVE
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
Each of these Funds expects 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 obligations the interest on which is exempt from regular federal
income tax. Tax-exempt interest dividends may generally be treated by such
Fund's shareholders as items of income excludible from their gross income under
the Code unless, under the circumstances applicable to the particular
shareholder, exclusion would be disallowed. Exempt-interest dividends may also
have certain collateral federal income tax consequences, including Alternative
Minimum Tax consequences.
Current federal tax law limits the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect on
the ability of these Funds to purchase sufficient amounts of tax-exempt
securities to satisfy the Code's requirements for the payment of 'exempt-
interest' dividends.
Interest on indebtedness incurred or continued by a shareholder in order
to purchase or carry shares of these Funds is not deductible for federal income
tax purposes. Furthermore, these Funds may not be an appropriate investment for
persons (including corporations and other business entities) who are
'substantial users' (or persons related to 'substantial users') of facilities
financed by industrial development or private activity bonds. Such persons
should consult their tax advisers before purchasing shares. A 'substantial user'
is defined generally to include 'certain persons' who regularly use in their
trade or business a part of a facility financed from the proceeds of such bonds.
Except as noted below, tax-exempt interest dividends and other
distributions paid by these Funds may be taxable to investors as dividend income
under state or local law even though a substantial portion of such distributions
may be derived from interest on tax-exempt obligations which, if received
directly, would be exempt from such income taxes.
CASH RESERVE
TREASURY RESERVE
TAX-FREE RESERVE
With respect to investments in STRIPS and Receipts which are sold at original
issue discount and thus do not make periodic cash interest payments, a Fund will
be required to include as part of its current income the imputed interest on
such obligations even though the Fund has not received any interest payments on
such obligations during that period. Because each Fund distributes all of its
net investment income to its shareholders, a Fund may have to sell portfolio
securities to distribute such imputed income, which may occur at a time when the
investment adviser would not have chosen to sell such securities and which may
result in a taxable gain or loss.
PENNSYLVANIA TAX CONSIDERATIONS
For purposes of the Pennsylvania Personal Income Tax and the Philadelphia School
District Investment Net Income Tax, distributions which are attributable to
interest received by the Pennsylvania Municipal Bond Fund from its investments
in Pennsylvania Municipal Securities or in direct obligations of the United
States, its territories and certain of its agencies and
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Taxes 61
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INFORMATION ON THE FUNDS (CONTINUED)
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instrumentalities ('Federal Securities'), including obligations issued by U.S.
possessions, are not taxable. Distributions by the Fund to a Pennsylvania
resident that are attributable to most other sources may be subject to the
Pennsylvania Personal Income Tax and (for residents of Philadelphia) to the
Philadelphia School District Investment Net Income Tax.
Shares of the Pennsylvania Municipal Bond Fund are exempt from
Pennsylvania county personal property taxes and (as to residents of Pittsburgh)
from personal property taxes imposed by the City of Pittsburgh and the School
District of Pittsburgh to the extent that the Fund's portfolio consists of
Pennsylvania Municipal Securities and Federal Securities, including obligations
issued by U.S. possessions.
To the extent that gain on the disposition of a share represents gain
realized on Pennsylvania Municipal Securities held by the Pennsylvania Municipal
Bond Fund, such gain may be subject to the Pennsylvania Personal Income Tax and
the School District Tax, except that gain realized with respect to a share held
for more than six months is not subject to the School District Tax.
NEW JERSEY TAX CONSIDERATIONS
Investors of the New Jersey Municipal Bond Fund will not be subject to the New
Jersey Gross Income Tax on distributions from the Fund attributable to interest
income from (and net gain, if any, from the disposition of) New Jersey Municipal
Securities or Federal Securities held by the Fund, either when received by the
Fund or when credited or distributed to the investors, provided that the Fund
meets the requirements for a qualified investment fund by: (i) maintaining its
registration as a registered investment company; (ii) investing at least 80% of
the aggregate principal amount of the Fund's investments, excluding cash and
cash items, in New Jersey Municipal Securities or Federal Securities; and (iii)
investing 100% of its assets in interest-bearing obligations, discount
obligations, and cash, including receivables.
For New Jersey Gross Income Tax purposes, net income or gains and
distributions derived from investments in other than New Jersey Municipal
Securities and Federal Securities, and distributions from net realized capital
gains in respect of such investments, will be taxable.
Gain on the disposition of shares of this Fund is not subject to New
Jersey Gross Income Tax, provided that the Fund meets the requirements for a
qualified investment fund set forth above.
BACK-UP WITHHOLDING
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.
IN GENERAL
The sale or redemption of shares of a mutual fund is a taxable event to the
selling or redeeming shareholder. Gains or losses (if any) may also be realized
from an ordinary redemption of shares, as described herein, or on a telephone
exchange among the CoreFunds portfolios.
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62 Taxes
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/X/ COREFUND
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In the opinion of counsel, shares of the Funds are exempt from current
Pennsylvania Personal Property Taxes.
Shareholders will be advised at least annually as to the federal income
tax status of distributions made during the year. See the Statement of
Additional Information for further information regarding taxes.
/X/
VALUATION OF SHARES
NET ASSET VALUE ________________________________________________________________
EQUITY FUNDS
FIXED INCOME FUNDS
The shares of these Funds will fluctuate in value as a result of changes in the
value of their portfolio investments. Shares in the Funds will realize capital
gains or losses as portfolio investments are sold above or below costs,
respectively.
The net asset value per share of these Funds for purposes of pricing
purchase and redemption orders is normally determined as of 4:00 p.m. (Eastern
time) (the 'valuation time') on each business day of the Funds. A 'business day'
of a Fund is a day on which the New York Stock Exchange is open for trading, and
any other day (other than a day on which no shares of the Fund are tendered for
redemption and no order to purchase any shares is received) during which there
is a sufficient degree of trading in securities or instruments held by the Fund
such that the Fund's net asset value per share might be materially affected. Net
asset value per share is calculated by dividing the value of all of the Fund's
portfolio securities and other assets, less liabilities, by the number of
outstanding shares of the Fund at the time of the valuation. The result
(adjusted to the nearest cent) is the net asset value per share.
MONEY MARKET FUNDS The net asset value per share of each of these Funds for
purposes of pricing purchase and redemption orders is normally determined as of
12:00 noon (Eastern time) on each business day of the Funds. These Funds are
managed to maintain a stable price per share of $1.00.
PORTFOLIO PRICING ______________________________________________________________
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. 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. 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.
INTERNATIONAL GROWTH FUND
GLOBAL BOND FUND
Securities listed on a foreign exchange are valued at the most recent closing
price available before the time when assets are valued. All prices of listed
securities are taken from the exchange where the security is primarily traded.
Securities regularly traded in the over-the-counter market for which market
quotations are readily available will be valued at the current bid price.
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. Other assets
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Valuation of Shares 63
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INFORMATION ON THE FUNDS (CONTINUED)
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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.
In addition, all assets and liabilities initially expressed in foreign
currencies will be translated into U.S. dollars at the bid price of such
currencies against U.S. dollars last quoted by a major bank or by a broker. If
such quotations are not available as of the close of the Exchange, the rate of
exchange will be determined in accordance with the policies established in good
faith by the Board of Directors.
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.
MONEY MARKET FUNDS The assets in the Money Market Funds are valued based upon
the amortized cost method, pursuant to rules promulgated under the Investment
Company Act. Under this method of valuation, the value of a Fund's shares
normally will not change in response to fluctuating interest rates. In
connection with its use of this valuation method, however, each Fund monitors
the deviation between the amortized cost value of its assets and their market
value (which can be expected to vary inversely with changes in prevailing
interest rates). Although each Fund seeks, through its use of amortized cost
valuation, to maintain its net asset value per share at $1.00, there can be no
assurance that the net asset value will not vary.
/X/
MANAGEMENT
The business and affairs of each Fund are managed under the direction of
CoreFunds' Board of Directors.
INVESTMENT ADVISER,
SUB-ADVISERS ___________________________________________________________________
CoreStates Advisers has overall responsibility for portfolio management for each
of the Funds. CoreStates Advisers is a wholly-owned subsidiary of CoreStates
Bank, itself a wholly-owned subsidiary of CoreStates Corp. CoreStates Corp,
based in Philadelphia, Pennsylvania, is one of the 20 largest bank
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64 Management
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/X/ COREFUND
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holding companies in the United States, and leads the region in investing
corporate cash. CoreStates Corp currently has over $45 billion in assets and
discretionary management over $22 billion in customer accounts through a variety
of banking activities at over 355 domestic and foreign locations. Corestates
Corp's leading subsidiary, CoreStates Bank, currently ranks thirty-second in the
management of discretionary trust assets.
CoreStates Advisers is an adviser registered under the Investment Advisers
Act of 1940. It performs most investment management and advisory functions for
the trust departments of CoreStates Corp's banking subsidiaries, related
investment advisory, research, trading, and fund management functions, and also
provides similar services to customers unrelated to CoreStates Corp. CoreStates
Advisers currently manages discretionary and nondiscretionary client security
portfolios with a total aggregate market value of over $16 billion, for
individuals, corporations, institutions, and municipalities. CoreStates Advisers
has extensive experience in the management of money market, tax-free, fixed
income, equity, and international investments. CoreStates Advisers' has
principal offices at 1500 Market Street, P.O. Box 7558, Philadelphia, PA 19102.
As investment adviser, CoreStates Advisers manages the investment
portfolio of each Fund, makes decisions with respect to and places orders for
all purchases and sales of a Fund's portfolio securities, and maintains certain
records relating to such purchases and sales. CoreStates Advisers pays all
expenses incurred by it in connection with its investment advisory activities,
other than the cost of securities (including any brokerage commissions)
purchased for the Funds and the cost of obtaining market quotations for
portfolio securities held by the Funds.
CoreStates Advisers has delegated some of its portfolio management
functions with respect to the International Growth Fund to Martin Currie and
Aberdeen Managers and with respect to Global Bond Fund to Alpha Global Fixed
Income Managers, Inc. ('Alpha Global') pursuant to separate Sub-Advisory
Agreements between CoreStates Advisers and each of Martin Currie, and Aberdeen
Managers and Alpha Global.
Martin Currie, a New York corporation located in Edinburgh, Scotland, is a
wholly-owned subsidiary of Martin Currie, Ltd., which is wholly-owned by its
full-time working executives and is one of Scotland's largest independent
investment management groups. Martin Currie was founded in order to provide
foreign investment advisory services to U.S. funds seeking diversification into
international markets. Although Martin Currie has had extensive experience in
managing a variety of international equity investment companies, International
Growth Fund is the first U.S. registered investment company for which Martin
Currie has acted in an investment advisory capacity. Martin Currie has principal
offices at Saltire Court, 20 Castle Terrace, Edinburgh EH 2ES, Scotland.
Aberdeen Managers, a Delaware corporation located in Ft. Lauderdale,
Florida, is a wholly-owned subsidiary of Aberdeen Trust PLC ('Aberdeen PLC'),
publicly traded in the U.K., which is owned by four institutional investors,
including a subsidiary of CoreStates Financial Corp which owns 14% of Aberdeen
PLC. Aberdeen was formed in 1876 and has been managing investment funds since
1986. It
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Management 65
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INFORMATION ON THE FUNDS (CONTINUED)
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formed Aberdeen Managers in 1995 and it provides foreign investment advisory
services in the U.S. Although Aberdeen Managers has had extensive experience in
managing a variety of international equity investment companies, International
Growth Fund is the first U.S. registered investment company for which Aberdeen
Managers has acted in an investment advisory capacity. Aberdeen Managers is
located at Nations Bank Tower, 22nd Floor, Ft. Lauderdale, Florida 33394.
Alpha Global 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 $130 billion. Alpha Global is a
member of the Investment Management Regulatory Organization, one of the
regulatory bodies approved by the U.K. Government, and its activities are
regulated accordingly. Alpha Global is located at 25/28 Old Burlington Street,
London WIX 1LB, England.
As sub-advisers to International Growth Fund and Global Bond Fund, Martin
Currie and Aberdeen Managers, and Alpha Global manage the investment portfolio
of their respective Funds, make decisions with respect to and place orders for
the majority of the purchases and sales of such Fund's portfolio securities, and
maintain certain records relating to such purchases and sales. Martin Currie and
Aberdeen Managers, and Alpha Global pay all expenses incurred by them in
connection with their sub-advisory activities, other than the cost of securities
(including any brokerage commissions) purchased for a Fund and the cost of
obtaining market quotations for portfolio securities held by a Fund.
ADVISORY FEES
For the services provided and expenses assumed as investment adviser of each
Fund, CoreStates Advisers is entitled to receive an annual fee from each of the
Funds, computed daily and paid monthly, at the annual rate of .40% of the
average daily net assets of Equity Index Fund; .74% of the average daily net
assets of Equity Fund; .75% of the average daily net assets of Growth Equity
Fund; .80% of the average daily net assets of International Growth Fund; 1.50%
of the average daily net assets of Special Equity Fund; .70% of the average
daily net assets of Balanced Fund; .74% of the average daily net assets of the
Bond Fund and the Short Term Income Fund, respectively; .60% of the average
daily net assets of Global Bond Fund; .50% of the average daily net assets of
Short-Intermediate Bond Fund, Intermediate Municipal Bond Fund, Government
Income Fund, Pennsylvania Municipal Bond Fund and New Jersey Municipal Bond
Fund, respectively; and .40% of the average daily net asset of Treasury Reserve,
Cash Reserve, and Tax-Free Reserve, respectively. CoreStates Advisers may, from
time to time and at its discretion, voluntarily waive all or a portion of its
investment advisory fees in order to assist the Funds in maintaining competitive
expense ratios.
For the services provided as sub-advisers to the International Growth
Fund, Martin Currie and Aberdeen Managers are each entitled to receive a fee
from CoreStates Advisers, computed daily and paid monthly, at the annual rate of
.50% of such portion of the Fund's assets managed. For the services provided as
Global Bond Fund's sub-adviser, Alpha Global is entitled to receive a fee from
CoreStates Advisers, computed daily and paid monthly, at the annual rate of .30%
of such Fund's average net assets.
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66 Management
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/X/ COREFUND
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FUND MANAGERS __________________________________________________________________
The following individuals are primarily responsible for managing the investment
portfolios of the Funds:
GROWTH EQUITY FUND Timothy R. Stives, a Senior Managing Director of CoreStates
Advisers, manages Growth Equity Fund. Prior to joining CoreStates Advisers, Mr.
Stives was Vice President of Chancellor Capital Management. Prior to joining
Chancellor, he was a securities analyst and portfolio manager with CitiCorp. Mr.
Stives has been managing growth stock portfolios, including corporate and public
pension fund portfolios, since 1988. Mr. Stives holds an M.B.A from Rutgers
University and a B.A. from Pennsylvania State University.
EQUITY AND SPECIAL EQUITY FUNDS Joseph E. Stocke, CFA, is a Senior Managing
Director of CoreStates Advisers and manages the Equity and Special Equity Funds.
Previously, he was a Senior Vice President and Senior Equity Manager with
Meridian Investment Company. Mr. Stocke had been with Meridian Investment
Company (or a predecessor) since 1983. Mr. Stocke began his investment career in
1982 and obtained his B.S. in Economics attending The Wharton School, and
University of Pennsylvania and completed graduate courses at New York
University. Mr. Stocke has been part of Meridian's Equity Unit Committee
overseeing the Equity Fund and the Special Equity Fund since their inception.
EQUITY INDEX FUND Lary Aasheim, C.F.A., a Vice President of CoreStates Advisers,
is portfolio manager of Equity Index Fund. In addition, he is a securities
analyst with responsibility for the technology and telecommunications equipment
industries, paper, forest products and building material industries. Prior to
joining CoreStates Advisers in 1990, Mr. Aasheim worked as an analyst at First
Fidelity Bank/Fidelity Bank, First Pennsylvania Bank and Bear Stearns in New
York. He received his B.S. degree in Economics from The Wharton School,
University of Pennsylvania. He also has earned his CFA from the Institute of
Chartered Financial Analysts.
INTERNATIONAL GROWTH FUND Michael J. Gibson, Director of Client Services for
Martin Currie, is the lead director of an investment team responsible for
managing International Growth Fund. Mr. Gibson has 21 years experience of
portfolio investment in international stock markets. A graduate of the
University of Oxford, England, he spent seven years as an investment manager
with British Investment Trust in Edinburgh and a further four years with The
Bank of Scotland in the same capacity. He joined Martin Currie in 1983 where he
worked initially in the North American investment team and was then made
responsible for the firm's investments in Continental Europe. He became Director
of Client Services in 1992.
Beverly Hendry, Director of Aberdeen Managers, is the lead director of an
investment team responsible for managing International Growth Fund.
BALANCED FUND Steve Dalton, a Vice President of CoreStates Advisers, is
portfolio manager of the Balanced Fund. Mr. Dalton has been a senior portfolio
manager of balanced portfolios since 1986 and a member of the Equity Policy
Committee since 1990. Since 1988 he has been responsible for management of
CoreStates' oldest commingled trust, the CoreStates Balanced Trust. In addition,
Mr. Dalton has managed balanced portfolios for employee benefit customers for
the last seven years, and has been a securities analyst responsible for the
health care, pharmaceutical, entertainment and broadcasting industries since
joining CoreStates in 1984. Prior to that, he was employed by Girard Bank as a
security analyst. He received a B.S. degree in Psychology from Cornell.
SHORT-INTERMEDIATE BOND FUND
Craig A. Moyer, a Senior Managing Director of CoreStates Advisers, is
portfolio manager of the Short-Intermediate Bond Fund. Mr. Moyer previously was
with Meridian Investment Company since 1977. He began his investment career in
1974 and obtained his B.A. from Pennsylvania State University.
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Management 67
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INFORMATION ON THE FUNDS (CONTINUED)
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GOVERNMENT INCOME FUND
William T. Lawrence, a Vice President of CoreStates Advisers, is portfolio
manager for the Government Income Fund. Mr. Lawrence is also involved in
specialized fixed income products including GIC and Mortgage Backed Securities.
Prior to joining CoreStates Advisers, he was Vice President, Fixed Income Sales
for First Boston Corp. He has an M.B.A. in Finance from the Wharton School and a
B.A. in Economics and English from Bucknell University.
BOND FUND Leslie M. Varrelman is a Vice President of CoreStates Advisers. She
formerly was a Vice President and Fixed Income Manager with Meridian Investment
Company, since January 1994. Prior to her position with Meridian, Ms. Varrelman
was Vice President of CoreStates Investment Advisers where she managed the
commingled fixed income funds and managed the Limited Maturity Products area.
Ms. Varrelman obtained her B.S. in Business Administration from Juniata College
in 1981. Ms. Varrelman is directly responsible for management of the Bond Fund.
SHORT TERM INCOME FUND Cathy L. Rahab is an Assistant Vice President of
CoreStates Advisers. She formerly was an Assistant Vice President and Portfolio
Manager with Meridian Investment Company. Ms. Rahab began her investment career
in 1986 and obtained her B.S. in Business Administration from Villanova
University. Ms. Rahab joined the Fixed Income Unit in July of 1994. Ms. Rahab is
directly responsible for management of the Short Term Income Fund.
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
Joseph R. Baxter manages these Funds. Mr. Baxter, a Vice President of CoreStates
Advisers, is head of the Tax-Advantaged unit at CoreStates Advisers. He is
directly responsible for management of the CoreStates Pennsylvania Tax Exempt
Common Trust Fund. Mr. Baxter graduated from LaSalle University with a Bachelor
of Science Degree majoring in Finance and Marketing. In June 1980, he joined a
stock brokerage firm, Elkins & Co., in an operations capacity and came to
Philadelphia National Bank in May 1982 as an operations supervisor. In October
1984, he joined the Investment Management Division as a corporate cash manager
and in 1986 assumed responsibility for the tax exempt common trust funds.
GLOBAL BOND FUND George McNeill, President and Chief Executive Officer of Alpha
Global, is portfolio manager for Global Bond Fund. Together with United Asset
Management Corporation of Boston, Mr. McNeill founded Alpha Global and has
overall responsibility for its operations. After graduating from Edinburgh
University with degrees in Political Economy and Economic History, he joined the
investment department of Scottish Equitable Life Assurance Society. He then
joined Wallace Brothers Bank where he spent nine years, including seven years as
a Director with principal responsibility for the bank's fixed income
investments. Since 1977, he has worked as Managing Director of the investment
management operating company of Gillett Brothers, and for eight years as
Managing Director of Reserve Asset Managers, a specialist fixed income manager.
In 1989 Mr. McNeill joined Axe-Houghton, Ltd., the London subsidiary of USF&G
Corporation, as
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68 Management
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/X/ COREFUND
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Director and Chairman of the Investment Strategy Committee.
CASH RESERVE Rosemary B. Crowley, a Senior Investment Officer of CoreStates
Advisers, is responsible for managing Cash Reserve. Ms. Crowley also manages the
CoreStates Liquidity Fund, as well as individually managed fixed income
portfolios. She is pursuing a Bachelor's Degree at the Wharton Evening School,
University of Pennsylvania. Ms. Crowley joined the Philadelphia National Bank in
1980 in the Institutional Sales Department and in 1981 transferred to the
Investment Management Division.
TREASURY RESERVE Ronald R. Brasten, a Senior Investment Officer of CoreStates
Advisers, manages Treasury Reserve. He also manages the CoreFund Fiduciary
Treasury Reserve and has investment responsibility for individually managed
corporate and personal accounts. After receiving his B.S. in Accounting from
Drexel University, Mr. Brasten joined the Financial Division of CoreStates in
1984. In 1986, he transferred to the Asset and Liability group as an ALCO
analyst. Mr. Brasten joined CoreStates Advisers in August 1989.
TAX-FREE RESERVE Folu Abiona, Senior Investment Officer, is portfolio manager of
the Tax-Free Reserve portfolio. Ms. Abiona also manages the Fiduciary Tax-Free
Reserve portfolio. She joined CoreStates Advisers in 1985 and became fixed
income portfolio manager in 1990. Prior to that, she was a mutual fund
administrator with CoreStates' Institutional Custody Division. She holds an
M.B.A. from Temple University and B.Sc. from the University of Ife, Nigeria.
ADMINISTRATOR __________________________________________________________________
SEI Financial Management Corporation ('SFMC' or the 'Administrator'), with
principal offices at 680 East Swedesford Road, Wayne, PA 19087, acts as each
Fund's administrator. For its administrative services, SFMC is entitled to
receive a fee from each Fund, computed daily and paid monthly, at the annual
rate of .25% of such Fund's average daily net assets. As Administrator, SFMC
generally assists in the Funds' administration and operations. State Street Bank
and Trust Company located at 225 Franklin Street, Boston, MA 02110, serves as
each Fund's transfer agent (the 'Transfer Agent') and dividend paying agent.
DISTRIBUTOR ____________________________________________________________________
SEI Financial Services Company ('SFS' or the 'Distributor'), with principal
offices at 680 East Swedesford Road, Wayne, PA 19087, serves as each Fund's
distributor pursuant to a Distribution Agreement which applies to Class Y, Class
A and Class C Shares. Class A and Class C Shares are also subject to a separate
distribution plan (the 'Distribution Plan') approved by the Board of Directors
on April 13, 1992. The Distribution Plan provides that CoreFunds will pay the
Distributor an annual fee, calculated on an average daily net basis and paid
monthly, of up to .25% of the average daily net assets of Class A or Class C
Shares of each Fund. The Distributor may use this fee as compensation for its
distribution-related services or to compensate Participating Broker/Dealers and
Shareholder Servicing Agents for performing distribution-related or shareholder
services.
The services provided by Participating Broker/Dealers or Shareholder
Servicing
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Management 69
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INFORMATION ON THE FUNDS (CONTINUED)
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Agents may include establishing and maintaining customer accounts and records;
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with the Distributor; automatically
investing customer account cash balances; providing periodic statements to
customers; arranging for bank wires; answering routine customer inquiries
concerning their investments; assisting customers in changing dividend options,
account designations and addresses; performing sub-accounting functions;
processing dividend payments on behalf of customers; forwarding certain
shareholder communications from the Funds to customers; and providing other
similar services.
Persons selling Class A or Class C Shares will receive different
compensation with respect to Class A or Class C Shares than Class Y Shares.
EXPENSES The Funds' expenses are accrued daily and are deducted from total
income before dividends are paid. Except as noted herein and in the Statement of
Additional Information, the Funds' service contractors bear all expenses
incurred in connection with the performance of their services on behalf of the
Funds. Similarly, the Funds bear the expenses incurred in their operations.
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 Series A 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 was 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.
In addition, certain state securities laws may require banks and other
institutional investors purchasing shares on behalf of their customers in such
states to register as dealers pursuant to state law.
/X/
PERFORMANCE
INFORMATION
TOTAL RETURN AND YIELD _________________________________________________________
From time to time, in advertisements or reports to shareholders, the performance
of the Funds may be quoted and compared to that of other mutual funds with
similar investment objectives and to relevant indices.
The Funds may calculate their performance on a total return basis for
various periods. The total return basis combines principal changes, income
dividends, and capital gains distributions paid during the period. Principal
changes are based on the difference between the beginning and closing net asset
values for the period and assume reinvestment of income dividends and capital
gains distributions paid during the period. The Funds may calculate their
performance for periods since commencement of operations and for calendar or
fiscal year periods (including multiple years). See 'Total Return' in the
Statement of Additional Information.
FIXED INCOME FUNDS
MONEY MARKET FUNDS
In addition to quoting total return, the Fixed Income Funds and Money Market
Funds may advertise 'yield' and 'effective yield.' Both yield figures are based
on historical earnings
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70 Performance Information
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/X/ COREFUND
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and are not intended to indicate future performance. The 'yield' of a Fund
refers to the income generated by an investment in the Fund over a 30-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 month is assumed to be generated each month over a 12-month 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 the 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. See
'Yields' in the Statement of Additional Information.
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund and Tax-Free Reserve may also advertise their
'taxable equivalent yield,' which is calculated by taking into account the
investor's current tax bracket. This is the yield an investor 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.
IN GENERAL _____________________________________________________________________
With the exception of Equity Index Fund, the Funds will include performance data
for Class Y and Class A or Class C, as appropriate, in any advertisement or
information including performance data of the Funds. Total return and
performance data concerning Class A Shares will reflect the sales charge and
distribution and incremental transfer agent expenses borne exclusively by Class
A Shares. Total return and performance data concerning Class C Shares will
reflect the distribution and incremental of transfer agent expenses borne
exclusively by Class C Shares.
The performance of any investment will generally reflect market conditions,
portfolio quality and maturity, type of investment, and operating expenses. Each
Fund's performance will fluctuate and is not necessarily representative of
future results. A Fund's performance would be favorably affected by any
investment advisory fee waivers on the part of CoreStates Advisers. Shareholders
will receive unaudited semi-annual reports describing the Funds' investment
operations and annual financial statements audited by independent auditors.
EXPENSE RATIOS OF INTERNATIONAL GROWTH FUND AND GLOBAL BOND FUND Investors
should understand that the expense ratios of International Growth Fund and
Global Bond Fund can be expected to be higher than the expense ratios of funds
that invest only in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of advisory fees relating to foreign
portfolios are generally higher.
/X/
HOW TO
PURCHASE
AND REDEEM
SHARES
PURCHASE OF SHARES _____________________________________________________________
Shares of the Funds are sold on a continuous basis by the Distributor with
principal offices located at 680 East Swedesford Road, Wayne, Pennsylvania
19087. Shares may also be purchased through CoreStates Securities Corp.
----
How to Purchase and Redeem Shares 71
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS (CONTINUED) /X/ COREFUND
- --------------------------------------------------------------------------------
Institutional investors may acquire Class Y Shares of a Fund for their own
account or as a record owner on behalf of fiduciary, agency, or custody accounts
by placing orders with the Distributor. Purchases may be made on any business
day of the Fund at the net asset value per share (see 'Valuation of Shares')
next determined after receipt by the Fund of an order to purchase shares. Shares
of the Funds are offered only to residents of states in which the shares are
eligible for purchase.
An order received before the valuation time on any business day will be
executed on the date of receipt at the net asset value determined as of the
valuation time on such date so long as federal funds are transmitted or
delivered to the Fund's custodian by close of business on the next business day
(or, in the case of the Money Market Funds, by the close of business on the same
business day). An order received after the valuation time on any business day
will be executed on the next business day of the Fund at the net asset value
determined on such date.
Funds should be wired to CORESTATES PHIL, Philadelphia, PA ABA #031000011,
for credit to COREFUNDS-A/C #0169-0541. The wire instructions must also include
the account number. Before wiring any funds however, an investor must call
CoreFund's Investor Services at 1-800-355-CORE in order to confirm the wire
instructions for the Transfer Agent, State Street Bank and Trust Company. An
order to purchase shares by federal funds wire will be deemed to have been
received by a Fund on the business day that investors notify SEI Financial
Management Corporation by 12:00 p.m. (Eastern time) of their intentions to wire
money provided that federal funds are received by the custodian on the following
business day.
The minimum investment amount is $1,000,000 for the initial purchase of
shares by an investor which amount may be waived at the discretion of the
Distributor. However, the minimum initial investment amount for retail investors
investing in Equity Index Fund is $500. There is no minimum for subsequent
investments.
The Funds reserve the right to reject any order for the purchase of their
shares in whole or in part.
Every shareholder of record will receive a confirmation of each new share
transaction with a Fund, which will also show the total number of shares being
held in safekeeping by the Transfer Agent for the account of the shareholder.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing shares of the Funds will not be issued.
Beneficial ownership of shares held of record by institutional investors
on behalf of their customers will be recorded by the institutions and reflected
in the regular account statements provided by them to their customers.
REDEMPTION OF SHARES ___________________________________________________________
Class Y Shares may ordinarily be redeemed in accordance with the procedures
described below.
With respect to shares held by institutional investors on behalf of their
customer accounts, all or part of the shares beneficially owned by a customer
may be redeemed in accordance with instructions and limitations pertaining to
their account at the institution.
Shareholders who desire to redeem Class Y Shares of a Fund must place
their redemption orders with CoreFund's Investor Services for the Transfer
Agent, State Street
- ----
72 How to Purchase and Redeem Shares
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
- --------------------------------------------------------------------------------
Bank and Trust Company, prior to 4:00 p.m. (Eastern Time) on any business day
(12:00 p.m. for the Money Market Funds). Payment will be made the next business
day after proper receipt by the Transfer Agent by transfer of federal funds.
Otherwise, the redemption order will be effective the next business day.
The Funds intend to pay cash for all shares redeemed but under abnormal
conditions which make payment in cash unwise, the Funds may make payment wholly
or partly in portfolio securities at their then market value equal to the
redemption price. In such cases, a shareholder may incur brokerage costs in
converting such securities to cash.
/X/
DESCRIPTION
OF SHARES
CoreFunds has set up Class Y Shares representing the following portfolios:
Growth Equity, Equity, Special Equity, Equity Index, International Growth,
Balanced, Short Intermediate Bond, Bond, Short-Term Income, Government Income,
Intermediate Municipal Bond, Pennsylvania Municipal Bond, New Jersey Municipal
Bond and Global Bond. CoreFunds offers two classes of shares of each portfolio
except for Equity Index Fund, CoreFund Elite Cash Reserve, CoreFund Elite
Government Reserve, CoreFund Elite Treasury Reserve, Fiduciary Reserve,
Fiduciary Tax-Free Reserve, and Fiduciary Treasury Reserve. In total, CoreFunds
presently offers shares in twenty-three different portfolios. CoreFunds may in
the future create one or more additional portfolios, or one or more Classes A
and C Shares -- Individual classes of shares within a portfolio and shares of
CoreFund Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite
Treasury Reserve, Fiduciary Reserve, Fiduciary Treasury Reserve, and Fiduciary
Tax-Free Reserve, are offered in separate prospectuses. This Prospectus solely
relates to the Class Y Shares -- Institutional.
Class A Shares differ from Class Y Shares in that Class A Shares are
subject to a sales load and distribution and transfer agent expenses for certain
additional shareholder services they receive. Class C Shares also differ from
Class Y Shares in that Class C Shares are subject to distribution and transfer
agent expenses for certain additional shareholder services, but unlike Class A
Shares, are not subject to a sales load. Class A and Class C Shares also have
voting rights which Class Y Shares do not, in connection with the Distribution
Plan affecting Class A or Class C Shares. In addition, the distribution and
transfer agent expenses charged to Class A and Class C Shares result in Class A
and Class C Shares having different dividends and performance results from Class
Y Shares. In addition, the minimum initial investment for Class Y Shares is
substantially higher than that required for Class A and Class C Shares with the
exception of the Equity Index Fund.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO CLASS Y SHARES OF THE FUNDS AND DESCRIBE ONLY THE
INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS
RELATING TO SUCH SHARES. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION
REGARDING OTHER
----
Description of Shares 73
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS (CONTINUED) /X/ COREFUND
- --------------------------------------------------------------------------------
COREFUND PORTFOLIOS MAY OBTAIN PROSPECTUSES DESCRIBING SUCH PORTFOLIOS BY
CONTACTING THE DISTRIBUTOR AT 1-800-355-CORE.
Except for differences between classes of shares of CoreFunds' portfolios
pertaining to distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class,
each share in each Fund represents an equal proportionate interest in that Fund
with each other share of the same Fund and is entitled to such dividends and
distributions out of the income earned on the assets belonging to such Fund as
are declared in the discretion of the Board of Directors.
CoreFunds' shareholders are entitled to one vote for each full share held,
and fractional votes for fractional shares held, and will vote in the aggregate
and not by portfolio or class except as otherwise expressly required by law or
when the Board of Directors determines that the matter to be voted upon affects
only the interests of the shareholders of a particular portfolio or class. See
the Statement of Additional Information under 'Description of Shares' for
examples where the Investment Company Act requires voting by portfolio or class.
Voting rights are not cumulative and, accordingly, the holders of more than 50%
of the aggregate number of shares of all of the Funds may elect all of the
directors if they choose to do so and, in such event, the holders of the
remaining shares would not be able to elect any person or persons to the Board
of Directors.
As used in this Prospectus, a 'vote of a majority of the outstanding
shares' of a Fund means the affirmative vote of the lesser of (a) more than 50%
of the outstanding shares of a Fund, or (b) at least 67% of the shares of a Fund
present at a meeting at which the holders of more than 50% of the outstanding
shares of such Fund are represented in person or by proxy.
/X/
GENERAL
INFORMATION
In accordance with the Maryland General Corporation Law, CoreFunds is not
required to hold annual meetings of shareholders unless the Investment Company
Act requires the shareholders to elect members of the Board of Directors.
However, a meeting of shareholders may be called for any purpose upon the
written request of the holders of at least 10% of the outstanding shares of
CoreFunds, or of a Fund with respect to matters affecting only such Fund.
As used in this Prospectus, 'assets belonging to the Fund' means the
consideration received by CoreFunds upon the issuance or sale of shares in a
Fund, together with all income, earnings, profits and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of CoreFunds
not belonging to that Fund or CoreFunds' other portfolios. Assets belonging to a
Fund are charged with the direct liabilities in respect of that Fund and with a
share of the general liabilities of CoreFunds allocated in proportion to the
relative asset values of each of CoreFunds' portfolios at the time the expense
or liability is incurred. The management of CoreFunds makes determinations with
respect to a Fund as to liabilities when they are incurred and as to assets when
they are acquired. Such determinations are reviewed and approved annually by the
Board of Directors and are conclusive.
- ----
74 General Information
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS (CONTINUED) /X/ COREFUND
- --------------------------------------------------------------------------------
/X/
DESCRIPTION
OF RATINGS
DESCRIPTION OF MUNICIPAL AND
CORPORATE BOND RATINGS _________________________________________________________
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
Debt rated A by S&P 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.
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.
Bonds which are rated Aaa by Moody's 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 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. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, 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 risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's 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.
Bonds which are rated Baa by Moody's 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.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions liable to only slight market fluctuation other than through changes
in the money rate. The prime feature of an AAA bond is a showing of earnings
several times or many times interest requirements, with such stability of
applicable earnings that safety is beyond reasonable question whatever changes
occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose merits are not unlike
those of the AAA class, but whose margin of safety is less strikingly broad. The
issue may be the
----
Description of Ratings 75
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS (CONTINUED) /X/ COREFUND
- --------------------------------------------------------------------------------
obligation of a small company, strongly secured but influenced as to rating by
the lesser financial power of the enterprise and more local type market.
Bonds rated Duff-1 are judged by Duff to be of the highest credit quality
with negligible risk factors, only slightly more than U.S. Treasury debt. Bonds
rated Duff-2, 3 and 4 are judged by Duff to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.
Obligations rated AAA by IBCA have 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 significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. 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.
DESCRIPTION OF MUNICIPAL NOTE RATINGS __________________________________________
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both. Short-term municipal securities rated MIG-2 or
VMIG-2 are of high quality. Margins of protection are ample although not so
large as in the preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment.
/ / Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
/ / 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).
S&P NOTE RATING SYMBOLS ARE AS FOLLOWS:
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.
SP-2 Satisfactory capacity to pay principal and interest.
- ----
76 Description of Ratings
<PAGE>
NOTES
<PAGE>
EQUITY FUNDS
(STOCKS)
GROWTH EQUITY FUND seeks capital growth by investing primarily in the equity
securities of companies believed by management to show the potential for
growth of earnings over time.
EQUITY FUND seeks capital growth by investing principally in a diversified
portfolio of common stocks of companies with large, medium or small
capitalizations.
SPECIAL EQUITY FUND seeks capital growth by investing principally in a
diversified portfolio of common stocks of domestic companies expected to
experience growth in earnings and price.
EQUITY INDEX FUND seeks to track the price and yield performance of the
Standard & Poor's 500 Composite Stock Price Index.
INTERNATIONAL GROWTH FUND seeks long-term capital appreciation by investing
primarily in appreciation-oriented equity securities of companies located
outside the United States.
BALANCED FUND seeks to provide total return while preserving capital by
investing in a combination of common stocks and fixed income securities.
FIXED INCOME FUNDS
(Bonds)
SHORT-INTERMEDIATE BOND Fund seeks income through investment in a diversified
portfolio of intermediate term, fixed income obligations with an expected
average weighted maturity of two to five years.
BOND FUND seeks to maximize long-term total return by investing principally
in a diversified portfolio of debt securities.
SHORT TERM INCOME FUND seeks to obtain consistent current income with
relative stability of principal by investing principally in a diversified
portfolio of investment grade debt securities.
GOVERNMENT INCOME FUND seeks to provide current income while preserving
principal value and maintaining liquidity by investing exclusively in
securities of the United States government and its agencies.
INTERMEDIATE MUNICIPAL BOND FUND seeks a high level of income generally
exempt from federal income taxes by investing at least 80% of its assets in
tax-exempt municipal securities.
PENNSYLVANIA MUNICIPAL BOND FUND seeks to provide a high rate of current
income that is exempt from both federal income taxes and (for Pennsylvania
residents) Pennsylvania state income taxes. The Fund invests primarily in
highly-rated, long-term municipal bonds issued by state, county, and local
agencies within the Commonwealth of Pennsylvania.
There is no assurance that the Funds will achieve their respective objectives.
<PAGE>
NEW JERSEY MUNICIPAL BOND FUND seeks to provide a high rate of current income
that is exempt from both federal income taxes and (for New Jersey residents)
New Jersey state income taxes. The Fund invests primarily in highly-rated,
long-term municipal bonds issued by state, county, and local agencies within
the state of New Jersey.
GLOBAL BOND FUND seeks to provide capital appreciation and current income
through investment primarily in fixed income securities of United States and
foreign issuers denominated in United States dollars and in other currencies.
MONEY MARKET FUNDS
CASH RESERVE seeks to obtain maximum current income consistent with the
preservation of principal and maintenance of liquidity by investing in a
diversified portfolio of money market instruments of the highest quality,
including a broad range of U.S. dollar-denominated government, bank, and
commercial paper obligations.
TREASURY RESERVE seeks to provide current interest income, liquidity and
safety of principal by investing in direct obligations of the U.S. Treasury
and repurchase agreements relating to such obligations.
TAX-FREE RESERVE seeks a high level of income exempt from federal income
taxes through investment of at least 80% of its total
assets in tax-free securities.
There is no assurance that the Funds will achieve their respective objectives.
<PAGE>
COREFUNDS(R)
FAMILY OF
MUTUAL FUNDS
INSTITUTIONAL SHARES
PROSPECTUS
APRIL 22, 1996
COREFUNDS, INC.
DIRECTORS
Emil J. Mikity, Chairman
George H. Strong
Erin Anderson
OFFICERS
David G. Lee, President
James W. Jennings, Secretary
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Financial Management Corporation
Wayne, PA 19087
DISTRIBUTOR
SEI Financial Services Company
Wayne, PA 19087
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
Investment Adviser
[CORESTATES LOGO]
CoreStates
Investment Advisers
FOR current performance, purchase, redemption and
other information, call 1-800-355-CORE (2673)
COR-F-045-04
</TABLE>
<PAGE>
COREFUND(R)
FAMILY OF
MUTUAL FUNDS
Prospectus
COREFUNDS, INC.
APRIL 22, 1996
INDIVIDUAL SHARES
CoreFunds, Inc. is an open-end management investment company presently
offering shares in twenty-three diversified and non-diversified portfolios
that offer a variety of investment opportunities. These portfolios are managed
by CoreStates Investment Advisers, Inc. This Prospectus relates to Class A and
Class C Shares in sixteen portfolios, including equity, fixed income, and money
market portfolios (the "Funds").
This Prospectus gives you information about the Funds that you should
be aware of before investing. Additional information about the Funds,
contained in a Statement of Additional Information dated April 22, 1996, has
been filed with the Securities and Exchange Commission. It is incorporated in
this Prospectus by reference. To obtain a copy without charge, call or write:
CoreFunds, Inc.
680 East Swedesford Road
Wayne, PA 19087
1-800-355-CORE
Keep this Prospectus for future reference.
SHARES IN THE FUNDS ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR
GUARANTEED OR ENDORSED BY, CORESTATES BANK, N.A., THE
PARENT CORPORATION OF EACH FUND'S INVESTMENT ADVISER, OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE CASH RESERVE, TREASURY RESERVE AND/OR TAX-FREE RESERVE IS
NEITHER INSURED NOR 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 PER SHARE.
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS /X/ COREFUND
<TABLE>
<S> <C>
Transaction and Operating Expense Tables............. 3
Financial Highlights................................. 7
Highlights........................................... 12
</TABLE>
FUNDAMENTALS OF MUTUAL FUND INVESTING
<TABLE>
<S> <C>
Types of investment vehicles......................... 16
How to invest in stocks, bonds, and money market
instruments....................................... 18
Developing your investment strategy.................. 23
</TABLE>
INFORMATION ON THE FUNDS
<TABLE>
<S> <C>
Investment Objectives of the Funds................... 27
Equity Funds....................................... 27
Fixed Income Funds................................. 27
Money Market Funds................................. 28
Investment Policies.................................. 28
Equity Funds....................................... 28
Fixed Income Funds................................. 31
Money Market Funds................................. 35
Other Investment Practices of the Funds............ 37
Types of Securities in Which the Funds Invest........ 44
Equity Funds....................................... 44
Taxable Fixed Income Funds......................... 44
Taxable Money Market Funds......................... 46
Tax-Free Fixed Income and Money Market Funds....... 47
Temporary Investments.............................. 49
Investment Restrictions.............................. 50
Investor Considerations.............................. 52
Investment Suitability............................. 52
Investment Risks................................... 54
Distributions........................................ 57
Taxes................................................ 58
Valuation of Shares.................................. 62
Net Asset Value.................................... 62
Portfolio Pricing.................................. 62
Management........................................... 63
Investment Adviser, Sub-Advisers................... 63
Fund Managers...................................... 65
Administrator...................................... 68
Distributor........................................ 68
Performance Information.............................. 69
Total Return and Yield............................. 69
In General......................................... 70
Description of Shares................................ 70
General Information.................................. 72
Description of Ratings............................... 72
Description of Municipal and Corporate Bond
Ratings......................................... 72
Description of Municipal Note
Ratings......................................... 73
</TABLE>
SHAREHOLDER SERVICES GUIDE
<TABLE>
<S> <C>
Opening an Account and Purchasing
Shares............................................ 75
Selling Your Shares.................................. 79
Exchanging Shares.................................... 82
</TABLE>
<TABLE>
<S> <C> <C>
No person is authorized by CoreFunds, Inc. to give any
information or make any representation other than those
contained in this Prospectus or in other printed or written
- ---- material issued by CoreFunds, Inc., and you should not rely
2 Table of Contents on any other information or representation.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION AND OPERATING EXPENSE TABLES | | COREFUND
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A and/or Class C Shares of the Funds.
THE INFORMATION CONTAINED IN THE TABLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<TABLE>
<CAPTION>
--------- ------- -------- ----------------
GROWTH SPECIAL INTERNATIONAL
Equity Funds EQUITY EQUITY(7) EQUITY GROWTH
- --------------- --------- ------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Class A Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 3.25% 3.25% 3.25% 3.25%
Maximum Sales Load Imposed on Reinvested
Dividends none none none none
Deferred Sales Load none none none none
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee
Waivers(1) .72% .74% .10% .80%
12b-1 Fees(2) .25% .25% .25% .25%
Administrative Fees After Fee Waivers(3) .16% .16% .16% .16%
Other Expenses(4) .08% .10% .05% .18%
Net Annual Fund Operating Expenses(5) 1.21% 1.25% .56% 1.39%
EXAMPLE
You would pay the following
expenses on a $1,000 investment, 1 year $ 44 $ 45 $ 38 $ 46
assuming (1) a 5% annual return 3 years 70 71 50 75
and (2) redemption at the end 5 years 97 99 63 106
of each time period.(6) 10 years 174 179 100 194
<CAPTION>
-----------
Equity Funds BALANCED
- --------------- -----------
<S> <C>
Class A Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 3.25%
Maximum Sales Load Imposed on Reinvested
Dividends none
Deferred Sales Load none
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee
Waivers(1) .56%
12b-1 Fees(2) .25%
Administrative Fees After Fee Waivers(3) .16%
Other Expenses(4) .08%
Net Annual Fund Operating Expenses(5) 1.05%
EXAMPLE
You would pay the following
expenses on a $1,000 investment, $ 43
assuming (1) a 5% annual return 65
and (2) redemption at the end 89
of each time period.(6) 157
</TABLE>
- --------------------------------------------------------------------------------
(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .75%, .74%, 1.50%, .80%, and .70% of the
average net assets of Growth Equity Fund, Equity Fund, Special Equity Fund,
International Growth Fund, and Balanced Fund, respectively.
(2) Note that long-term shareholders may pay more than the economic equivalent
of the maximum front-end load (6.25%) permitted by the Rules of Fair
Practice of the National Association of Securities Dealers.
(3) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(4) Includes (among others) legal, auditing, and printing fees.
(5) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein (except the Equity Fund and Special
Equity Fund) are net of investment advisory and administrative fee waivers
expected to be in effect during the fiscal period ending June 30, 1996.
Absent any fee waivers, such expense ratios would have been 1.33%, 1.48% and
1.28% for Growth Equity Fund, International Growth Fund and Balanced Fund,
respectively. The expense ratios for the Equity Fund and Special Equity Fund
are net of investment advisory and administrative fee waivers expected to be
in effect during the final period ending October 31, 1996. Absent any fee
waivers, such expense ratios would have been 1.34% and 2.05% for the Equity
Fund and Special Equity Fund, respectively. The service providers of all the
Funds have been waiving all or a portion of their fees since inception.
However, these providers may change the waiver so that a Fund's expense
ratio will approach the contractually mandated ratio.
(6) Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one year, three years, five years and ten
years, would be $46, $73, $103 and $187 for Growth Equity Fund; $46, $74,
$104 and $189 for Equity Fund; $53, $95, $139 and $263 for Special Equity
Fund; $47, $78, $111 and $204 for International Growth Fund; and $45, $72,
$100, and $182 for Balanced Fund.
(7) Prior to the date of this Prospectus, this Fund's name was Value Equity
Fund.
----
Transaction and Operating Expense Tables 3
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION AND OPERATING EXPENSE TABLES (CONTINUED)
<TABLE>
<CAPTION>
------------------- ----------- ----------- ----------------- -------------------
SHORT
SHORT-INTERMEDIATE TERM INTERMEDIATE
Fixed Income Funds BOND(7) BOND INCOME GOVERNMENT INCOME MUNICIPAL BOND
------------------- ----------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases 3.25% 3.25% 3.25% 3.25% 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends none none none none none
Deferred Sales Load none none none none none
Redemption Fee none none none none none
Exchange Fee none none none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net
assets):
Investment Advisory Fees
After Fee Waivers1 .25% .35% .25% .37% .37%
12b-1 Fees2 .25% .25% .25% .25% .25%
Administrative Fees After Fee
Waivers3 .16% .16% .16% .16% .16%
Other Expenses4 .10% .05% .05% .21% .06%
Net Annual Fund Operating
Expenses5 .76% .81% .71% .99% .84%
EXAMPLE
You would pay the following
expenses on a $1,000
investment, 1 year $ 40 $ 41 $ 40 $ 42 $ 41
assuming (1) a 5% annual
return 3 years 56 58 54 63 58
and (2) redemption at the end 5 years 73 76 N/A 85 78
of each time period.6 10 years 124 129 N/A 150 133
</TABLE>
- --------------------------------------------------------------------------------
(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .50%, .74%, .74%, .50% and .50% of the
average net assets of Short Intermediate Bond Fund, Bond Fund, Short-Term
Income Fund, Government Income Fund and Intermediate Municipal Bond Fund,
respectively.
(2) Note that long-term shareholders may pay more than the economic equivalent
of the maximum front-end load (6.25%) permitted by the Rules of Fair
Practice of the National Association of Securities Dealers.
(3) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(4) Includes (among others) legal, auditing and printing fees.
(5) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein (except for the Bond Fund and Short
Term Income Fund) are net of investment advisory and administrative fee
waivers expected to be in effect during the fiscal period ending June 30,
1996. Absent fee waivers, such expense ratios would have been 1.10%, 1.21%
and 1.06% for Short-Intermediate Bond Fund, Government Income Fund and
Intermediate Municipal Bond Fund, respectively. The expense ratios for the
Bond Fund and Short Term Income Fund are net of investment advisory and
administrative fee waivers expected to be in effect during the fiscal period
ending October 31, 1996. Absent fee waivers, such expense ratios would have
been 1.29% each for the Bond Fund and Short Term Income Fund. The service
providers of all the Funds have been waiving all or a portion of their fees
since inception. However, these providers may change the waiver so that a
Fund's expense ratio will approach the contractually mandated ratio.
(6) Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one year, three years, five years and ten
years, would be $43, $66, $91 and $162 for Short Intermediate Bond Fund;
$45, $72, $101 and $183 for Bond Fund; $45, $72, $101 and $183 for
Short-Term Income Fund; $44, $70, $97, and $174 for Government Income Fund;
and $43, $65, $89, and $158 for Intermediate Municipal Bond Fund.
(7) Prior to the date of this Prospectus, this Fund's name was Intermediate Bond
Fund.
4 Transaction and Operating Expense Tables
<PAGE>
- --------------------------------------------------------------------------------
| | COREFUND
<TABLE>
<CAPTION>
---------------- ------------- --------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL GLOBAL
Fixed Income Funds BOND BOND BOND
- ----------------------- ---------------- ------------- --------
<S> <C> <C> <C> <C>
Class A Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 3.25% 3.25% 3.25%
Maximum Sales Load Imposed on Reinvested Dividends none none none
Deferred Sales Load none none none
Redemption Fee none none none
Exchange Fee none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee Waivers(1) 0% 0% .52%
12b-1 Fees(2) .25% .25% .25%
Administrative Fees After Fee Waivers(3) 0% 0% .16%
Other Expenses(4) .14% .40% .21%
Net Annual Fund Operating Expenses(5) .39% .65% 1.14%
EXAMPLE
You would pay the following
expenses on a $1,000 investment, 1 year $ 36 $ 39 $ 44
assuming (1) a 5% annual return 3 years 45 53 68
and (2) redemption at the end 5 years 54 68 93
of each time period.(6) 10 years 80 111 167
</TABLE>
- --------------------------------------------------------------------------------
(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .50%, .50% and .60% of the average net
assets of Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund
and Global Bond Fund, respectively.
(2) Note that long-term shareholders may pay more than the economic equivalent
of the maximum front-end load (6.25%) permitted by the Rules of Fair
Practice of the National Association of Securities Dealers.
(3) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(4) Includes (among others) legal, auditing and printing fees.
(5) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein are net of investment advisory and
administrative fee waivers expected to be in effect during the fiscal period
ending June 30, 1996. Absent fee waivers, such expense ratios would have
been 1.14%, 1.40% and 1.31% for Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund and Global Bond Fund, respectively. The service
providers of all the Funds have been waiving all or a portion of their fees
since inception. However, these providers may change the waiver so that a
Fund's expense ratio will approach the contractually mandated ratio.
(6) Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one year, three years, five years and ten
years, would be $44, $68, $93, and $167 for Pennsylvania Municipal Bond
Fund; $46, $75, $107, and $195 for New Jersey Municipal Bond Fund; and $45,
$73, $102, and $185 for Global Bond Fund.
----
Highlights 5
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION AND OPERATING EXPENSE TABLES (CONTINUED) | | COREFUND
<TABLE>
<CAPTION>
------------- --------------- ---------------
TREASURY TAX-FREE
Money Market Funds CASH RESERVE RESERVE RESERVE
- ------------------------ ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Class C Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases none none none
Maximum Sales Load Imposed on Reinvested
Dividends none none none
Deferred Sales Load none none none
Redemption Fee none none none
Exchange Fee none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee Waivers1 .28% .28% .28%
12b-1 Fees2 .25% .25% .25%
Administrative Fees After Fee Waivers3 .16% .16% .16%
Other Expenses4 .07% .07% .07%
Net Annual Fund Operating Expenses5 .76% .76% .76%
EXAMPLE
You would pay the following
expenses on a $1,000 investment, 1 year $ 8 $ 8 $ 8
assuming (1) a 5% annual return 3 years 24 24 24
and (2) redemption at the end 5 years 42 42 42
of each time period.6 10 years 94 94 94
</TABLE>
- --------------------------------------------------------------------------------
(1) Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .40%, .40%, and .40% of the average net
assets of Cash Reserve, Treasury Reserve, and Tax-Free Reserve,
respectively.
(2) Note that long-term shareholders may pay more than the economic equivalent
of the maximum front-end load (6.25%) permitted by the Rules of Fair
Practice of the National Association of Securities Dealers.
(3) Absent voluntary waivers, the Administrator's fee is calculated at the
annual rate of .25% of each Fund's average net assets.
(4) Includes (among others) legal, auditing, and printing fees.
(5) The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Funds in maintaining a competitive expense
ratio. The expense ratios noted herein are net of investment advisory and
administrative fee waivers expected to be in effect during the fiscal period
ending June 30, 1996. Absent any fee waivers, such expense ratios would have
been 0.97%, 0.97%, and 0.97% for Cash Reserve, Treasury Reserve, and
Tax-Free Reserve, respectively. The service providers of all the Funds have
been waiving all or a portion of their fees since inception. However, these
providers may change the waiver so that a Fund's expense ratio will approach
the contractually mandated ratio.
(6) Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one year, three years, five years and ten
years, would be $10, $31, $54 and $119 for Cash Reserve; $10, $31, $54, and
$119 for Treasury Reserve; and $10, $31, $54 and $119 for Tax-Free Reserve.
6 Transaction and Operating Expense Tables
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS /X/ COREFUND
The tables that follow present information about the investment results of
the shares of the Funds. The financial highlights for each of the Growth Equity
Fund, Equity Index Fund, International Growth Fund, Balanced Fund, Government
Income Fund, Short-Intermediate Bond Fund, Intermediate Municipal Bond Fund,
Global Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Cash Reserve Fund, Treasury Reserve Fund and Tax-Free Reserve Fund have
been audited by Ernst & Young LLP, independent accountants, whose report thereon
appears in CoreFunds' annual report which accompanies the Statement of
Additional Information. The financial highlights for each of the Equity Fund,
Special Equity Fund, Bond Fund and Short Term Income Fund have been audited by
Coopers & Lybrand, independent accountants, for the periods presented, whose
report thereon appears in the Conestoga Funds annual report which accompanies
the Statement of Additional Information.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30,
Equity Funds
______________
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
- -------------
GROWTH EQUITY
- -------------
CLASS Y (INSTITUTIONAL)
1995** (unaudited) $ 11.18 $ 0.04 $ 1.54 $ (0.04) $ (0.35) $ 12.37 14.14%+ $ 102,288
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777
19921 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418
CLASS A
(INDIVIDUAL)
1995** (unaudited) $ 11.17 $ 0.02 $ 1.53 $ (0.02) $ (0.35) $ 12.35 13.93%+ $ 2,297
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,730
1993* 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224
- ---------------------
INTERNATIONAL GROWTH
- ---------------------
CLASS Y (INSTITUTIONAL)
1995** (unaudited) $ 12.29 $ 0.05 $ 1.02 $ (0.29) $ (0.06) $ 13.01 8.69%+ $ 111,921
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582
19902 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513
CLASS A (INDIVIDUAL)
1995** (unaudited) $ 12.27 $ 0.03 $ 1.02 $ (0.25) $ (0.06) $ 13.01 8.61%+ $ 1,977
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019
1993* 10.07 0.05 1.59 -- -- 11.71 16.29+ 344
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Ratio of Net Average Net to Average
Expenses to Income to Assets Net Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
- --------------
GROWTH EQUITY
- --------------
CLASS Y (INSTITUTIONAL)
1995** (unaudited) 0.84% 0.61% 1.11% 0.34% 43%
1995 0.76 0.84 1.10 0.50 113
1994 0.69 0.48 1.11 0.06 127
1993 0.43 0.85 1.11 0.17 103
19921 0.14 1.38 1.12 0.40 66
CLASS A (INDIVIDUAL)
1995** (unaudited) 1.09% 0.36% 1.36% 0.09% 43%
1995 1.01 0.59 1.35 0.25 113
1994 0.94 0.23 1.36 (0.19) 127
1993* 0.80 0.39 1.48 (0.29) 103
- --------------------
INTERNATIONAL GROWTH
- --------------------
CLASS Y (INSTITUTIONAL)
1995** (unaudited) 1.17% 0.73% 1.29% 0.61% 15%
1995 1.05 0.98 1.19 0.84 59
1994 0.99 0.23 1.18 0.04 67
1993 0.99 1.22 1.28 0.93 59
1992 0.96 1.67 1.40 1.23 87
1991 0.99 1.80 1.56 1.23 49
19902 1.22 2.57 1.99 1.80 20
CLASS A (INDIVIDUAL)
1995** (unaudited) 1.42% 0.48% 1.54% 0.36% 15%
1995 1.30 0.73 1.44 0.59 59
1994 1.24 0.05 1.43 (0.14) 67
1993* 1.15 1.51 1.44 1.22 59
</TABLE>
----
Financial Highlights 7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, (CONTINUED)
Equity Funds (continued)
______________
<TABLE>
<CAPTION>
Realized and Net Net Assets,
Net Asset Unrealized Dividends Distribution Asset End of Ratio of
Value, Net Net Gains from Net from Value Period Expenses
Beginning Investment or (Losses) Investment Capital End of Total (000 to Average
of Period Income on Securities Income Gains Period Return omitted) Net Assets
--------- ---------- ------------- ---------- ------------ ------ ------ ---------- ----------
- ---------
BALANCED
- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
(INSTITUTIONAL)
1995**
(unaudited) $11.06 $ 0.17 $ 1.23 $(0.17) $(0.15) $12.14 12.66%+ $ 68,283 0.80%
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
19933 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45
CLASS A
(INDIVIDUAL)
1995**
(unaudited) $11.06 $ 0.15 $ 1.23 $(0.15) $(0.15) $12.14 12.53%+ $ 2,687 1.05%
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
1993* 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31,(4)
- -------
EQUITY
- -------
CLASS Y
(INSTITUTIONAL)
1995(5) $15.00 $ 0.19 $ 2.87 $(0.19) $(0.80) $17.07 22.00% $378,352 1.05%
CLASS A
(INDIVIDUAL)
1995(5) $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 1.40%
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(6) 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.55
- ---------------
SPECIAL EQUITY
- ---------------
CLASS Y
(INSTITUTIONAL)
1995(5) $ 9.37 $0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $57,306 0.32%
CLASS A
(INDIVIDUAL)
1995(5) $ 9.37 $0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $ 734 0.27%
PRIOR CLASS
1994(7) $10.00 $0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $10,069 0.15%
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Net Average Net to Average
Income to Assets Net Assets Portfolio
Average Net (Excluding (Excluding Turnover
Assets Waivers) Waivers) Rate
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
- ---------
BALANCED
- ---------
CLASS Y
(INSTITUTIONAL)
1995**
(unaudited) 2.85% 1.06% 2.59% 32%
1995 3.51 1.07 3.17 46
1994 3.46 1.08 3.00 56
19933 3.38 1.39 2.45 21
CLASS A
(INDIVIDUAL)
1995**
(unaudited) 2.60% 1.31% 2.34% 32%
1995 3.27 1.32 2.93 46
1994 3.21 1.33 2.75 56
1993* 5.76 1.48 4.83 21
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31,(4)
- ------
EQUITY
- ------
CLASS Y
(INSTITUTIONAL)
1995(5) 1.44% 1.10% 1.44% 119%
CLASS A
(INDIVIDUAL)
1995(5) 1.23% 1.53% 1.04% 119%
PRIOR CLASS
1994 0.75% 1.51% 0.73% 35%
1993 0.94 1.41 0.73 24
1992 1.47 1.23 1.17 39
1991 2.30 1.48 1.36 68
1990(6) 2.29 1.59 1.35 43
- ---------------
SPECIAL EQUITY
- ---------------
CLASS Y
(INSTITUTIONAL)
1995(5) 1.14% 1.97% (0.51)% 129%
CLASS A
(INDIVIDUAL)
1995(5) 1.29% 2.24% (0.68)% 129%
PRIOR CLASS
1994(7) 1.06% 2.10% (0.80)% 39%
</TABLE>
- --------------------------------------------------------------------------------
+ Returns are for the period indicated and have not been annualized.
* Class A has been offered since January 4, 1993. Balanced has offered Class A
since March 16, 1993.
** Ratios for the six-month period ended December 31, 1995 have been annualized.
(1) Growth Equity commenced operations on February 3, 1992. All ratios for the
period have been annualized.
(2) International Growth commenced operations on February 12, 1990. All the
ratios for the period have been annualized.
(3) Balanced commenced operations on January 4, 1993. All ratios for the period
have been annualized.
(4) The performance results of the Equity and Special Equity Funds prior to the
merger of CoreFunds and Conestoga Family of Funds ('Conestoga') are based
on the performance of the respective Conestoga portfolios and employ an
October 31st fiscal year.
8 Financial Highlights
<PAGE>
(5) On February 21, 1995 the shares of the Fund (formerly a portfolio of
Conestoga) were redesignated as either Retail (Class A) or Institutional
(Class Y) shares. For the year ended October 31, 1995, the Financial
Highlights' ratios of expenses, ratios of net investment income, total
return, and the per share investment activities and distributions are
presented on a basis whereby 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 based upon the relative net assets
of each class of shares as of February 21, 1995 and the results combined
therewith the results of operations and distributions for each applicable
class for the period February 21, 1995 through October 31, 1995.
(6) Equity Fund (formerly Value Equity Fund) commenced operations on February
28, 1990. All ratios for the period have been annualized.
(7) Special Equity Fund commenced operations on March 15, 1994. All ratios for
the period have been annualized.
8 Financial Highlights
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS /X/ COREFUND
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, (CONTINUED)
Fixed Income Funds
__________________
<TABLE>
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distributions End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value, End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------
GOVERNMENT INCOME
- ------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.83 $0.31 $ 0.27 $(0.31) $ ___ $10.10 6.02%+ $13,426
1995 9.52 0.62 0.31 (0.62) ___ 9.83 10.26 11,305
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089
1993(1) 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323
CLASS A
(INDIVIDUAL)
1995** (unaudited) $ 9.84 $0.30 $ 0.26 $(0.30) $ ___ $10.10 5.78%+ $ 1,344
1995 9.51 0.61 0.33 (0.61) ___ 9.84 10.23 1,374
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536
1993* 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Ratio of Ratio of Net Average Net Average Net
Expenses to Income to Assets Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.57% 6.28% 0.90% 5.95% 77%
1995 0.59 6.53 0.98 6.14 368
1994 0.50 4.93 1.00 4.43 157
1993(1) 0.44 5.41 1.10 4.75 93
CLASS A (INDIVIDUAL)
1995** (unaudited) 0.82% 6.03% 1.15% 5.70% 77%
1995 0.85 6.25 1.24% 5.86 368
1994 0.75 4.68 1.25 4.18 157
1993* 0.63 5.35 1.29 4.69 93
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distributions End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value, End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
- -----------------------
SHORT-INTERMEDIATE BOND
- -----------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.84 $0.29 $ 0.13 $(0.29) $ ___ $ 9.97 4.33%+ $55,290
1995 9.63 0.53 0.21 (0.53) ___ 9.84 8.22 55,128
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692
1992(2) 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623
CLASS A (INDIVIDUAL)
1995** (unaudited) $ 9.84 $0.28 $ 0.13 $(0.28) $ ___ $ 9.97 4.20%+ $ 2,052
1995 9.63 0.54 0.20 (0.53) ___ 9.84 7.95 1,961
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365
1993* 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Ratio of Ratio of Net Average Net Average Net
Expenses to Income to Assets Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.62% 5.81% 0.85% 5.58% 109%
1995 0.60 5.76 0.84 5.52 405
1994 0.58 4.30 0.86 4.02 299
1993 0.42 4.62 0.86 4.18 188
1992(2) 0.11 5.73 0.84 5.00 51
CLASS A
(INDIVIDUAL)
1995** (unaudited) 0.87% 5.56% 1.10% 5.33% 109%
1995 0.85 5.27 1.09 5.03 405
1994 0.83 4.05 1.11 3.77 299
1993* 0.75 3.78 1.19 3.34 188
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distributions End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value, End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------
INTERMEDIATE MUNICIPAL BOND
- ---------------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.83 $0.18 $ 0.28 $(0.18) $ -- $10.11 4.71%+ $ 236
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088
1993(3) 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009
CLASS A (INDIVIDUAL)
1995** (unaudited) $ 9.83 $0.17 $ 0.27 $(0.17) $ -- $10.10 4.47%+ $1,032
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311
1993* 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Ratio of Ratio of Net Average Net Average Net
Expenses to Income to Assets Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.97% 3.57% 1.34% 3.20% 0%
1995 0.82 3.91 1.26 3.47 9
1994 0.63 3.91 1.17 3.37 43
1993(3) 0.58 2.74 1.45 1.87 10
CLASS A (INDIVIDUAL)
1995** (unaudited) 1.22% 3.32% 1.59% 2.95% 0%
1995 1.08 3.65 1.52 3.21 9
1994 0.88 3.66 1.42 3.12 43
1993* 0.81 2.51 1.68 1.64 10
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distributions End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value, End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------
GLOBAL BOND
- ------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $ 9.62 $0.24 $ 0.42 $(0.38) $-- $9.90 6.96%+ $33,237
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898
1994(4) 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957
CLASS A
(INDIVIDUAL)
1995** (unaudited) $ 9.61 $0.29 $ 0.36 $(0.37) $-- $9.89 6.83%+ $ 172
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170
1994(4) 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Ratio of Ratio of Net Average Net Average Net
Expenses to Income to Assets Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.70% 5.96% 1.00% 5.66% 24%
1995 0.64 6.84 1.03 6.45 133
1994(4) 0.73 5.04 1.12 4.65 161
CLASS A
(INDIVIDUAL)
1995** (unaudited) 0.95% 5.71% 1.25% 5.41% 24%
1995 0.89 6.59 1.28 6.20 133
1994(4) 0.98 4.79 1.37 4.40 161
</TABLE>
----
Financial Highlights 9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, (CONTINUED)
Fixed Income Funds (continued)
__________________
<TABLE>
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $10.16 $0.27 $ 0.45 $(0.27) $ -- $10.61 7.22%+ $2,870
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434
CLASS A
(INDIVIDUAL)
1995** (unaudited) $10.16 $0.26 $ 0.45 $(0.26) $ -- $10.61 7.08%+ $ 217
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Ratio of Net Average Net to Average
Expenses to Income to Assets Net Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
<CAPTION>
CLASS Y
1995** (unaudited) 0.35% 5.26% 1.10% 4.51% 5%
1995 0.39 5.26 1.14 4.51 18
1994(5) 0.42 5.09 1.17 4.34 3
CLASS A
(INDIVIDUAL)
1995** (unaudited) 0.60% 5.01% 1.35% 4.26% 5%
1995 0.64 4.95 1.39 4.20 18
1994(5) 0.67 4.84 1.42 4.09 3
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------
NEW JERSEY MUNICIPAL BOND
- -------------------------
CLASS Y
(INSTITUTIONAL)
1995** (unaudited) $10.12 $0.26 $ 0.44 $(0.26) $(0.06) $10.50 7.02%+ $1,564
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550
1994(5) 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432
CLASS A
(INDIVIDUAL)
1995** (unaudited) $10.12 $0.25 $ 0.43 $(0.25) $(0.06) $10.49 6.79%+ $ 100
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Ratio of Net Average Net to Average
Expenses to Income to Assets Net Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995** (unaudited) 0.40% 4.96% 1.16% 4.20% 13%
1995 0.42 5.21 1.17 4.46 32
1994(5) 0.43 5.07 1.35 4.15 13
CLASS A
(INDIVIDUAL)
1995** (unaudited) 0.65% 4.71% 1.41% 3.95% 13%
1995 0.68 4.97 1.44 4.21 32
1994(5) 0.68 4.82 1.60 3.90 13
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31,(6)
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----
BOND
- ----
CLASS Y
(INSTITUTIONAL)
1995(7) $ 9.81 $0.61 $ 0.71 $(0.58) $ -- $10.55 13.87% $194,442
CLASS A
(INDIVIDUAL)
1995(7) $ 9.81 $0.60 $ 0.72 $(0.57) $ -- $10.56 13.83% $ 1,373
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82 15,180
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255
1990(8) 10.00 0.50 (0.04) (0.50) -- 9.96 4.64 4,593
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Ratio of Net Average Net to Average
Expenses to Income to Assets Net Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995(7) 0.71% 6.09% 1.12% 5.68% 352%
CLASS A
(INDIVIDUAL)
1995(7) 0.97% 6.02% 1.44% 5.55% 352%
PRIOR CLASS
1994 1.01% 5.07% 1.60% 4.48% 232%
1993 0.88 5.16 1.49 4.55 158
1992 0.46 6.78 1.24 6.01 99
1991 0.47 7.71 1.41 6.78 47
1990(8) 0.68 7.75 1.62 6.81 23
<CAPTION>
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of
Value, Net or (Losses) from Net from Net Asset Period
Beginning Investment on Investment Capital Value End Total (000
of Period Income Securities Income Gains of Period Return omitted)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
- -----------------
SHORT TERM INCOME
- -----------------
(INSTITUTIONAL)
1995(9) $10.00 $0.25 $0.03 $(0.23) $-- $10.05 2.87% $36,059
CLASS A
(INDIVIDUAL)
199510 $10.01 $0.23 $0.02 $(0.22) $-- $10.04 2.57% $ 11
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Ratio of Net Average Net to Average
Expenses to Income to Assets Net Assets Portfolio
Average Net Average Net (Excluding (Excluding Turnover
Assets Assets Waivers) Waivers) Rate
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS Y
1995(9) 0.63% 5.43% 1.08% 4.98% 40%
CLASS A
(INDIVIDUAL)
199510 0.88% 5.05% 1.33% 4.60% 40%
</TABLE>
- --------------------------------------------------------------------------------
+ Returns are for the period indicated and have not been annualized.
* Class A has been offered since January 4, 1993. Government Income and
Intermediate Municipal Bond have offered Class A since May 3, 1993. Ratios
for this period have been annualized.
** Ratios for the six-month period ended December 31, 1995, have been
annualized.
(1) Government Income commenced operations on April 1, 1993. Ratios for this
period have been annualized.
(2) Short-Intermediate Bond commenced operations on February 3, 1992. Ratios for
this period have been annualized.
(3) Intermediate Municipal Bond commenced operations on May 3, 1993. Ratios for
this period have been annualized.
(4) Global Bond commenced operations on December 15, 1993. Ratios for this
period have been annualized.
(5) Pennsylvania Municipal Bond and New Jersey Municipal Bond commenced
operations on May 16, 1994. Ratios for this period have been annualized.
(6) The performance results of the Bond and Short-Term Income Funds prior to
the merger of CoreFunds and Conestoga are based on the performance of the
respective Conestoga portfolios and employ an October 31st fiscal year. (7)
On February 21, 1995 the shares of the Fund (formerly a portfolio of
Conestoga) were redesignated as either Retail or Institutional shares. For
the year ended October 31, 1995, the Financial Highlights' ratios of
expenses, ratios of net investment income, total return, and the per share
investment activities and distributions are presented on a basis whereby
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 based upon the relative net assets of each class of shares
as of February 21, 1995 and the results combined therewith the results of
operations and distributions for each applicable class for the period
February 21, 1995 through October 31, 1995.
(8) Bond Fund commenced operations on February 28, 1990. All ratios for the
period have been annualized.
(9) Class Y Shares of the Short Term Income Fund commenced operations on
May 15, 1995. All ratios for the period have been annualized.
(10) Class A Shares of the Short Term Income Fund commenced operations on
May 17, 1995. All ratios for the period have been annualized.
10 Financial Highlights
- --------------------------------------------------------------------------------
/X/ COREFUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30,
Money Market Funds
- ------------------
<TABLE>
<CAPTION>
Net
Assets
Net Asset Dividends Net End of Ratio of Ratio of
Value Net from Net Asset Value Period Expenses to Net Income
Beginning Investment Investment End of Total (000 Average Net to Average
of Period Income Income Period Return omitted) Assets Net Assets
----------- ----------- ----------- ----------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------
CASH RESERVE
- ------------
CLASS Y(INSTITUTIONAL)
1995**
(unaudited) $1.00 $0.03 $(0.03) $1.00 2.72%+ $551,429 0.50% 5.33%
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54
1987 1.00 0.06 (0.06) 1.00 5.85 35,054 0.54 5.60
19861 1.00 0.06 (0.06) 1.00 3.36+ 56,416 0.59 6.93
CLASS C (INDIVIDUAL)
1995**
(unaudited) $1.00 $0.03 $(0.03) $1.00 2.59%+ $ 18,064 0.75% 5.08%
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86
1994 1.00 0.03 (0.03) 1.00 2.74+ 11,451 0.72 2.70
1993* 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52
<CAPTION>
Expenses to Income to
Ratio of Ratio of Net
Average Net Average Net
Assets Assets
(Excluding (Excluding
Waivers) Waivers)
------------- -------------
CLASS Y (Institutional)
<S> <C> <C>
1995**
(unaudited) 0.85% 4.98%
1995 0.85 4.67
1994 0.85 2.57
1993 0.85 2.58
1992 0.82 4.24
1991 0.82 6.49
1990 0.80 7.82
1989 0.90 8.05
1988 1.14 5.96
1987 1.01 5.13
19861 1.21 6.31
CLASS C (Individual)
1995**
(unaudited) 1.10% 4.73%
1995 1.10 4.49
1994 1.10 2.32
1993* 1.15 2.13
Net
Assets
Net Asset Dividends Net End of Ratio of Ratio of
Value Net from Net Asset Value Period Expenses to Net Income
Beginning Investment Investment End of Total (000 Average Net to Average
of Period Income Income Period Return omitted) Assets Net Assets
----------- ----------- ----------- ----------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
TREASURY RESERVE
- ----------------
CLASS Y (Institutional)
1995**
(unaudited) $1.00 $0.03 $(0.03) $1.00 2.69%+ $526,081 0.50% 5.28%
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26
CLASS C (Individual)
1995**
(unaudited) $1.00 $0.03 $(0.03) $1.00 2.56%+ $ 22,023 0.75% 5.03%
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62
1993* 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Average Net Average Net
Assets Assets
(Excluding (Excluding
Waivers) Waivers)
------------- -------------
CLASS Y (Institutional)
<S> <C> <C>
1995**
(unaudited) 0.85% 4.93%
1995 0.85 4.54
1994 0.86 2.49
1993 0.85 2.50
1992 0.82 4.14
1991 0.82 6.35
1990 0.84 7.56
19892 0.84 8.62
CLASS C (Individual)
1995**
(unaudited) 1.10% 4.68%
1995 1.10 4.44
1994 1.11 2.24
1993* 1.14 2.07
<CAPTION>
Net
Assets
Net Asset Dividends Net End of Ratio of Ratio of
Value Net from Net Asset Value Period Expenses to Net Income
Beginning Investment Investment End of Total (000 Average Net to Average
of Period Income Income Period Return omitted) Assets Net Assets
----------- ----------- ----------- ----------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
TAX-FREE RESERVE
- ----------------
CLASS Y (Institutional)
1995**
(unaudited) $1.00 $0.02 $(0.02) $1.00 1.66%+ $59,109 0.50% 3.27%
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20
CLASS C (Individual)
1995**
(unaudited) $1.00 $0.02 $(0.02) $1.00 1.53%+ $ 2,264 0.75% 3.02%
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75
1993* 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Average Net Average Net
Assets Assets
(Excluding (Excluding
Waivers) Waivers)
------------- -------------
<S> <C> <C>
CLASS Y (Institutional)
1995**
(unaudited) 0.85% 2.92%
1995 0.85 2.72
1994 0.87 1.62
1993 0.89 1.82
1992 0.88 2.88
19913 0.81 3.45
CLASS C (Individual)
1995**
(unaudited) 1.10% 2.67%
1995 1.10 2.43
1994 1.12 1.37
1993* 1.14 1.33
</TABLE>
- --------------------------------------------------------------------------------
+ Returns are for the period indicated and have not been annualized.
* Class C has been offered since January 4, 1993. Ratios for this period have
been annualized.
** Ratios for the six-month period ended December 31, 1995, have been
annualized.
(1) Cash Reserve commenced operations on August 16, 1985. Ratios for this
period have been annualized.
(2) Treasury Reserve commenced operations on November 21, 1988. Ratios for this
period have been annualized.
(3) Tax-Free Reserve commenced operations on April 16, 1991. Ratios for this
period have been annualized.
----
Financial Highlights 11
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
<TABLE>
<S> <C>
COREFUNDS CoreFunds, Inc. ('CoreFunds') is an open-end management investment company presently offering shares
in twenty-three diversified and non- diversified portfolios. This Prospectus offers Class A of the
Equity and Fixed Income Funds and Class C Shares of the Money Market Funds. Class A and Class C
Shares are primarily offered to the general public as well as various types of institutional
investors, which may include CoreStates Bank and its affiliate and corresponding banks, for the
investment of their own funds or for 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. Investors purchasing A
and C Shares will normally be those who desire certain additional shareholder services from certain
security broker/dealers and financial institutions which have entered into shareholder servicing
agreements with the Funds' distributor. Materials relating to Class Y Shares of the Funds may be
obtained by calling 1-800-355-CORE or by writing to CoreFunds, Inc., 680 East Swedesford Road, Wayne,
PA 19087. Prior to the date of this Prospectus, all Class A Shares were known as Series B --
Individual for all portfolios other than Money Market Funds; Class C Shares were known as Series B --
Individual for the Money Market Funds; and Class Y Shares were known as Series A -- Institutional.
CoreFunds has changed these designations to conform to the standard designations suggested by the
Investment Company Institute.
- -------------------------------------------------------------------------------------------------------------------------------
FUNDAMENTALS OF MUTUAL This section will assist you in appreciating investments generally. It describes the three basic
FUND INVESTING types of investment vehicles--stocks, bonds, and money market instruments--as well as mutual funds
which employ one or more of these instruments. The various types of mutual funds available and the
advantages of mutual fund investing are discussed.
PAGE 14
- -------------------------------------------------------------------------------------------------------------------------------
MULTIPLE PORTFOLIOS Investors may choose to invest in any of the sixteen funds of CoreFunds
offered in this Prospectus.
EQUITY FUNDS FIXED INCOME FUNDS MONEY MARKET FUNDS
Growth Equity Fund Short-Intermediate Bond Fund Cash Reserve
Equity Fund Bond Fund Treasury Reserve
Special Equity Fund Short Term Income Fund Tax-Free Reserve
International Growth Fund Government Income Fund
Balanced Fund Intermediate Municipal
Bond Fund
Pennsylvania Municipal
Bond Fund
New Jersey Municipal
Bond Fund
Global Bond Fund
PAGE 25
</TABLE>
12 Highlights
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
<TABLE>
<S> <C>
RISK Investment in the Funds involves a number of risks, including possible loss of principal. The Funds
CHARACTER- differ significantly in terms of specific risks. Certain risk factors applicable to the Funds are
ISTICS described below.
EQUITY FUNDS
The Equity Funds are subject to market risk and fund risk. Market risk is the possibility that stock
prices in general will decline over short or even extended periods of time. Stock markets tend to be
cyclical, with periods when stock prices generally rise and periods when stock prices generally
decline. Fund risk is the possibility that a Fund's performance during a specific period may not meet
or exceed that of the stock market as a whole. Investors should consider their holdings in equity
mutual funds to be long-term investments.
In addition to market and fund risks, International Growth Fund is subject to foreign market and
currency risk. Investments in foreign stock markets can be as volatile, if not more volatile, than
investments in U.S. markets. Currency risk is the risk that changes in foreign exchange rates will
affect, favorably or unfavorably, the value of foreign securities held by the Fund.
FIXED INCOME FUNDS
Securities held by the Fixed Income Funds may be subject to several types of investment risk,
including market risk, credit risk, and call risk. With respect to these Funds, market risk (or
interest rate risk) is the potential for a decline in the price of fixed-income securities due to
rising interest rates. Credit risk is the possibility that a bond issuer will be unable to make
timely payments of either principal or interest. Call risk (or income risk) relates to corporate and
municipal bonds during periods of falling interest rates, and involves the possibility that
securities with high interest rates will be prepaid (or 'called') by the issuer prior to maturity.
Such an event would require a Fund to invest the resulting proceeds elsewhere, at generally lower
interest rates, which would cause fluctuations in the Fund's net income.
Short-Intermediate Bond Fund, Bond Fund and Short Term Income Fund may also be exposed to event risk,
the possibility that corporate fixed income securities held by these Funds may suffer a substantial
decline in credit quality and market value due to a corporate restructuring, such as an acquisition.
While event risk may be high for certain corporate securities held by these Funds, event risk in the
aggregate should be low because of the Funds' diversified holdings.
An investment in either the Pennsylvania Municipal Bond Fund or the New Jersey Municipal Bond Fund
involves special risk considerations. The concentration of investments in Pennsylvania municipal
securities by the Pennsylvania Municipal Bond Fund and the concentration of investments in
</TABLE>
----
Highlights 13
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS (CONTINUED)
<TABLE>
<S> <C>
New Jersey municipal securities by the New Jersey Municipal Bond Fund
raises certain investment considerations, including the possibility that changes
in the economic condition and governmental policies of either state or its
municipalities could adversely affect the value of the corresponding Fund and
the portfolio securities held by it.
Global Bond Fund is also subject to foreign market and currency risks, as described above.
MONEY MARKET FUNDS
Securities held by Cash Reserve and Treasury Reserve may be subject, on a limited basis, to credit
risk. The credit risk of a money market investment portfolio is similar to that of a fixed income
portfolio.
Securities held by Tax-Free Reserve may be subject, on a limited basis, to several types of
investment risk, including market risk (or interest rate risk), credit risk and call risk (or income
risk).
PAGE 50
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CoreStates Investment Advisers, Inc. ('CoreStates Advisers') serves as the investment adviser for
ADVISER each Fund. The International Growth Fund and Global Bond Fund also retain investment sub-advisers.
CoreStates Advisers has extensive experience in the management of money market, tax-free, fixed
income, equity, and international investments. It currently manages discretionary and
non-discretionary client security portfolios with a total aggregate market value exceeding $16
billion, for individuals, corporations, institutions and municipalities.
PAGE 59
- ------------------------------------------------------------------------------------------------------------------------------
DIVIDEND Shareholders of a Fund are entitled to dividends and distributions arising from the net investment
POLICY income and capital gains, if any, earned on investments held by the Fund.
PAGE 53
- ------------------------------------------------------------------------------------------------------------------------------
TAXES The sale or redemption of shares of a mutual fund is a taxable event to the selling or redeeming
shareholder. In addition, any receipt of dividends which represent capital gain distributions will
be subject to federal and state income taxes. However, receipt of other dividends will generally not
be subject to federal income taxes. Ordinary dividends also will be subject to state income taxes,
except as to Pennsylvania residents for the Pennsylvania Municipal Bond Fund and New Jersey
residents for the New Jersey Municipal Bond Fund.
There will be no federal income tax consequences to shareholders as a result of the Merger of the
Conestoga Funds into the CoreFund family of mutual funds. Shareholders of the Conestoga portfolios
will recognize no gain or loss on receipt of shares of the CoreFunds portfolio and shareholders of
the CoreFunds portfolio will have no tax consequences as a result of the Merger.
PAGE 54
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
14 Highlights
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
/X/ COREFUND
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
PURCHASING You may purchase shares by mail, wire or exchange from another account or Fund. The minimum initial
SHARES investment is $500 for each Fund. There is no minimum for subsequent investments. There is also no
minimum initial investment for automatic investment plans.
PAGE 71
- ------------------------------------------------------------------------------------------------------------------------------
SELLING You may redeem or sell shares of each Fund by mail or telephone. You may also redeem shares of the
SHARES Money Market Funds by check. There is no charge for redemptions, except for wire withdrawals which
are subject to the transfer agent's then-current wire fee. Your bank may also impose a fee upon
receipt of a wire. The share price of each Fund except for the Money Market Funds is expected to
fluctuate, and may at redemption be more or less than at the time of initial purchase, resulting in
a gain or loss.
PAGE 73
- ------------------------------------------------------------------------------------------------------------------------------
SERVICES FOR CoreFunds offers checkwriting services (minimum $250) on the Money Market Funds for easy access to
SHAREHOLDERS your account balances.
CoreFunds also offers additional services including automatic investment and systematic withdrawal
plans.
PAGE 71
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-----
Highlights 15
<PAGE>
FUNDAMENTALS OF MUTUAL FUND INVESTING
AN INTRODUCTORY
GUIDE FOR INVESTORS
This section is devoted to those who are unfamiliar or uncomfortable with the
concepts of mutual fund investing, as well as those who are interested in
developing a coordinated strategy which can help them reach their financial
goals.
It describes the three basic types of investment vehicles stocks,
bonds, and money market instruments as well as mutual funds which employ one
or more of these investments.
Of course, no guide alone can help you determine how or when to
invest. That's why we recommend that you work closely with an investment
representative to develop a solid program which is designed specifically
for your goals and risk tolerance.
PART I:
TYPES OF INVESTMENT VEHICLES
For details on how each of these instruments is used in mutual funds, please
see the section entitled, "What types of mutual funds are available?"
The three most popular types of investments are stocks, bonds, and money
market instruments. The following is an introduction to what they are and how
they work.
WHAT IS A STOCK?
Also known as equities, stocks represent an ownership position in a business
entity, such as a company or corporation. Each share of stock represents a
proportionate "share" of ownership in the business entity. As a result,
stocks offer individual investors the opportunity to take part in the
economic future of business.
Stocks are bought and sold on the open market, through a variety of
stock exchanges in the U.S. and around the world.
This system allows any individual to purchase and sell shares through stock
brokers, who are licensed to participate in the exchange.
The price for a share of stock is established by an "auction" system,
in which the broker for the buyer negotiates with the broker for the seller.
When the demand for a stock is low, its price will most likely fall; when
demand is high, the stock's price will most likely rise.
Because each share of stock represents a share in the company's
earnings, one of the most common factors affecting the price of the stock is
the direction of the company's earnings. In theory, the more a company earns,
or is expected to earn, the higher the price of its shares.
ALSO SEE: "Equity Mutual Funds" and "What are balanced funds?"
However, a number of other factors can cause a stock's price to go
up or down, including events which will positively or negatively affect the
company's future, changes in the overall economy, changes in the mood of the
market, and the market's perceptions of the company or its stock.
16 Fundamentals
<PAGE>
For definitions of investment terms,
please see the glossary following
this section.
WHAT IS A BOND?
When a corporation, government or government agency needs money for a
certain project, it often borrows money by issuing bonds to investors. So, in
the simplest terms, a bond is an IOU. The investor who purchases a bond is
acting as the lender.
Rather than offering an ownership share in business, as stocks do,
bonds are simply an agreement to repay the investor the amount loaned, also
known as principal, on a certain date. In addition, the issuer commits to
making periodic fixed interest payments to the lender until the loan is repaid.
When the bond is issued by a state or municipality, the interest paid
to investors is generally free of federal income taxes.
Like stocks, bonds are also traded in the open market. The value of a
bond can fluctuate due to changing market conditions. For example, when
interest rates in the market fall, the prices of bonds tend to rise. On the
other hand, when interest rates rise, the value of bonds falls.
ALSO SEE: "Fixed Income Mutual Funds"
Generally, the longer the maturity of a bond, the higher its yield
and the greater its price volatility. The shorter the maturity, the lower
the yield and the greater its price stability.
Price of the
same bond if
Price of a 7% the yield
coupon bond increases to 8%
Years to now trading to to keep pace with Percent change
maturity yield 7% rising interest rates in price
1 year $100.00 $99.06 - 0.94%
3 years 100.00 97.38 - 2.62%
10 years 100.00 93.20 - 6.80%
30 years 100.00 88.69 - 11.31%
During times when overall interest rates are falling, fixed-income investors
generally enjoy higher prices for their bonds. Conversely, rising interest
rates tend to reduce the value of bonds. Longer maturity bonds experience a
greater change in price, as shown above.
WHAT IS A MONEY MARKET INSTRUMENT
Simply put, money market instruments are short-term bonds, with maturities
typically ranging from overnight to 13 months. They pay investors a rate of
interest which is generally lower than that of longer-term bonds.
Money market securities are issued by a number of sources, including
the U.S. Government, its agencies and large, reputable banks and corporations.
ALSO SEE: "Money Market Mutual Funds"
Money market instruments are generally quite stable, due to their
short maturities. Therefore, they are chosen by investors who wish to maintain
the safety of their investment.
Fundamentals 17
<PAGE>
PART II:
HOW TO INVEST IN STOCKS, BONDS, AND MONEY
MARKET INSTRUMENTS
Now that you've reviewed the basic types of investment vehicles
available, here's a discussion of how mutual funds can help you invest in
stocks, bonds, and money market securities.
WHAT IS A MUTUAL FUND?
Simply defined, a mutual fund pools the money of many investors and invests
it toward a specific goal, such as stability of principal, regular income, or
long-term growth. The fund's professional managers choose investments that,
in their judgment, will help the fund achieve its goal. As an investor, you
share in the fund's gains, losses, income, and expenses on a proportional
basis.
An equity fund pools its money to purchase stocks, a fixed-income
fund purchases bonds, and a money market fund purchases short-term debt
instruments.
ADVANTAGES OF MUTUAL FUND INVESTING.
While many investors enjoy excellent results by purchasing individual stocks
or bonds, most investors find that mutual funds offer a more viable
alternative, for the following reasons:
PROFESSIONAL MANAGEMENT: With individual securities, you or your
broker must do the extensive research necessary to choose from among the
thousands of securities available. With mutual funds, you enjoy having a
professional money manager uncover opportunities and research them to make
sure the investment is appropriate for the needs of the fund.
LOW COSTS: With mutual funds, trading costs are modest because they
are shared by all investors in the fund.
DIVERSIFICATION: When investing, it's important to not put all your
eggs in one basket, so that you will be protected against an excessive loss in
any one investment. But only the wealthiest investors can afford to purchase
the wide range of individual securities to achieve true diversification. With
mutual funds, however, you can enjoy immediate diversification with even a very
limited amount of money, because investment risk is spread over many different
securities for greater stability and safety of your investment.
LIQUIDITY: With individual securities, it can sometimes be difficult
to redeem your investment due to market conditions and other factors. Mutual
fund shares, however, are easily redeemed at their current market value.
WHAT TYPES OF MUTUAL FUNDS ARE AVAILABLE?
The three basic categories of mutual funds are as follows:
EQUITY (STOCK) MUTUAL FUNDS A stock fund consists of selected
securities traded on the stock market. The fund changes in value as the prices
of the stocks in the fund change. Although these funds tend to rise or fall in
price more than other types of mutual funds, they have traditionally rewarded
investors with higher returns over the long run.
18 Fundamentals
<PAGE>
FIXED INCOME (BOND) MUTUAL FUNDS A fixed income fund is a mutual
fund which invests in a pool of bonds. Bonds generally pay a fixed rate of
interest. While fixed income mutual funds buy bonds, it's important to note
that the income paid by a bond fund will fluctuate as individual securities
are added to or subtracted from the pool.
In addition, fixed income funds are subject to changes in net
asset value due to changing market conditions. Like individual bonds,
fixed income funds will tend to increase in value during times of decreasing
interest rates, and will generally decrease in value when interest rates rise.
There are a wide range of fixed-income funds to choose from,
each with its own investment objectives. These objectives range from
stability of principal, to maximum yield, to tax-free income.
MONEY MARKET FUNDS Of the basic mutual fund categories, money
market funds are managed to maintain the greatest stability of principal.
They are managed to maintain a value of $1 per share.
Money market funds invest in short-term money market securities,
such as U.S. Treasury Bills, certificates of deposit from large banks,
and commercial paper. Because the interest rates paid on these securities
fluctuate with market conditions, the yield for money market
funds will also change.
WHAT ARE TAX-FREE FUNDS?
Tax-free funds, which include both fixed income (bond) and money market
funds, invest in securities which are issued by state, county, and local
governments and their agencies. The proceeds from these securities are used
to finance a variety of public-works projects, such as the building of
roads, schools, and sewers.
Under current tax laws, the interest paid to investors in these
securities is generally exempt from Federal income taxes. Therefore,
they are frequently purchased by investors who wish to shelter their
investment income from taxes. However, Congress from time to time reviews
this aspect of the tax code and may at any time repeal the exemption on
any or all of these securities. If this were to occur, it would have a
negative impact on any affected securities, as well as the mutual funds
in which they were held.
It's Easy to Compare Tax-Free and Taxable Yields:
Tax-Free Yield
-------------- = Taxable Yield
1 - Tax Rate
Fundamentals 19
<PAGE>
WHAT ARE BALANCED FUNDS?
In addition to the types of mutual funds already described, there are also
funds which blend investments in stock, bond, and money market securities.
These are commonly known as balanced funds.
The returns for balanced funds are typically greater than those
of bond and money market funds, but lower than those of pure stock funds.
Investing in all three types of securities means the value of your
principal should fluctuate less than it would in a stock or bond fund
alone.
Typically, the fund's professional manager has the flexibility
to change the investment mix based on current economic conditions.
COMPARING THE PERFORMANCE OF STOCK, BOND, AND MONEY MARKET INVESTMENTS
In order to balance risks and rewards, it's helpful to see how stocks,
bonds, and money market investments have performed over time.
Mutual fund performance is stated in terms of total return.
The total return of a mutual fund or any other investment consists of
the combination of capital appreciation (or loss) and investment income.
Capital appreciation (or loss) is a change in the market
value. Income is made up of dividends earned on stocks, and
interest paid on bonds or money market investments. In general, stocks
have the highest total return, because over long periods
of time they have achieved the greatest capital appreciation.
Bonds have provided the greatest income or interest, but
because their prices are more stable they have less potential
than stocks for capital appreciation. Therefore, they have a lower
total return potential over time than stocks.
Of course, past returns are no guarantee of future results.
But historical data tells a story which surprises many investors.
As the chart on the right shows, for the forty-year period
between January 1956 and December 1995, stocks have averaged
annual returns of 10.8%, while long-term bonds have averaged 6.4%,
intermediate-term bonds have averaged 7.0%, and money market instruments
have averaged 5.7%. During this same period, inflation
averaged 4.5%. Therefore, bonds and money market investments actually
delivered very little growth in excess of inflation.
Stocks, on the other hand, averaged more than double the rate
of inflation. What about the price fluctuations? Well, it's true that
stocks do fluctuate and probably always will. But as the accompanying
chart shows, stocks have consistently rewarded long-term
investors.
Since money market funds are managed to have a constant
$1 share price, their total return consists only of the interest
earned on their investments.
20 Fundamentals
<PAGE>
Growth of $1,000
A line graph depicting the historical performance of stocks, bonds and cash
based on total dollars in thousands related to year ends ranging from 1956 to
1991 broken into the following categories; large stocks, long-term Govt
bonds intermediate-term Govt bonds, T-Bills and inflation.
Range of Stock Rates of Return for One and Five Year Rolling Periods (1956-
1995)
A bar graph depicting annual (one year) returns and rolling five-year periods
rates of return for stock rates
GROWTH
OF $1,000
(Historical Performance
of Stocks,
Bonds and
Cash)
Dollars in Thousands
1965 3.77 1.34 1.19 1.19 1.35
1967 3.39 1.4 1.23 1.23 1.41
1968 4.2 1.46 1.27 1.12 1.42
1969 4.66 1.54 1.33 1.12 1.49
1970 4.27 1.64 1.41 1.06 1.48
1971 4.44 1.75 1.49 1.19 1.73
1972 5.07 1.82 1.54 1.35 1.88
1973 6.04 1.89 1.59 1.42 1.97
1974 5.15 2.02 1.73 1.41 2.07
1975 3.79 2.19 1.94 1.47 2.18
1976 5.19 2.31 2.08 1.6 2.35
1977 6.43 2.43 2.18 1.87 2.66
1978 5.97 2.56 2.32 1.86 2.69
1979 6.36 2.74 2.53 1.84 2.79
1980 7.53 3.02 2.87 1.82 2.9
1981 9.97 3.36 3.23 1.74 3.02
1982 9.48 3.86 3.51 1.78 3.3
1983 11.51 4.26 3.65 2.49 4.26
1984 14.1 4.64 3.79 2.51 4.58
1985 14.99 5.09 3.94 2.9 5.22
1986 19.82 5.48 4.09 3.8 6.28
1987 23.48 5.82 4.14 4.73 7.23
1988 24.7 6.14 4.32 4.6 7.44
1989 28.85 6.53 4.51 5.04 7.89
1990 37.94 7.08 4.72 5.96 8.94
1991 36.73 7.63 5 6.33 9.81
1992 47.93 8.06 5.16 7.55 11.33
1993 51.62 8.34 5.31 8.15 12.14
1994 56.78 8.58 5.45 9.64 13.51
1995 57.52 8.92 5.6 8.89 12.81
1996 60.013 11.862 5.719 9.289 15.062
This chart shows how the major types of investments have performed over the
past 40 years. More stable money market investments have produced the lowest
annual returns, while stocks have produced the greatest growth even though
their value fluctuates more.
HISTORICAL ANNUALIZED RETURN
(January 1956 -December 1995)
Stocks 10.8%
Long-Term Government Bonds 6.4
Intermediate-Term Government Bonds 7.0
Cash 5.7
Inflation 4.5
Assumptions for the table and charts shown on this page: Returns based on
historical performance, which is no guarantee of future results. Stock
returns represent total return of the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500 Index"). Fixed income, or bonds, is composed of
intermediate- and long-term Government Bonds. Cash represents 30-day Treasury
Bills. Source: SEI Financial Services Company.
RANGE
OF STOCK
RATES OF RETURN
FOR ONE-
AND
FIVE-YEAR
ROLLING PERIODS
(1956-1995)
Percent
Annual Returns Rolling Five-Year Periods
37.2% 17.9%
-10.9% 1.4%
Many individuals are concerned about the risks associated with investing in
stocks. Many do not realize, however, that despite the fluctuation of annual
returns, investors who held stocks for a full five years historically earned
a positive return in more than ninety five percent of the cases. Best and worst
case scenarios presented in this illustration represent the fifth and
ninety-fifth percentile of the historical return distribution. Source: SEI
Financial Services Company.
Fundamentals 21
<PAGE>
WHAT ARE INTERNATIONAL FUNDS?
International funds invest primarily in stock, bond and money market
securities issued by corporations, governments and banks worldwide.
International equity funds invest in the equity (stock) securities
of companies based outside the United States. Today, international markets
account for over 62% of the world's equity capitalization, as measured by the
Morgan Stanley World Index in February, 1996. This indicates that many
investment opportunities now exist globally. Likewise, international bond
funds may invest in government and corporate debt obligations from around the
world with the aim of providing income and the potential for capital
appreciation. Investing in international equity (stock) and fixed income
(bond) funds provides investors with a way to participate in a diversified
portfolio of many international securities of many countries.
GROWTH OF $1,000
A line graph depicting the performance of international and domestic stocks
based on total dollars in thousands related to year ends ranging from 1976 to
1994 broken into the following categories; S&P 500 and MSCI EAFE (the Morgan
Stanley Capital International Europe, Australia and Far East Index) indexes.
A Comparison of Foreign Govt Bond Return Performance 1995
A bar graph comparing the total return in U.S. dollars for foreign government
bonds broken into the following categories; Japan, United Kingdom, Australia,
France, Canada, United states and Germany.
GROWTH
OF $1,000
(Performance
of International and
Domestic
Stocks)
Dollars in Thousands
1976 1.4223 1.6985
1977 1.6986 1.5762
1978 2.2812 1.6803
1979 2.4222 1.9894
1980 3.014 2.634
1981 2.9829 2.505
1982 2.9573 3.041
1983 3.6851 3.7252
1984 3.9749 3.9599
1985 6.2296 5.235
1986 10.586 6.2035
1987 13.226 6.5291
1988 17.007 7.6225
1989 18.843 10.024
1990 14.473 9.7028
1991 16.281 12.662
1992 14.352 13.637
1993 19.08 15.001
1994 20.618 15.196
1995 16.775 15.229
Growth of $1,000 in international and domestic stocks. MSCI EAFE (the Morgan
Stanley Capital International Europe Australia and Far East Index) represents
the growth of an investment in international stocks, and the S&P 500 Index
represents an investment in domestic stocks.
A
COMPARISON OF FOREIGN
GOV'T
BOND
RETURN
PERFORMANCE
1995
Total Return in U.S. Dollars
Japan 9.57%
U.K. 15.62%
Australia 14.94%
France 27.69%
Canada 23.45%
U.S. 18.30%
Germany 25.91%
Source: SEI Financial Services Company
Although investing internationally can reward investors (see graphs
above), there is an added dimension to the risks involved in investing in
domestic securities. Currency fluctuations in the countries in which
international stock and bond securities are issued can negatively impact the
value of these securities, as well as the mutual funds in which they are
held.
22 Fundamentals
<PAGE>
PART III:
DEVELOPING YOUR
INVESTMENT STRATEGY
Now that you have a basic understanding of the investments available to you,
let's look at how these investments can be used to help you achieve your
goals.
Everyone, whatever their income level, has financial goals.
Perhaps yours include a comfortable retirement, education for your
children or grandchildren, a new home, or simply the accumulation
of wealth.
Whatever your personal goals, the best way to achieve them is to
take control of your financial future. And one of the best ways to do that
is through a coordinated program of saving and investing.
Saving money provides the foundation for reaching your goals,
while investing builds on that foundation by using the money you save
to make even more money.
Mutual funds provide one of the most convenient and rewarding
means of saving and investing.
Mutual funds are particularly well-suited to long-term goals such
as education and retirement, because they offer a convenient way to invest
regularly in a diversified portfolio of securities.
Once you've decided to use mutual funds to help reach your
goals, here are some very simple steps to follow:
STEP 1:
SET WELL-DEFINED GOALS.
Whether you're investing for retirement, education, wealth accumulation, or
regular income, start by determining how much you will need to satisfy your
goals. When making this assessment, you may want to seek the guidance of an
investment professional. Also take into account the effects of inflation,
which historically has reduced purchasing power by an average of 4.5% per year.
Short-term goals will require a greater initial investment and
a more conservative investment approach. Longer-term goals will require
a smaller initial investment and a more aggressive approach, including
investments in stock and bond funds which are expected to yield higher
returns over the long run.
Once you determine your primary and secondary goals, you'll
then need to calculate how soon you will need your money.
STEP 2:
ESTABLISH YOUR TIME HORIZON.
For each of your goals, determine how soon you will need the money you're
investing. If it's a shorter-term goal, such as a new home in a few
years, you'll want investments that offer fairly predictable
results in a short time. If it is a longer-term goal, such as education for
young children, you can plan for longer-term results. Accordingly, the type
of investments you choose for retirement will depend on whether your
retirement is a few years away, or a few decades.
Fundamentals 23
<PAGE>
STEP 3:
UNDERSTAND THE REAL RISKS.
Most people think of an investment as "risky" or "safe" based only on how
much the value of their principal can fluctuate. But in the long run, there
is more to risk than whether your principal goes up or down. It's just as
important to consider the following risks:
THE RISK OF INFLATION. To achieve any real increase in your
wealth, your investment return must outstrip inflation, or
you may end up actually losing purchasing power in the long run. To beat
inflation, consider investing some of your money where values and return are
not fixed, but grow with the economy. Experience shows that stock-based
investments such as equity mutual funds offer this type
of performance potential.
THE RISK OF NOT REACHING YOUR GOAL. Another potential risk
that many investors tend to overlook is the risk that an investment
strategy will not enable them to reach their goal. To properly
assess this risk, you first need to define your goals, and then strike a
balance between the risk of principal volatility and the risk of failing
to reach your goals.
For example, statistics show that at age 70 you can expect to
live another 20 years. To achieve the many years of comfortable retirement
you want, you must have the discipline to set aside enough money during
your working years and invest it wisely.
STEP 4:
DECIDE ON AN INVESTMENT MIX.
When you are selecting specific investments, choose those which offer the
greatest potential for reaching your short-term and long-term goals, and
which are within your risk tolerance.
Many investors find that they are most comfortable with a mix of
investments, including stocks, bonds, and money market funds. This approach
offers the advantage of not putting all your eggs in
one basket, and also allows you to enjoy the distinct advantages of each
type of investment.
If you use this approach, known as "asset allocation", the key
is deciding how much to allocate to each type of investment. To make this
decision easier, you can select a balanced fund, which combines stock,
bond, and money market investments under the guidance
of professional investment managers.
As this chart below suggests, bonds and money markets fluctuate
less in the short term, and there is less chance of experiencing a loss.
History has shown, however, that the longer you stay invested, the more
stocks have provided a higher return, with a decreasing potential for loss.
24 Fundamentals
<PAGE>
REDUCTION OF
RISK OVER TIME
A bar graph depicting the average annual return of stocks, long-term bonds,
intermediate-term bonds, cash and inflation for one year, five year, ten year
and twenty year periods.
1 Year
Stocks 43.36 -26.5
LT 40.36 -9.18
Int 29.1 -5.14
Cash 14.71 1.5
Inflation 13.31 0.4
5 Years
Stocks 20.4 -2.36
LT 21.62 -2.14
Int 16.98 0.96
Cash 11.12 2.33
Inflation 10.06 1.24
10 Years
Stocks 17.59 1.24
LT 15.56 1.13
Int 13.13 2.92
Cash 9.17 2.58
Inflation 7.67 1.57
20 Years
Stocks 14.59 6.53
LT 10.45 1.94
Int 9.85 3.98
Cash 7.72 4
Inflation 6.36 3.37
The longer you hold any particular asset class (stocks, bonds, money market
instruments), the less the variation in return. While stocks have fluctuated
in value much more than other investments, they have also delivered higher
returns over the long run. In addition, the longer an investor remains
invested in stocks, the less the chance there is for a capital loss. The
best- and worst-case scenarios presented in this illustration represent the
absolute highest and lowest returns from January 1956 to 1995. Source: Based
on historical data on the S&P 500 Index, intermediate- and long-term
Government bonds, and 30-Day Treasury Bills for rolling one-, five-, 10-, and
20-year periods between 1956 and 1995. Past results do not guarantee future
performance.
STEP 5:
GET STARTED.
Don't make the mistake of waiting until tomorrow. With mutual funds, you
don't need a large investment to start your program. All it takes is a small
amount of money, and a strong desire to reach your goals.
For full details on how the principles of mutual fund investing can
work for you, please contact your investment representative.
STEP 6:
BE DISCIPLINED.
Once you have a good strategy, stay with it. Avoid sudden changes in reaction
to temporary market trends. Remember, you're interested in long-term
performance.
In mutual fund investing, particularly with equity funds, one of
the surest ways to maximize the value of your investment is through a regular
program of monthly contributions. By adding to your account each month,
you'll be purchasing shares during both "up" markets and "down" markets. This
technique, known as dollar cost averaging", has been shown to yield optimum
results over the long run.
Fundamentals 25
<PAGE>
GLOSSARY
OF KEY INVESTMENT TERMS
CAPITAL GAIN: The profit made from the sale of securities due to an increase
in share value.
CURRENT YIELD: The income paid annually on mutual fund shares, expressed
as a percentage of the current price per share.
DISTRIBUTION: Payment of capital gains to shareholders of a mutual fund.
For tax purposes, distributions are separate from interest income or dividends.
DOLLAR COST AVERAGING: Investing a fixed dollar amount at regular intervals
over a long period of time to reduce the average cost per share of a mutual
fund.
INCOME DIVIDENDS: Regular payments from mutual funds to their shareholders,
made up of dividends, interest, and short-term capital gains earned from the
fund's portfolio of securities. May be distributed annually, bi-annually,
quarterly, or monthly, with operating expenses deducted.
MATURITY: The date on which the issuer is scheduled to return the amount
borrowed to the lender, or investor.
MUNICIPAL BOND: A debt obligation issued by a city, state, or municipality.
Interest from these bonds is generally exempt from federal income tax.
NET ASSET VALUE: The dollar value of one share of a mutual fund. This value
is generally calculated at least once each day, and is the price at which the
fund will redeem its shares from investors.
PRINCIPAL, OR PAR VALUE: Also known as face value, this is the amount loaned
to the issuer of a bond.
PROSPECTUS: A booklet distributed by the issuer of a security or mutual fund,
in compliance with SEC regulations. A mutual fund prospectus must include the
fund's investment objectives, all expenses and fees including management and
sales fees, a description of shareholder services offered, and information on
how to buy shares.
REDEMPTION PRICE: Also known as "bid price", this is the price at which
mutual funds buy back their shares. It is usually the net asset price of the
fund.
TOTAL RETURN: The combined return of capital appreciation and income
(interest and dividends) that an investment earns. (See page 66).
26 Fundamentals
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INFORMATION ON THE FUNDS /X/ COREFUND
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/X/
INVESTMENT
OBJECTIVES
OF THE FUNDS
The descriptions that follow are designed to help you choose the Fund that best
fits your investment objectives. The objectives of each Fund are fundamental and
may only be changed by the affirmative vote of a majority of the outstanding
shares of such Fund. You may want to pursue more than one objective by investing
in more than one of these Funds.
As investment adviser of each Fund, CoreStates Advisers manages each
Fund's portfolio of investments in a manner which it believes will best
accomplish the Fund's stated objective. However, there can be no assurance that
a Fund will meet its objective.
EQUITY FUNDS___________________________________________________________________
GROWTH EQUITY FUND Growth Equity Fund's investment objective is to provide
growth of capital and an increasing flow of dividends from the diversified
portfolio of common stocks comprising the Fund.
EQUITY FUND Equity Fund's investment objective is to provide maximum total
return, including capital appreciation and investment income, in excess of stock
market indices such as the S&P 500 Index, as measured over a period of time.
SPECIAL EQUITY FUND Special Equity Fund's investment objective is to seek
capital growth by investing principally in a diversified portfolio of common
stocks.
INTERNATIONAL GROWTH FUND International Growth Fund's investment objective is to
provide its shareholders with long-term capital appreciation, consistent with
reasonable risk, by investing primarily in a diversified portfolio of
appreciation-oriented equity securities of companies located outside the United
States.
BALANCED FUND Balanced Fund's investment objective is to provide total return
while preserving capital. This Fund pursues its objective by investing in a
combination of common stocks and fixed income securities. Under normal
conditions, Balanced Fund will invest a minimum of 25% of its assets in senior
fixed income securities and between 30% and 70% of its assets in common stocks.
FIXED INCOME FUNDS _____________________________________________________________
SHORT-INTERMEDIATE BOND FUND Short-Intermediate Bond Fund's investment objective
is to provide a moderate level of current income consistent with conservation of
capital, by investing substantially all of its assets in a diversified portfolio
of intermediate-term, fixed income obligations which will have an expected
average weighted maturity of two to five years.
BOND FUND Bond Fund's investment objective is to seek to maximize long-term
total return by investing principally in a diversified portfolio of debt
securities.
SHORT TERM INCOME FUND Short Term Income Fund's investment objective is to seek
consistent current income with relative stability of principal by investing
principally in a diversified portfolio of investment grade debt securities.
GOVERNMENT INCOME FUND Government Income Fund's investment objective is to
provide current income while preserving principal value and maintaining
liquidity.
INTERMEDIATE MUNICIPAL BOND FUND Intermediate Municipal Bond Fund's investment
objective is to seek the highest level of income exempt from federal income
taxes that can be obtained, consistent with the preservation of capital, from a
diversified portfolio of high quality, intermediate-term municipal securities.
This Fund has a
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Investment Objectives 27
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INFORMATION ON THE FUNDS (CONTINUED)
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fundamental policy to invest, under normal circumstances, at least 80% of its
assets in municipal securities the interest of which is exempt from federal
income taxes, based on opinions from bond counsel for the issuers.
PENNSYLVANIA MUNICIPAL BOND FUND Pennsylvania Municipal Bond Fund seeks current
income exempt from federal and Pennsylvania income taxation with preservation of
capital by investing primarily in a non-diversified portfolio of municipal
securities.
NEW JERSEY MUNICIPAL BOND FUND New Jersey Municipal Bond Fund seeks current
income exempt from federal and New Jersey income taxation with preservation of
capital by investing primarily in a non-diversified portfolio of municipal
securities.
GLOBAL BOND FUND Global Bond Fund's investment objective is to provide capital
appreciation and current income through investment primarily in fixed income
securities of United States and foreign issuers denominated in United States
dollars and in other currencies.
MONEY MARKET FUNDS _____________________________________________________________
CASH RESERVE Cash Reserve's investment objective is to provide as high a level
of current income as is consistent with liquidity and relative stability of
principal.
TREASURY RESERVE Treasury Reserve's investment objective is to provide current
interest income, liquidity and safety of principal.
TAX-FREE RESERVE Tax-Free Reserve's investment objective is to provide as high a
level of current interest income that is exempt from federal income taxes as is
consistent with liquidity and relative stability of principal. This Fund
intends, under normal market conditions, to invest at least 80% of its assets in
tax-free securities.
/X/
INVESTMENT
POLICIES
The policies which the Funds follow to achieve their investment objectives are
described below. These are non-fundamental policies which may be changed without
a shareholder vote.
Descriptions of the securities in which the Funds invest are contained
below in 'Types of Securities in Which the Funds Invest.'
EQUITY FUNDS ___________________________________________________________________
The CoreFund Equity Funds cover a range of investment styles. CoreStates
Advisers, specialists in the management of growth portfolios, manages the Growth
Equity, Equity, Special Equity and Balanced Funds. CoreStates Advisers has
selected Martin Currie, Inc., ('Martin Currie') and Aberdeen Fund Managers, Inc.
('Aberdeeen Managers') to manage the International Growth Fund. These firms are
specialists in their investment styles.
GROWTH EQUITY FUND Growth Equity Fund strives to provide a return in excess
of stock market indices such as the Russell 1000 Index and the S&P 500 Index.
Growth Equity Fund pursues its investment objective by investing primarily in
common stocks, preferred stocks, convertible securities, and other equity
securities of companies which CoreStates Advisers believes show the potential
for growth of earnings over time. Stock selection is guided by a top-down
approach that places heavy emphasis on fundamental research to uncover companies
with proven earnings growth records, high reinvestment rates,
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28 Investment Policies
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/X/ COREFUND
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high returns on equity, and strong balance sheets showing low debt to total
capital. The adviser makes qualitative judgments on such elements as the
company's competitive position, the quality of its management and the potential
for future growth.
This Fund intends, under normal market conditions, to hold at least 75% of
its total assets in the equity securities described above. Over the long term,
continued earnings growth tends to lead to both higher dividends and capital
appreciation.
EQUITY FUND The Equity Fund pursues its investment objective by investing
principally in a diversified portfolio of common stocks of companies with large,
medium or small capitalizations. The Equity Fund will normally invest at least
80% of the value of its total assets in common stocks. The Fund may also invest
up to 20% of the value of its total assets in securities convertible into common
stocks, preferred stocks, corporate bonds, notes, warrants, and short-term
obligations (with maturities of 18 months or less) such as commercial paper
(including variable amount master demand notes), banker's acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. During
temporary defensive periods, the Fund has the ability to hold up to 100% of its
total assets in short-term obligations including domestic bank certificates of
deposit, banker's acceptances and repurchase agreements secured by U.S.
Government securities.
Stocks held by the Equity Fund may be listed on a national securities
exchange or may be unlisted securities with an established over-the-counter
market. CoreStates Advisers has developed a quantitative process which evaluates
stocks in a number of ways, including the ratios of market price to book value,
recent changes in market price, return on equity, price to earnings ratios,
dividend paying abilities, and liquidity. CoreStates Advisers believe that its
quantitative approach reduces subjectivity in the stock selection process.
Equity securities such as those in which the Equity Fund may invest are
more volatile and carry more risk than some other forms of investment. Depending
upon the performance of the Fund's investments, the net asset value per share of
the Fund may decrease instead of increase.
SPECIAL EQUITY FUND The investment objective of the Special Equity Fund is to
seek capital growth by investing principally in a diversified portfolio of
common stocks. The Special Equity Fund will normally invest in common stocks of
domestic companies that CoreStates Advisers expect will experience growth in
earnings and price. The Special Equity Fund will invest primarily in equity
securities, including common stocks, both debt securities and preferred stocks
convertible into common stocks and foreign securities (up to 35% of the Fund's
net assets). The Fund may also purchase securities convertible into common
stocks, preferred stocks, notes, warrants, and, for daily cash management
purposes, short-term obligations (with maturities of 18 months or less) such as
commercial paper (including variable amount master demand notes), banker's
acceptances, certificates of deposit, repurchase agreements, obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, and
demand and time deposits of domestic and foreign banks and
----
Investment Policies 29
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INFORMATION ON THE FUNDS (CONTINUED)
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savings and loan associations. During temporary defensive periods, the Fund has
the ability to hold up to 100% of its total assets in short-term obligations,
including domestic bank certificates of deposit, banker's acceptances and
repurchase agreements secured by U.S. Government securities. CoreStates
Advisers' quantitative process described above under 'The Equity Fund' will be
utilized for the Special Equity Fund.
Many of the companies in which the Special Equity Fund invests will be
small and medium capitalized companies. Small capitalized companies are those
organizations with 'stock market capitalizations' between $100 million and $1
billion and medium capitalized companies are those organizations with stock
market capitalizations between $1 billion and $5 billion. 'Stock market
capitalizations' means the total number of common shares outstanding multiplied
by the market price per share.
The Special Equity Fund will normally purchase the securities of small and
medium capitalized companies across a wide range of industry sectors. These
securities may be traded over-the-counter or listed on an exchange and may or
may not pay dividends. Small and medium capitalized companies may be more
vulnerable than larger, more established organizations to adverse business or
economic developments. In particular, small capitalized companies may have
limited product lines, markets and financial resources and may be dependent upon
a relatively small management group. Accordingly, equity securities such as
those in which the Fund may invest are more volatile and carry more risk than
some other forms of investment. Depending upon the performance of the Fund's
investments, the net asset value per share of the Fund may decrease instead of
increase.
INTERNATIONAL GROWTH FUND International Growth Fund pursues its investment
objective by investing in foreign equity securities which offer favorable
prospects for capital return. This Fund seeks to diversify its assets by
investing in appreciation-oriented equity securities of companies located
outside the United States, which may include, but not be limited to, Australia,
Canada, France, Hong Kong, Japan, Mexico, Singapore, Sweden, Switzerland,
Germany, the Netherlands, and the United Kingdom. In general,
'appreciation-oriented' securities are equity securities of companies that
CoreStates Advisers, as well as Martin Currie and Aberdeen Managers, the
sub-advisers, believe have the greatest potential for long-term growth, and
which exhibit operating characteristics that may enable such companies to
compete successfully in their marketplace.
International Growth Fund offers increased diversification through
investment in foreign markets. This Fund's advisers believe that both the
selection of individual securities and the allocation of International Growth
Fund's assets across foreign markets are important in managing an international
equity fund. Most foreign equity securities are purchased in over-the-counter
markets or on stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located. Under
normal market conditions, International Growth Fund will invest an aggregate of
at least 65% of its total assets in the equity securities of at least three
different countries.
In determining the distribution of International Growth Fund's investments
among various countries and geographic regions, the advisers consider many
factors,
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30 Investment Policies
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/X/ COREFUND
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such as: prospects for relative economic growth between countries; government
policies affecting business conditions; outlook for local currency; and the
range of available, attractive investment opportunities. For the selection of
securities, the advisers' criteria includes: earnings growth; return on capital;
quality of management; cash flow; and strength of balance sheet.
While foreign stocks are the primary securities utilized to achieve
International Growth Fund's objective, the advisers may also invest in other
types of foreign equity securities, consistent with the objective and policies
described herein.
The net asset value of this Fund will fluctuate, and investments are
expected to yield little, if any, current income.
BALANCED FUND In managing Balanced Fund, CoreStates Advisers uses a balanced
portfolio philosophy which combines separate equity, fixed income, and asset
allocation strategies. This produces a portfolio of stocks of companies
exhibiting growth in revenues and earnings and strong balance sheet
characteristics. All of the common stocks in which Balanced Fund invests are
traded on registered exchanges or in the 'over-the-counter' market.
The fixed income strategy values bonds using historical yield
differentials. U.S. Government securities and corporate bonds are used
exclusively to implement Balanced Fund's fixed income strategy. The asset
allocation strategy shifts the stock-fixed income-money market instrument mix
based on the investment adviser's judgment of the relative attractiveness of
these markets and securities given its view of economic conditions, the level of
interest rates, and the outlook for corporate profits. The strategy uses present
and historical economic and market data to reach these conclusions.
Balanced Fund seeks strong total return in all market conditions, with a
special emphasis on minimizing interim declines during falling equity markets.
Long-term growth is pursued through equity holdings, and current income through
fixed income securities and common stock dividends.
The strategy focuses on controlling downside risk, both through holdings
in relatively high-dividend-yielding stocks and convertible securities, and
through diversification between stocks and bonds.
To employ this strategy, the Fund's adviser uses present and historical
economic and market data.
This Fund will, under normal conditions, invest between 30% and 70% of
total assets in common stocks, depending on the investment adviser's assessment
of market conditions. When CoreStates Advisers believes that equity markets are
overvalued, the common stock exposure will be at the low end of this range.
CoreStates Advisers expects that equity exposure will average 60% over time.
Balanced Fund may also invest in U.S. dollar denominated securities of foreign
issuers (including American Depositary Receipts that are traded on registered
exchanges or listed on NASDAQ).
FIXED INCOME FUNDS _____________________________________________________________
CoreFund Fixed Income Funds employ an investment process that attempts to manage
large swings in interest rates within the maturity parameters of each Fund to
reduce an investor's risk of principal. Significant effort is put forth to
identify value along the yield curve, taking into account the
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Investment Policies 31
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INFORMATION ON THE FUNDS (CONTINUED)
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economic outlook, fiscal and monetary policies, and inflation trend.
Developments that can significantly impact the supply and demand of securities
within the various sectors of the bond market are also carefully considered. By
identifying these opportunities, and acting upon them in a timely manner, the
Funds' advisers seek to enhance overall value.
SHORT-INTERMEDIATE BOND FUND This Fund pursues its investment objective by
investing primarily in corporate debt securities such as bonds and commercial
paper, as well as securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Fund intends, under normal market conditions,
to invest at least 65% of its total assets in bonds and 35% or less in other
fixed income securities.
Short-Intermediate Bond Fund maintains a maximum average maturity of no
more than five years, pursuant to a fundamental investment policy of the Fund.
By maintaining an average maturity of not more than five years, CoreStates
Advisers expects the Fund's net asset value to be relatively stable while
providing higher income than money market funds.
Should a security held by this Fund be downgraded below the minimum
required ratings, CoreStates Advisers will reassess the creditworthiness of the
security and will consider such an event in determining whether the Fund should
continue to hold the security in question. Securities that are unrated at the
time of purchase may only be purchased by the Fund if they are determined by
CoreStates Advisers to be of comparable quality to securities rated BBB or
better (investment-grade securities) as set forth in 'Types of Securities in
Which the Funds Invest.' See 'Description of Ratings' in this Prospectus and the
'Appendix' to the Statement of Additional Information for a description of
applicable ratings.
BOND FUND The investment objective of the Bond Fund is to seek to maximize
long-term total return by investing principally in a diversified portfolio of
debt securities. The Bond Fund will normally invest at least 80% of the value of
its total assets in debt securities of all types. Debt securities include
domestic and foreign bonds, debentures, notes, equipment lease and trust
certificates, asset-backed and mortgage-backed securities, and obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
A portion of the Fund also may from time to time be invested in first
mortgage loans and participation certificates in pools of mortgages issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, preferred
stocks, convertible debt securities, common stock obtained upon the conversion
or exchange of such securities, and short-term money market instruments.
Securities in which the Fund invests may have warrants or options attached. The
Fund anticipates investing no more than 5% of its net assets in below Investment
Grade debt securities.
SHORT TERM INCOME FUND The investment objective of the Short Term Income Fund is
to seek consistent current income with relative stability of principal by
investing principally in a diversified portfolio of investment grade debt
securities. Under normal conditions, the Fund's portfolio securities will have
maximum expected or remaining maturities of three years or less. The Fund will
normally have an average dollar weighted Portfolio maturity of approximately one
year.
The Fund will invest principally in debt securities, including bonds,
debentures, notes, equipment lease and trust certificates, asset-backed and
mortgage-backed securities, and
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32 Investment Policies
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/X/ COREFUND
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obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The Fund may invest up to 35% of its total assets in U.S.
dollar denominated international debt securities for which the primary trading
market is in the United States ('Yankee Bonds').
GOVERNMENT INCOME FUND Government Income Fund invests exclusively in obligations
issued or guaranteed as to principal and interest by the agencies and
instrumentalities of the U.S. Government and repurchase agreements involving any
of such obligations. Although there are no restrictions on maturity, Government
Income Fund generally strives to maintain an average maturity of about seven
years. This Fund intends to invest at least 65% of its total assets in
instruments issued or guaranteed as to principal and interest by the agencies
and instrumentalities of the U.S. Government and mortgage-backed securities.
INTERMEDIATE MUNICIPAL BOND FUND Intermediate Municipal Bond Fund invests
substantially all of its assets in a diversified portfolio consisting of
short-term obligations issued by or on behalf of states, territories and
possessions of the United States, the District of Columbia and their political
subdivisions, agencies, instrumentalities and authorities, the interest on
which, in the opinion of counsel to the issuer, is exempt from federal income
tax. The municipal securities in which this Fund invests are described in 'Types
of Securities in Which the Funds Invest.'
Although CoreStates Advisers has no present intention of doing so, up to
20% of all assets in this Fund can be invested in taxable debt securities for
defensive purposes or when sufficient tax-exempt securities considered
appropriate by CoreStates Advisers are not available for purchase.
Intermediate Municipal Bond Fund will maintain an average weighted
maturity of three to ten years. However, when the investment adviser determines
that market conditions so warrant, the Fund can maintain an average weighted
maturity of less than three years. CoreStates Advisers may, at times, elect to
adjust the average maturity upwards, between seven and ten years, in order to
pick up incremental yield, while avoiding the risks associated with long-term
bonds.
PENNSYLVANIA MUNICIPAL BOND FUND At least 80% of this Fund's assets will be
invested in municipal securities, the interest on which is exempt from federal
income tax. Under normal circumstances, at least 65% of the Fund's assets will
be invested in municipal securities, the interest on which is exempt from
Pennsylvania personal income tax ('Pennsylvania Municipal Securities').
This Fund will primarily purchase (i) municipal bonds rated in one of the
three highest rating categories; (ii) municipal notes rated in one of the two
highest rating categories; (iii) commercial paper rated in one of the two
highest short-term categories; or (iv) any of the foregoing determined by
CoreStates Advisers to be of comparable quality at the time of investment.
However, CoreStates Advisers has discretion to invest up to 20% of the Fund's
assets in municipal bonds rated BBB by Standard & Poor's Corporation ('S&P') or
Baa by Moody's Investors Service, Inc. ('Moody's'). See 'Description of
Ratings.'
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Investment Policies 33
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INFORMATION ON THE FUNDS (CONTINUED)
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Pennsylvania Municipal Bond Fund will invest more than 25% of its net assets
in municipal securities whose issuers are located in Pennsylvania. This Fund may
also invest up to 20% of its assets in Taxable Obligations. Taxable Obligations
may include obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, certificates of deposit and demand and time
deposits of domestic banks and savings and loan associations, bankers'
acceptances issued by domestic banks, commercial paper issued by U.S.
corporations (including variable amount master demand notes) meeting the Fund's
quality standards, and securities subject to Federal Alternative Minimum Tax.
Pennsylvania Municipal Bond Fund may also hold a portion of its assets in
cash. To the extent that the Fund's assets are invested in cash, they will not
be invested so as to meet such Fund's investment objective. There are no
restrictions on the average maturity of Pennsylvania Municipal Bond Fund or the
maturity of a single instrument.
Pennsylvania Municipal Bond Fund is a non-diversified investment portfolio
which means that more than 5% of its assets may be invested in each of one or
more issuers. Since a relatively high percentage of assets of the Fund may be
invested in the obligations of a limited number of issuers, the value of the
shares of the Fund may be more susceptible to any single economic, political or
regulatory occurrence than the shares of a diversified investment portfolio
would be. The Fund intends to satisfy the diversification requirements necessary
to comply with Subchapter M of the Internal Revenue Code of 1986, as amended
(the 'Code'). In part, Subchapter M requires that, at the close of each quarter
of the taxable year, those issues which represent more than 5% of the Fund's
assets be limited in aggregate to 50% of the Fund and that no one issue exceed
25% of the Fund's total assets.
NEW JERSEY MUNICIPAL BOND FUND At least 80% of this Fund's assets will be
invested in municipal securities, the interest on which is exempt from federal
income tax. Under normal circumstances, at least 65% of the Fund's assets will
be invested in municipal securities, the interest on which is exempt from New
Jersey personal income tax ('New Jersey Municipal Securities').
This Fund will primarily purchase (i) municipal bonds rated in one of the
three highest rating categories; (ii) municipal notes rated in one of the two
highest rating categories; (iii) commercial paper rated in one of the two
highest short-term categories; or (iv) any of the foregoing determined by
CoreStates Advisers to be of comparable quality at the time of investment.
However, CoreStates Advisers has discretion to invest up to 20% of the Fund's
assets in municipal bonds rated BBB or better by S&P or Baa or better by
Moody's. See 'Description of Ratings.'
New Jersey Municipal Bond Fund will invest more than 25% of its net assets
in municipal securities whose issuers are located in New Jersey. This Fund may
also invest up to 20% of its assets in Taxable Obligations, as described above.
New Jersey Municipal Bond Fund may also hold a portion of its assets in
cash. To the extent that the Fund's assets are invested in cash, they will not
be invested so as to meet such Fund's investment objective. There are no
restrictions on the average maturity of New Jersey Municipal Bond Fund or the
maturity of a single instrument.
New Jersey Municipal Bond Fund is a non-diversified investment portfolio,
as
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34 Investment Policies
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/X/ COREFUND
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described above. The Fund intends to satisfy the diversification requirements
necessary to comply with Subchapter M of the Code.
GLOBAL BOND FUND Global Bond Fund will invest, under normal circumstances, at
least 65% of its total assets in high quality fixed income securities or debt
obligations of foreign or domestic government entities, corporations or
supranational agencies. The Fund will invest in at least three supranational
agencies or countries. Supranational agencies will include, but not be limited
to, the International Bank of Reconstruction and Development, the InterAmerican
Development Bank, and the Asian Development Bank. Countries will include, but
not be limited to, Austria, Australia, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, New
Zealand, Norway, Spain, Sweden, Switzerland, the United Kingdom and the United
States. Although this Fund will concentrate its investments in the developed
countries listed above, it may invest up to 5% of its assets in similar
securities or debt obligations that are denominated in the currencies of
developing countries and that are of comparable quality to such securities and
debt obligations at the time of purchase as determined by CoreStates Advisers
and the sub-adviser, Alpha Global Fixed Income Managers, Inc.
Global Bond Fund is a non-diversified investment portfolio, as described
above. The Fund intends to satisfy the diversification requirements necessary to
comply with Subchapter M of the Code.
This Fund will strive to take maximum advantage of financial and economic
developments and currency fluctuations. All of its investments will be in
quality securities denominated in various currencies, including the European
Currency Unit, and will be rated in one of the highest four rating categories by
a nationally recognized statistical rating agency or of comparable quality at
the time of purchase as determined by the advisers.
There are no restrictions on the average maturity of Global Bond Fund or
the maturity of any single instrument. Maturities may vary widely depending on
the advisers' assessment of interest rate trends and other economic and market
factors. In the event a security owned by Global Bond Fund is downgraded below
rating categories discussed above, the advisers will review the situation and
take appropriate action with regard to the security.
MONEY MARKET FUNDS _____________________________________________________________
Investments by money market funds such as Cash Reserve, Treasury Reserve and
Tax-Free Reserve are subject to limitations imposed under regulations adopted by
the Securities and Exchange Commission (the 'SEC'). These regulations generally
require money market funds to acquire only U.S. dollar denominated obligations
maturing in 397 days or less, although securities subject to repurchase
agreements, securities with optional and mandatory tender provisions, variable
rate demand obligations and certain other securities may bear longer maturities.
Money market funds also must maintain a dollar-weighted average portfolio
maturity of 90 days or less.
In addition, money market funds may acquire only obligations that
represent minimal credit risks and that are 'eligible securities' which means
they are (i) rated,
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Investment Policies 35
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INFORMATION ON THE FUNDS (CONTINUED)
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at the time of investment, by at least two nationally recognized statistical
rating organizations (one if it is the only organization rating such obligation)
in the highest short-term rating category or, if unrated, determined to be of
comparable quality (a 'first tier security'), or (ii) rated according to the
foregoing criteria in the second highest short-term rating category, or, if
unrated, determined to be of comparable quality (a 'second tier security'). A
security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term rating.
CoreStates Advisers will determine that an obligation presents minimal credit
risks or that unrated instruments are of comparable quality in accordance with
guidelines established by CoreFunds' Board of Directors. The Directors must also
approve or ratify the acquisition of unrated securities or securities rated by
only one rating organization. Investments in second tier securities are subject
to the further constraints that (i) no more than 5% of a Fund's assets may be
invested in such securities in the aggregate, and (ii) any investment in such
securities of one issuer is limited to the greater of 1% of the Fund's total
assets or $1 million. In addition, a Fund may only invest up to 25% of its total
assets in the first tier securities of a single issuer for three business days.
CASH RESERVE Cash Reserve intends to achieve its investment objective by
investing in a diversified portfolio of money market instruments of the highest
quality, including a broad range of U.S. dollar-denominated government, bank,
and commercial paper obligations. By investing only in high quality money market
instruments with remaining maturities of 13 months or less, Cash Reserve strives
to capture the highest yield possible within safety, compliance, and liquidity
parameters.
TREASURY RESERVE Treasury Reserve intends to achieve its investment objective by
investing in direct obligations of the U.S. Treasury, such as bills, bonds, and
notes and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system, known
as Separately Traded Registered Investment and Principal Securities ('STRIPS'),
and in repurchase agreements relating to direct U.S. Treasury obligations.
TAX-FREE RESERVE Tax-Free Reserve invests substantially all of its assets in a
diversified portfolio consisting of short-term obligations issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their political subdivisions, agencies, instrumentalities and
authorities, the interest on which, in the opinion of counsel to the issuer, is
exempt from federal income tax. The municipal securities in which this Fund
invests are described in 'Types of Securities in Which the Funds Invest.' In
managing Tax-Free Reserve, the investment adviser uses a strategy that aims to
take advantage of key seasonal supply and demand factors that govern short-term
rates.
Although CoreStates Advisers has no present intention of doing so, up to
20% of all assets in this Fund can be invested in taxable debt securities for
defensive purposes or when sufficient tax-exempt securities considered
appropriate by CoreStates Advisers are not available for purchase.
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36 Investment Policies
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/X/ COREFUND
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OTHER INVESTMENT PRACTICES OF THE FUNDS ________________________________________
In addition to the investments described above, the Funds may engage in a number
of additional investment practices, as discussed below:
REPURCHASE AGREEMENTS-- All Funds
Under certain circumstances, the 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 Fund's 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 the 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 CoreFunds' custodian in the Federal Reserve
book-entry system. Default by the seller could, however, expose a Fund to loss
in the event of adverse market action or delay in connection with the
disposition of the underlying securities. Repurchase agreements are considered
to be loans by a Fund under the Investment Company Act of 1940 (the 'Investment
Company Act').
REVERSE REPURCHASE AGREEMENTS--
All Funds
Each of the Funds may borrow funds 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
the Fund enters into a reverse repurchase agreement, it places in a segregated
custodial account liquid assets such as U.S. Government securities or other
liquid high-grade debt securities 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 a Fund under
the Investment Company Act.
OTHER INVESTMENT COMPANIES-- All Funds
The Funds may invest in the securities of other investment companies. Such
shares will be purchased by the Funds within the limits prescribed by the
Investment Company Act. Such investments will be limited to amounts not in
excess of 5% of a Fund's total assets at the time of purchase.
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Investment Policies 37
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INFORMATION ON THE FUNDS (CONTINUED)
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PUT TRANSACTIONS-- Intermediate Municipal Bond Fund, Short-Intermediate Bond
Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund, Global
Bond Fund, Tax-Free Reserve
These Funds may purchase securities subject to a put. A 'put' feature permits a
Fund to sell a security at a fixed price prior to maturity. The underlying
municipal securities subject to a put may be sold at any time at the market
rates. However, unless the put was an integral part of the security as
originally issued, it may not be marketable or assignable; therefore, the put
would only have value to the Fund. In certain cases a premium may be paid for
put features. A premium paid will have the effect of reducing the yield
otherwise receivable on the underlying security. The purpose of engaging in
transactions involving puts is to maintain flexibility and liquidity to permit
these Funds to meet redemption requests and remain as fully invested as possible
in municipal securities. These Funds will limit their put transactions to
institutions which their advisers believe present minimal credit risk.
There is no limit to the percentage of portfolio securities that each Fund
may purchase subject to a put, but the amount paid directly or indirectly for
puts which are not integral parts of the security as originally issued held in
such Fund will not exceed 1/2 of 1% of the value of the total assets of the Fund
calculated immediately after any such put is acquired.
WHEN-ISSUED SECURITIES-- Equity Fund, Special Equity Fund, Intermediate
Municipal Bond Fund, Short-Intermediate Bond Fund, Bond Fund, Short Term Income
Fund, Government Income Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund, Global Bond Fund, Tax-Free Reserve
These Funds may purchase securities on a 'when-issued' basis. When-issued
securities are subject to settlement on a future date. The interest rate
realized on these securities is fixed as of the purchase date and no interest
accrues to the Fund before settlement. These securities are subject to market
fluctuation due to changes in market interest rates and will have the effect of
leveraging a Fund's assets. Each Fund will establish one or more segregated
accounts with the custodian and will maintain liquid assets in such accounts in
an amount at least equal to the value of its commitments to purchase when-issued
securities.
MUNICIPAL LEASE OBLIGATIONS--
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund, Tax-Free Reserve
Municipal lease obligations are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the municipality's credit, and
their interest may become taxable if the lease is assigned. If funds are not
appropriated for the following year's lease payments, the lease may terminate,
with the possibility of default on the lease obligation and significant loss to
a Fund. Certificates of participation in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest in
the lease-purchase payments made.
FOREIGN CURRENCY TRANSACTIONS--
International Growth Fund and
Global Bond Fund
The value of the assets of the Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversions between various currencies. The Fund will conduct its foreign
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38 Investment Policies
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currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, of through forward
contracts to purchase or sell foreign currencies. A forward foreign currency
exchange contract ('forward currency contracts') involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These forward currency contracts are
traded directly between currency traders (usually large commercial banks) and
their customers. The Fund may enter into forward currency contracts in order to
hedge against adverse movements in exchange rates between currencies.
For example, when the Fund enters into a contract for the purchase or sale
of a security denominated in a foreign currency, it may want to establish the
U.S, dollar cost or proceeds, as the case may be. By entering into a forward
currency contract in U.S. dollars for the purchase or sale of the amount of
foreign currency involved in an underlying security transaction, the Fund can
help to protect itself from a possible loss between trade and settlement dates
resulting from an adverse change in the relationship between the U.S. dollar and
such foreign currency. Additionally, for example, when the Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward currency sale contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities or other assets denominated in such foreign currency or when the Fund
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward currency purchase contract to buy that
foreign currency for a fixed U.S. dollar amount. However, these contracts tend
to limit potential gains which might result from positive changes in currency
relationships. The Fund may also hedge its foreign currency exchange rate risk
by engaging in currency financial futures and options transactions. The
forecasting of short-term currency market movement is extremely difficult and
whether short-term hedging strategies would be successful is highly uncertain.
FORWARD CURRENCY CONTRACTS--
International Growth Fund, Global Bond Fund
International Growth Fund and Global Bond Fund may enter into forward foreign
currency exchange contracts in order to protect against uncertainty in the level
of future foreign exchange rates in the purchase and sale of investment
securities. These Funds will not enter into such contracts for speculative
purposes.
A forward foreign currency exchange contract is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. In addition, International Growth Fund and Global Bond
Fund may be required to segregate certain assets when entering into such
contracts, in order to complete the settlement transactions in the future. The
contracts may be bought or sold in amounts up to 100% of exposure to protect a
Fund to a limited extent against adverse changes in exchange rates between
foreign currencies and the U.S. dollar. Such contracts, which protect the value
of a Fund's investment securities against a decline in the value of currency, do
not
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Investment Policies 39
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INFORMATION ON THE FUNDS (CONTINUED)
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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.
FUTURES CONTRACTS OR OPTIONS TRANSACTIONS-- International Growth Fund, Global
Bond Fund, Equity Fund and
Special Equity Fund
International Growth Fund and Global Bond Fund may purchase futures contracts
and may purchase, sell, and write options on securities (including puts and
calls) to a limited extent. Specifically, these Fundsmay purchase futures
contracts provided that not more than 5% of its total assets are acquired as a
futures contract; in addition, such Fundsmay purchase futures contracts or enter
into options transactions only to the extent that obligations under such
contracts or transactions represent not more than 20% of its total assets.
International Growth Fund and Global Bond Fund do not intend to use options on
futures contracts. The risk of loss from investing in futures contracts is
potentially unlimited based largely on whether the advisers of these Funds
correctly assess the direction of stock prices.
The Equity Fund and Special Equity Fund may purchase, sell and write
options on securities for the purpose of hedging against market risks related to
their portfolio securities. These funds will only write covered call options
(options on securities owned by the Funds) as deemed appropriate by CoreStates
Advisers. Each Fund may purchase options in an amount not exceeding 5% of its
total assets. Under normal conditions, it is not expected that the underlying
value of portfolio securities subject to options transactions would exceed 50%
of the net assets of a Fund.
Futures contracts or options transactions may be used for several reasons:
to maintain cash reserves while remaining fully invested; to facilitate trading;
to reduce transactions costs; or to seek higher investment returns when a
futures contract is priced more attractively than the underlying equity security
or index. The Funds may not use futures contracts or options transactions to
leverage their net assets, or for speculative purposes.
For example, in order to remain fully invested in stocks while maintaining
liquidity to meet potential shareholder redemptions, the Funds may invest a
portion of their assets in futures contracts or options transactions as
applicable. Because futures contracts only require a small marginal deposit and
options contracts a small premium payment, these Funds would then be able to
maintain a cash reserve for potential redemptions, while at the same time
remaining fully exposed to markets. Also, because transaction costs of futures
and options may be lower than the costs of investing in securities directly, it
is expected that the use of futures contracts and options transactions may
reduce the total transaction costs of such Funds.
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
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40 Investment Policies
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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.
DERIVATIVES--
Derivatives are securities that derive their value from other securities. The
following are considered derivative securities: options on futures, futures,
options (e.g., puts and calls), swap agreements, mortgage-backed securities
(CMDs, REMICs, IOs, and POs), when-issued securities and forward commitments,
floating and variable rate securities, convertible securities, 'stripped' U.S.
Treasury securities (e.g., Receipts and STRIPS), privately-issued stripped
securities (e.g., TGRs, TRs, and CATs). See elsewhere in 'Other Investment
Practices of the Funds' for discussion of these various instruments, and see
'Types of Securities in which the Funds Invest' for more information about any
investment policies and limitations applicable to their use.
ILLIQUID SECURITIES-- All Funds
The Funds may invest up to 10% of their assets in illiquid securities except for
the CoreFund Special Equity Fund, Balanced Fund, Bond Fund, Short Term Income
Fund, Government Income Fund, Intermediate Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, New Jersey Municipal Bond Fund, and Global Bond Fund which
may invest up to 15% of their assets in illiquid securities. Under the
supervision of CoreFunds' Board of Directors, each Fund's advisers determine the
liquidity of the Fund's investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid investments. Disposing of
illiquid investments may 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.
LENDING OF SECURITIES-- All Funds
The Funds may lend their portfolio securities to qualified brokers, dealers,
banks, and other financial institutions for the purpose of realizing additional
net investment income through the receipt of interest on the loan. Each Fund may
lend portfolio securities with a value of up to 33 1/3% of its total assets.
Such loans may be terminated at any time. These Funds will receive 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
dividends, interest or other distributions on the loaned securities. Voting
rights pass with the lending. The Funds will call loans to vote proxies if a
material issue affecting the investment is to be voted upon. Loans will be made
only to borrowers deemed by CoreStates Advisers to be of good standing.
Such loans would involve risk of delay in receiving additional collateral
in the event the value of the collateral decreased below the value of the
securities loaned, or risk of delay in recovering the securities loaned or even
loss of rights in the collateral should the borrower of the securities fail
financially.
ASSET-BACKED SECURITIES-- Bond Fund, Short Term Income Fund
These Funds will invest only in privately-issued asset-backed securities, which
are
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Investment Policies 41
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INFORMATION ON THE FUNDS (CONTINUED)
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readily marketable and rated at the time of purchase in the two highest rating
categories assigned by a Rating Organization. For a description of rating
symbols see the Appendix to the Statement of Additional Information.
MORTGAGE-BACKED SECURITIES-- Bond Fund, Short Term Income Fund
These Funds will invest only in privately-issued mortgage-backed securities
which are readily marketable and rated at the time of purchase in the two
highest rating categories assigned by a Rating Organization. For a description
of rating symbols see the Appendix to the Statement of Additional Information.
SWAPS-- Global Bond Fund
Global Bond Fund may enter into interest rate swaps, currency swaps and other
types of swap agreements such as caps, collars and floors as a way of managing
its exposure to different types of investments. In a typical interest rate swap,
one party agrees to make regular payments equal to a floating interest rate
times a 'notional principal amount,' in return for payments equal to a fixed
rate times the same amount, for a specific period of time. If a swap agreement
provides for payment in different currencies, the parties might agree to
exchange the notional principal amount as well. Swaps may also depend on other
prices or rates, such as the value of an index or mortgage prepayment rates. In
a typical cap or floor agreement, one party agrees to make payments only under
specified circumstances, usually in return for payment of a fee by the other
party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specific interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift the Global Bond 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 on how they are used, swap agreements may increase or
decrease the overall volatility of Global Bond Fund's investments and its share
price and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
As a result, swaps can be highly volatile and have a considerable impact on a
Fund's performance. Swap agreements are subject to 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 high quality liquid
securities in a segregated account. Global Bond Fund will enter into swaps only
with counterparties deemed creditworthy by its advisers.
FOREIGN SECURITIES-- Equity Fund, Special Equity Fund, International Growth
Fund, Global Bond Fund, Bond Fund and Short Term Income Fund
The Special Equity Fund and the International
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42 Investment Policies
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Growth Fund may invest in securities of foreign issuers by acquiring both
sponsored and unsponsored American Depositary Receipts ('ADR's'). ADRs are
receipts issued by a bank or trust company in the United States evidencing
ownership of underlying securities of a foreign issuer. Unsponsored ADRs are
organized independently and without the cooperation of the issuer of the
underlying securities. As a result, available information concerning the issuer
may not be as current as for sponsored ADRs, and the prices of unsponsored ADRs
may be more volatile than if such instruments were sponsored by the issuer. The
Funds may also invest in securities issued by foreign branches of U.S. banks
and foreign banks, in Canadian commercial paper, and in Europaper (U.S.
dollar-denominated commercial paper of a foreign issuer). The Funds may also
invest in ECDs, ETDs, CTDs, and Yankee CDs. The Bond Fund and the Short Term
Income Fund may invest in Yankee Bonds.
For many foreign securities, U.S. dollar-denominated American Depositary
Receipts, or ADRs, which are traded in the United States on exchanges or
over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in the stock of foreign issuers, the Fund can avoid currency risks
during the settlement period for either purchases or sales. In general, there is
a large, liquid market in the United States for many ADRs. The information
available for ADRs is subject to the accounting, auditing and financial
reporting standards of the domestic market or exchange on which they are traded,
which standards are more uniform and exacting than those to which many foreign
issuers may be subject. The Special Equity Fund and International Growth Fund
may also invest in European Depositary Receipts, or EDRs, which are receipts
evidencing an arrangement similar to that for ADRs and are designed for use in
the European securities markets. EDRs are not necessarily denominated in the
currency of the underlying security.
Certain ADRs and EDRs, typically those denominated as unsponsored, require
the holders thereof to bear most of the costs of such facilities while issuers
of sponsored facilities normally pay more of the costs thereof. The depositary
of an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited securities
or to pass through voting rights to facility holders in respect to the deposited
securities, whereas the depositary of a sponsored facility typically distributes
shareholder communications and passes through the voting rights.
Investment in securities of foreign issuers involves certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, difficulties in predicting
international trade patterns, political, social and economic instability in the
country of the issuer, foreign trading practices (including higher trading
commissions, custodial charges and delayed settlements), foreign withholding and
income taxation, the possible establishment of exchange controls or the adoption
of other foreign governmental restrictions (which may adversely affect the
payment of principal and interest), difficulty
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Investment Policies 43
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INFORMATION ON THE FUNDS (CONTINUED)
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in obtaining and enforcing judgments against foreign issuers, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. With respect to certain countries, there is also the possibility
of expropriation of assets, nationalization of assets, limits on removal of
currency or other assets, confiscatory taxation, political or social instability
or diplomatic developments which could adversely affect investments in those
countries.
Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies abroad than in the U.S.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries. In addition, foreign branches of U.S. banks, foreign banks and
foreign issuers may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting and recordkeeping standards than those
applicable to domestic branches of U.S. banks and U.S. domestic issuers.
/X/
TYPES OF
SECURITIES IN
WHICH THE
FUNDS INVEST
The various types of securities in which the Funds invest are described below.
EQUITY FUNDS ___________________________________________________________________
GROWTH EQUITY FUND
EQUITY FUND
SPECIAL EQUITY FUND
INTERNATIONAL GROWTH FUND
The types of equity securities in which these Funds invest generally include
common stocks, preferred stocks and convertible securities.
BALANCED FUND In addition to equity securities, Balanced Fund may invest in
fixed income securities. The fixed income securities in which this Fund will
invest consist of bonds, debentures, notes and similar obligations or
instruments which constitute a security and evidence indebtedness, including
U.S. Government obligations, mortgage-backed securities and bank obligations (as
described below). Balanced Fund may also invest in corporate bonds which are
rated, at time of purchase, A or higher by S&P or Moody's.
TAXABLE FIXED INCOME FUNDS _____________________________________________________
SHORT-INTERMEDIATE BOND FUND
BOND FUND
SHORT TERM INCOME FUND
The various types of securities which may be purchased by these Funds include
the following:
U.S. Government Obligations--
1. U.S. Treasury Securities-includes bills, notes, bonds, and other debt
securities issued by the U.S. Treasury. These are direct obligations of the U.S.
Government and are supported by the full faith and credit of the United States.
They differ mainly in interest rates, maturities, and dates of issue.
2. U.S. Government Agency Securities-issued or guaranteed by U.S.
Government-sponsored instrumentalities and federal agencies. These include
obligations supported by the right of the issuer to borrow from the Treasury,
such as those of the Export-Import Bank of the United States; obligations
supported by the discretionary authority of the U.S. Treasury to purchase the
agency's obligations, such as those of the Federal National Mortgage Association
('FNMA'); and obligations supported only by the credit of the agency or
instrumentality, such as those of the
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Student Loan Marketing Association ('SLMA'). However, 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.
Bank Obligations--
1. Certificates of Deposit--negotiable certificates representing a
commercial bank's obligation to repay funds deposited with it, earning specified
rates of interest over given periods.
2. Bankers' Acceptances--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.
Each of Short-Intermediate Bond Fund and Intermediate Municipal Bond Fund,
as well as Balanced Fund, will limit its 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 as shown on their last published financial statements at
the time of investment.
Mortgage-Backed Securities--These securities may be issued or guaranteed
by U.S. Government agencies such as the Government National Mortgage Association
('GNMA'), FNMA, or the Federal Home Loan Mortgage Corporation ('FHLMC'). GNMA
mortgage-backed certificates are mortgage-backed securities of the modified
pass-through type, which means that both interest and principal payments
(including prepayments) are passed through monthly to the holder of the
certificate. The National Housing Act provides that the full faith and credit of
the United States is pledged to the timely payment of principal and interest by
GNMA of amounts due on these GNMA certificates. Each GNMA certificate evidences
an interest in a specific pool of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by the Veterans
Administration. FNMA, a federally chartered and stockholder-owned corporation,
issues pass-through certificates which are guaranteed as to principal and
interest by FNMA. FHLMC, a corporate instrumentality of the United States,
issues participation certificates which represent an interest in mortgages held
in FHLMC's portfolio. FHLMC guarantees the timely payment of interest and the
ultimate collection of principal. Securities issued or guaranteed by FNMA and
FHLMC are not backed by the full faith and credit of the United States. There
can be no assurance that the United States Government would provide financial
support to FNMA or FHLMC if necessary in the future.
Mortgage-backed securities also include collateralized mortgage
obligations ('CMOs') or real estate mortgage investment conduits ('REMICs'), a
type of CMO. CMOs or REMICS are mortgage pass-throughs issued in multiple
classes. In a CMO, a series of bonds or certificates are usually issued in
multiple classes. Each class of CMOs is issued with a specific fixed or floating
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgage assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates,
resulting in a loss of all or part of any premium paid. Interest typically is
paid or accrues on all classes of the CMOs on a monthly, quarterly or semiannual
basis.
The principal of and interest on the underlying mortgage assets may be
allocated among the several classes of a series of a
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CMO in a variety of ways. In a common structure, payments of principal,
including any principal payments, on the underlying mortgage assets are applied
to the classes of the series of a CMO in the order of their respective stated
maturities or final distribution dates, so that no payment of principal will be
made on any class of CMOs until all other classes having an earlier stated
maturity or final distribution date have been paid in full.
Asset-backed Securities--
Asset-backed securities consist of securities secured by company receivables,
truck and auto loans, leases and credit card receivables. These issues are
normally traded over-the-counter and typically have a short-intermediate
maturity structure depending on the paydown characteristics of the underlying
financial assets which are passed through to the security holder.
Corporate Securities--
Corporate securities include corporate bonds, convertible and non-convertible
debt securities, and preferred stocks, as well as commercial paper. Corporate
securities in which these Funds may invest must satisfy certain minimum ratings
at the time of purchase by Moody's or S&P. Corporate bonds must be rated A or
better by S&P or Moody's.
GOVERNMENT INCOME FUND Government Income Fund may invest in U.S. Government
obligations, mortgage-backed securities and asset-backed securities, as defined
above.
GLOBAL BOND FUND Global Bond Fund may invest in fixed income or debt obligations
issued or guaranteed by the U.S. Government or a foreign government, or by one
of its agencies, authorities, instrumentalities or political subdivisions; fixed
income or debt obligations issued or guaranteed by supranational entities; and
corporate securities and bank obligations, as described above.
TAXABLE MONEY MARKET FUNDS _____________________________________________________
CASH RESERVE The various types of securities invested in by Cash Reserve include
U.S. Government obligations, bank obligations, and asset-backed securities, as
described above.
With respect to U.S. Government obligations, in addition to bills, notes
and bonds issued by U.S. Government agencies, Cash Reserve may invest in STRIPS
as defined below in 'Investment Policies-Treasury Reserve.' STRIPS may be sold
as zero coupon securities, which means that they are sold at a substantial
discount and redeemed at face value at their maturity date without interim cash
payments of interest or principal. This discount is amortized over the life of
the security, and such amortization will constitute the income earned on the
security for both accounting and tax purposes. See also 'Taxes.'
With respect to bank obligations, in addition to certificates of deposit
and bankers' acceptances, Cash Reserve may invest in foreign securities and time
deposits. Time deposits are non-negotiable deposits in a banking institution
earning a specified interest rate over a given period of time. Such deposits
cannot be withdrawn before the date specified at the time of deposit.
With respect to asset-backed securities, Cash Reserve may invest only in
asset-backed securities having final maturity dates of 13 months or less.
Cash Reserve may also invest in the following types of securities:
Commercial Paper--
Commercial paper are short-term promissory notes issued by corporations,
including variable amount master demand notes, having short-term ratings at the
time of purchase of
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"Prime-1" by Moody's and/or "A-1" or better by S&P.
Variable amount master demand notes in which Cash Reserve may invest are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. 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. Although there is no secondary market in the notes, the Fund may demand
payment of principal and accrued interest at any time. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes (which are normally manufacturing, retail, financial, and other
business concerns) must satisfy the same criteria as set forth above for issuers
of commercial paper. CoreStates Advisers will consider the earning power, cash
flow, and other liquidity ratios of the issuers of such notes and will
continuously monitor their financial status to meet payment on demand.
Receipts--
Receipts are interests in separately traded interest and principal component
parts of U.S. Treasury obligations that are issued by banks or brokerage firms
and are created by depositing U.S. Treasury obligations into a special account
at a custodian bank. The custodian holds the interest and principal payments for
the benefit of the registered owners of the certificates or receipts. The
custodian arranges for the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts include 'Treasury Receipts'
('TR'S'), 'Treasury Investment Growth Receipts' ('TIGR'S'), and 'Certificates of
Accrual on Treasury Securities' ('CATS').
TREASURY RESERVE Treasury Reserve may invest in U.S. Treasury obligations, such
as bills, notes and bonds, and in separately traded interest and principal
component parts of such obligations, such as STRIPS. Treasury Reserve may also
invest in repurchase agreements fully collateralized by U.S. Treasury
obligations.
TAX-FREE FIXED INCOME AND MONEY MARKET FUNDS ___________________________________
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
TAX-FREE RESERVE These Funds will invest in municipal securities. The two
principal classifications of municipal securities which may be held by these
Funds are 'general obligation' securities and 'revenue' securities. These are
discussed below, along with other municipal securities in which these Funds may
invest.
1. General Obligation Securities
'General obligation' securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
2. Revenue Securities
'Revenue' securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or another specific revenue source such as the user of
the facility being financed. Industrial development and pollution control bonds
held by these Funds are in most cases revenue securities and are not
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Types of Securities 47
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INFORMATION ON THE FUNDS (CONTINUED)
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payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of such revenue bonds is usually directly related to the credit standing
of the corporate user of the facility involved.
3. Moral Obligation Bonds
The portfolios of these Funds may also include 'moral obligation' bonds, which
are normally issued by special-purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
4. Variable Rate Demand Obligations
Municipal securities purchased by these Funds may include 'variable rate demand
obligations,' which are tax-exempt obligations upon which interest is payable at
a floating or variable rate. While there may be no active secondary market with
respect to a particular variable rate demand obligation purchased by such Funds,
they normally may demand payment of the principal of and accrued interest on the
obligation upon not more than seven days' notice and may resell the obligation
at any time to a third party. The absence of any active secondary market,
however, could make it difficult for such Funds to dispose of a variable rate
demand obligation if the issuer defaulted on its payment obligation, and they
could, for this or other reasons, suffer a loss to the extent of the default.
5. When-Issued Securities
These Funds may purchase municipal securities on a 'when-issued' basis, as
described in 'Other Investment Practices of the Funds.' Each Fund expects that
commitments to purchase when-issued securities will not exceed 25% of the value
of its total assets, absent unusual market conditions, and does not intend to
purchase when-issued securities for speculative purposes, but only in
furtherance of its investment objective. Because each Fund will set aside cash
or liquid assets to satisfy its purchase commitments in the manner described,
its liquidity and ability to manage its portfolio might be affected in the event
its commitments to purchase when-issued securities should ever exceed 25% of the
value of its total assets.
PENNSYLVANIA MUNICIPAL SECURITIES
In managing the portfolios of Intermediate Municipal Bond Fund and Tax-Free
Reserve, CoreStates Advisers intends to invest, when possible, such Funds'
assets in Pennsylvania Municipal Securities, provided the investment is
consistent with the Funds' investment objectives and policies and their status
as diversified investment companies. Because of the relatively limited number of
Pennsylvania municipal issuers and the restricted supply of outstanding
municipal securities issued by them that meet the Funds' investment criteria,
CoreStates Advisers cannot predict precisely what percentage of each Fund's
portfolio will be invested in such issuers.
Except as stated above with respect to Pennsylvania Municipal Securities,
CoreStates Advisers does not intend on a regular basis to invest more than 25%
of either Intermediate Municipal Bond Fund's or Tax-Free Reserve's total assets
in (i) municipal securities whose issuers are in the same state, (ii) municipal
securities, the interest on which is paid solely from revenues of similar
projects, and (iii) industrial development bonds, although it may do so from
time to time. To the extent such Funds' assets are so concentrated, they would
be subject to the peculiar risks presented by the laws and economic conditions
relating to such states, projects, and bonds to a greater
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48 Types of Securities
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extent than it would be if its assets were not so concentrated.
AMT OBLIGATIONS
While Intermediate Municipal Bond Fund and Tax-Free Reserve are permitted to
purchase 'private activity bonds' that are subject to the Alternative Minimum
Tax (the 'AMT') imposed by Section 55 of the Code, these Funds do not currently
hold or anticipate purchasing such bonds. If they did so, however, a portion of
the dividends received would be subject to the AMT. The purchase of such bonds
by these Funds could have a material effect on the AMT liability of their
investors, and hence these Funds do not intend to invest any portion of their
assets in such bonds.
Corporate shareholders, however, should note that all exempt-interest
dividends are includable in the computation of 'adjusted current earnings' for
AMT purposes, regardless of when the bonds from which they are derived were
issued or whether they are derived from 'private activity bonds.' Accordingly,
corporate shareholders should consult their tax advisers regarding the impact
that holding shares of these Funds would have on their own AMT liability.
TEMPORARY INVESTMENTS __________________________________________________________
On occasion, a Fund may be unable to achieve its investment objective due to
market conditions. Under such circumstances, a Fund is permitted to make certain
temporary investments which deviate from the investment policies described
above. Such investments may be used to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions, or to take a temporary
defensive position against potential or serious stock market declines. The
temporary investments the Funds are permitted to make under such circumstances
are described below.
GROWTH EQUITY FUND
EQUITY FUND
SPECIAL EQUITY FUND
INTERNATIONAL GROWTH FUND
Although these Funds normally seek to remain fully invested in equity
securities, they may invest all or a portion of their assets temporarily in
certain short-term and fixed income vehicles, in accordance with the investment
restrictions described herein. Money market instruments, such as commercial
paper, and fixed income securities, such as bonds, must be assigned, or
determined by the advisers to be equal to, certain minimum ratings in each
category by either Moody's or S&P at the time of purchase by a Fund. Temporary
investments may include the following:
Money Market Instruments
U.S. Government Obligations
Fixed Income Securities
Repurchase Agreements
BALANCED FUND Although Balanced Fund normally seeks to remain fully invested in
a combination of equity, fixed income, and money market securities, when
CoreStates Advisers determines that market conditions warrant, it may invest up
to 100% of its assets in money market instruments, including securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements, certificates of deposit and bankers' acceptances issued
by banks or savings and loan associations having net assets of at least $500
million as of the end of their most recent fiscal year, and commercial paper
rated, at time of purchase, in the top two categories by a national rating
agency
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Types of Securities 49
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or determined to be of comparable quality by the investment adviser at time of
purchase, and other long- and short-term debt instruments which are rated A or
higher at time of purchase, and may hold a portion of its assets in cash
reserves.
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
Each of the Funds may increase its investment in Taxable Obligations to over 20%
of its total assets if suitable tax-exempt obligations are unavailable or for
temporary defensive purposes.
GLOBAL BOND FUND For temporary defensive purposes, when the advisers determine
that market conditions warrant, Global Bond Fund may invest up to 100% of its
assets in U.S. dollar-denominated fixed income securities or debt obligations
and the following domestic and foreign money market instruments: government
obligations, certificates of deposit, bankers' acceptances, time deposits,
commercial paper, short-term corporate debt issues and repurchase agreements.
This Fund may hold a portion of its assets in cash for liquidity purposes.
TAX-FREE RESERVE Tax-Free Reserve may hold uninvested cash reserves which do not
earn income (pending investment) during temporary defensive periods or if, in
the opinion of CoreStates Advisers, suitable tax-exempt obligations are
unavailable. There is no percentage limitation on the amount of assets which may
be held uninvested. In addition, such Fund may invest from time to time, to the
extent consistent with its investment objective, a portion of its assets on a
temporary basis or for temporary defensive purposes in short-term money market
instruments, the income from which is subject to federal income tax.
Temporary investments will generally not exceed 20% of the total assets of
Tax-Free Reserve except when made for temporary defensive purposes, and may
include obligations of the U.S. Government or its agencies or instrumentalities;
debt securities (including taxable commercial paper) of issuers having been
assigned, at the time of purchase, the highest short-term rating of either
Moody's or S&P; certificates of deposit or bankers' acceptances of domestic
branches of U.S. banks with total assets at the time of purchase of $1 billion
or more; repurchase agreements with respect to such obligations; or reverse
repurchase agreements.
/X/
INVESTMENT
RESTRICTIONS
Investment policies of the Funds that are not fundamental may be changed by the
Board of Directors without shareholder approval, provided such changes are
deemed to be consistent with a Fund's objective and in the best interests of its
shareholders. However, the investment objectives of each Fund, along with the
restrictions and limitations described herein and in the Statement of Additional
Information, are fundamental and may be changed only by the affirmative vote of
a majority of the outstanding shares of such Fund. See 'Description of Shares.'
A FUND MAY NOT:
1. 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.
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50 Investment Restrictions
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2. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts not to exceed 10% of the value of its 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 its total assets at the time
of such borrowing. A Fund will not purchase any securities while its borrowings
(including reverse repurchase agreements) are outstanding.
3. Invest more than 10% of its total assets in illiquid securities,
including repurchase agreements maturing in more than seven days or the lending
of securities which provide for settlement more than seven days after notice.
This fundamental restriction does not apply to Balanced Fund, Government Income
Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, Global Bond Fund, Equity Fund, Special Equity Fund,
Bond Fund, and Short Term Income Fund. These Funds, as a matter of
non-fundamental investment policy, may invest up to 15% of their assets in
illiquid securities.
4. Purchase securities of any one issuer (other than obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities) if, immediately after such purchase, more than 5% of the
value of the Fund's total assets would be invested in such issuer or hold more
than 10% of the outstanding voting securities of such issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation. With respect to the Fixed Income Funds and Cash Reserve,
however, there is no limit to the percentage of assets that may be invested in
U.S. Treasury bills and notes, or other obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. With respect to Global
Bond Fund, there is no limit to the percentage of assets that may be invested in
securities issued by foreign governments. This restriction does not apply to
Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund, Global Bond
Fund or Treasury Reserve.
5. Invest 25% or more of its total assets in any one industry. For
purposes of this limitation, 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 their parents, and utilities will be
divided according to their services--for example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a separate
industry. This restriction does not apply to Treasury Reserve.
With respect to Intermediate Municipal Bond Fund, Pennsylvania Municipal
Bond Fund, New Jersey Municipal Bond Fund and Tax-Free Reserve, this limitation
does not apply to investments in tax-exempt securities issued by governments or
political sub-divisions of governments.
With respect to Global Bond Fund, there is no limitation with respect to
obligations issued by the U.S. Government, by foreign governments, or by
supranational agencies.
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Investment Restrictions 51
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With respect to Cash Reserve, there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its
instrumentalities.
EQUITY FUNDS In addition, an Equity Fund may not purchase the securities of any
one issuer (other than obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities) if, as a
result thereof, more than 10% of the voting securities of such issuer would be
held by the Fund.
TREASURY RESERVE In addition, Treasury Reserve may not purchase securities other
than direct obligations of the U.S. Treasury, such as Treasury bills and notes,
none of which may be subject to repurchase agreements.
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% rate of turnover 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. With the exception of Global Bond Fund, 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. As a general rule, net gains are distributed to
shareholders and will be taxable at ordinary income tax rates, for federal
income tax purposes, regardless of long- or short-term capital gains status. See
'Distributions' and 'Taxes' for more information on taxation. The tables set
forth in 'Financial Highlights' present the Funds' historical portfolio turnover
rates.
/X/
INVESTOR
CONSIDERATIONS
INVESTMENT SUITABILITY _________________________________________________________
EQUITY FUNDS
The Equity Funds are appropriate for investors seeking long-term growth.
Historically, equities have provided significantly higher returns than fixed
income and money market instruments, yet subject the investor to greater price
fluctuation. The CoreFund Equity Funds offer a range of growth and risk
characteristics, incorporating high grade domestic and international securities.
Growth Equity Fund
Equity Fund
Special Equity Fund
These Funds are appropriate for investors who are seeking long-term income and
capital appreciation, and who do not need to earn current income from their
investments in a
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52 Investor Considerations
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Fund. They are suited to those investors who are willing to hold their
investments over a long horizon in anticipation of the returns that common
stocks may provide. Because these Funds invest in equity securities, investors
should be able to tolerate fluctuations in the principal value of their
investment. Investors should be cognizant of the inherent volatility in the
stock market, and the investment risks discussed below; and understand that all
investments carry a risk factor.
Balanced Fund
Balanced Fund is appropriate for investors who seek to capture the interest
income of bonds and the capital appreciation of stocks while reducing risk
through diversification among these securities.
International Growth Fund
International Growth Fund is appropriate for investors who are seeking long-term
capital appreciation, and who do not need to earn current income from their
investment in a Fund. International Growth Fund is suited to those investors who
are willing to hold their investment over a long horizon in anticipation of the
returns that foreign stocks may provide. Because the Fund invests in foreign
equity securities, investors should be able to tolerate fluctuations in the
principal value of their investment. Investors should be cognizant of the unique
risks of international investing, including their exposure to currency
fluctuations; and understand that all investments carry a risk factor.
Under the multiple manager structure, CoreStates Advisers has general
oversight responsibility for the investment advisory services provided to the
Fund by Martin Currie and Aberdeen Managers. CoreStates Advisers is also
responsible for managing the allocation of assets among the Fund's sub-advisers.
Accordingly, each sub-adviser will be responsible for the day-to-day investment
management of all or a discrete portion of the assets of the Fund. To the extent
that having multiple sub-advisers responsible for investing separate portions of
the Fund's assets creates the need for coordination among sub-advisers, there is
an increased risk that the Fund may not comply with certain regulatory and tax
requirements.
FIXED INCOME FUNDS
These Funds are appropriate for investors seeking an investment vehicle that
offers a higher level of current income with low to moderate share price
fluctuations. These Funds differ primarily by their average maturity, credit
quality, and tax status.
Short-Intermediate Bond Fund will purchase U.S. Government and corporate
securities rated A or better and is expected to have an average maturity of no
more than five years.
The Bond Fund will normally invest in domestic and foreign corporate debt
securities, U.S. government securities, mortgage-backed securities and
asset-backed securities, without limitation to the average maturity of the Fund.
Short Term Income Fund will invest in a diversified portfolio of
investment-grade debt securities, including corporate debt securities and U.S.
government securities, having an expected or remaining maturity of three years
or less. The Fund is expected to have an average dollar-weighted maturity of
approximately one year.
Government Income Fund will invest only in obligations issued or
guaranteed by the U.S. Government and its agencies. There is no limit to the
average maturity
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Investor Considerations 53
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so it is appropriate for investors who seek a higher level of current income
than that which is generally possible with money market funds, and who can
tolerate moderate fluctuations in principal value.
Intermediate Municipal Bond Fund is for investors seeking income exempt
from federal income taxes, generally investors in a high income tax bracket.
This Fund will only purchase securities rated A or better and is expected to
have an average maturity of three to ten years.
Pennsylvania Municipal Bond Fund is appropriate generally for investors
seeking an investment vehicle that offers a higher level of current income
exempt from federal income taxes and (as to Pennsylvania residents) Pennsylvania
income taxes, with low to moderate share price fluctuations.
New Jersey Municipal Bond Fund is appropriate generally for investors
seeking an investment vehicle that offers a higher level of current income
exempt from federal income taxes and (as to New Jersey residents) New Jersey
income taxes, with low to moderate share price fluctuations.
Global Bond Fund is suitable for long-term investors who are looking for
both income and capital appreciation from a portfolio of fixed income securities
denominated in U.S. and foreign currencies. Because the value of the securities
will fluctuate with changes in interest rates and relative currency values,
investors must be willing to invest their money over a longer time horizon in
anticipation of the returns afforded by a diversified portfolio of U.S. and
foreign bonds.
MONEY MARKET FUNDS
As each of these Funds is designed and managed to maintain a stable price per
share of $1.00, they provide liquidity and a high degree of safety for investors
who are unable to tolerate fluctuations in the principal value of their
investments.
Cash Reserve is appropriate for investors who are seeking an investment
vehicle that provides current interest income at competitive rates of return.
By investing in direct obligations of the U.S. Treasury, Treasury Reserve
affords an extra margin of protection for investors for whom a high degree of
safety is a primary concern. Treasury Reserve is considered to be the most
secure of the Money Market Funds. This Fund is appropriate for investors who are
seeking an investment vehicle that provides current interest income at
competitive rates of return. Tax-Free Reserve is appropriate for conservative
investors in higher-level federal income tax brackets who may benefit from an
investment that offers current interest income that is at least 80% free of
federal income taxes. Therefore, investors contemplating the purchase of this
Fund should first consider their 'taxable equivalent yield.' This is the
comparison between the tax-exempt yield from Tax-Free Reserve and the equivalent
yield from a taxable investment, using a calculation that takes into account the
investor's current tax bracket. Tax-Free Reserve's current taxable equivalent
yield may be obtained by contacting its distributor.
INVESTMENT RISKS _______________________________________________________________
The Funds differ significantly in terms of risk. Because of the concerns listed
below, a Fund should not be considered a complete investment program. Most
investors should maintain diversified holdings of securities with different risk
characteristics--including common stocks, bonds and different types of money
market instruments. Investors may also wish to complement an investment in a
Fund with other portfolios offered by CoreFunds.
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54 Investor Considerations
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EQUITY FUNDS
The Equity Funds are subject to market risk and fund risk. Market risk is the
possibility that stock prices in general will decline over short or even
extended periods of time. Stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when stock prices generally decline.
Fund risk is the possibility that a Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole. Therefore, investors
should consider their holdings in equity mutual funds to be long-term
investments. In addition to the risks noted above for all equity funds, the
following equity funds are also subject to additional risks as described below.
Balanced Fund
With respect to Balanced Fund, the market value of fixed income securities bears
an inverse relationship to changes in market interest rates. Moreover, changes
by recognized rating agencies in the ratings of any fixed income security and in
the ability of an issuer to make payments of interest and principal may also
affect the market value of these securities. Each of these factors will cause
the net asset value of shares of Balanced Fund to fluctuate over time.
In addition, mortgage-backed securities are subject to prepayment of the
underlying mortgages. During periods of declining interest rates, pre-payment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fund are prepaid, the Fund must reinvest
the proceeds in securities, the yield of which reflects prevailing interest
rates, which may be lower than the yield on the prepaid securities. Thus,
mortgage-backed securities may not be an effective means of locking in long-term
interest rates for Balanced Fund.
International Growth Fund
In addition to market and fund risk, International Growth Fund is also subject
to currency risk. Currency risk is the risk that changes in foreign exchange
rates will affect, favorably or unfavorably, the value of foreign securities
held by the Fund. In a period when the U.S. dollar generally rises against
foreign currencies, the returns on foreign stocks for U.S. investors will
usually be diminished. By contrast, in a period when the U.S. dollar generally
declines, the returns on foreign stocks will usually be enhanced. In addition,
investments in foreign stock markets can be as volatile, if not more volatile,
than investments in U.S. markets.
Investors should also recognize that investing in foreign companies
involves certain special considerations which are not typically associated with
investing in U.S. companies. Since the stocks of foreign companies are
frequently denominated in foreign currencies, and since this Fund may
temporarily hold uninvested reserves in bank deposits in foreign currencies, its
portfolio will be affected favorably or unfavorably by changes in currency rates
and in exchange control regulations, and may incur costs in connection with
conversions between various currencies. The investment policies of International
Growth Fund permit it to enter into forward foreign currency exchange contracts
in order to hedge its holdings and commitments against changes in the level of
future currency rates. Such contracts involve an obligation to purchase or sell
a specific currency at a
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Investor Considerations 55
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future date at a price set at the time of the contract.
In addition, as foreign companies are not generally subject to uniform
accounting, auditing, and financial reporting standards and practices comparable
to those applicable to domestic companies, there may be less publicly available
information about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers, and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although International Growth Fund will endeavor to achieve the most
favorable execution costs in its portfolio transactions, fixed commissions on
many foreign stock exchanges are generally higher than negotiated commissions on
U.S. exchanges. Moreover, transactions executed on foreign exchanges may be
subject to longer settlement periods than transactions executed on U.S.
exchanges. In addition, it is expected that the expenses for custodial
arrangements of the Fund's foreign securities will be somewhat greater than
typical expenses for custodial arrangements for handling U.S. securities of
equal value.
Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the companies comprising International Growth Fund's
portfolio. However, these foreign withholding taxes are not expected to have a
significant impact since this Fund's investment objective is to seek long-term
capital appreciation and any income should be considered incidental.
International Growth Fund attempts to reduce international investment
risks by diversifying among as many foreign economies and currencies as
possible. This includes investments in both developed and selected emerging
markets. In addition, the International Growth Fund offers its shareholders the
ability to diversify their equity investments to reduce the risk of having such
investments affected solely by political and economic events in one country.
FIXED INCOME FUNDS
Securities held by the Fixed Income Funds may be subject to several types of
investment risk, including market risk, credit risk, and call risk. With respect
to these Funds, market risk (or interest rate risk) is the potential for a
decline in the price of fixed income securities due to rising interest rates.
Market risk will be greater for longer term securities than for shorter term
securities. Credit risk is the possibility that a bond issuer will be unable to
make timely payments of either principal or interest. Call risk (or income risk)
relates to corporate bonds during periods of falling interest rates, and
involves the possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity. Such an event would
require a Fund to invest the resulting proceeds elsewhere, at generally lower
interest rates, which would cause fluctuations in the Fund's net income.
Short-Intermediate Bond Fund, Bond Fund and Short Term Income Fund may
also be exposed to event risk, the possibility that corporate fixed income
securities held by these Funds may suffer a substantial decline in
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56 Investor Considerations
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credit quality and market value due to a corporate restructuring. Corporate
restructurings (mergers, leveraged buyouts, takeovers or similar events) are
often financed by a significant expansion of corporate debt. As a result, the
credit quality and market value of a firm's existing debt securities may decline
significantly. While event risk may be high for certain corporate securities
held by these Funds, event risk in the aggregate should be low because of the
Funds' diversified holdings.
The Bond Fund, Short Term Income Fund and Government Income Fund may all
acquire mortgage-backed and asset-backed securities, and therefore, may be
subject to the risks associated with these securities, which are described
above.
The concentration of investments in Pennsylvania Municipal Securities by
the Pennsylvania Municipal Bond Fund raises special investment considerations.
In particular, changes in the economic condition and governmental policies of
the Commonwealth of Pennsylvania and its municipalities could adversely affect
the value of the Fund and the portfolio securities held by it. Rising medical
assistance costs, a slow rate of economic recovery, increased costs of union
contracts, rising unemployment and the potential negative impact of pending
litigation may place increased pressures on the tax resources of the
Commonwealth and its municipalities. See 'Special Risk Factors--Pennsylvania
Municipal Securities' in the Statement of Additional Information for further
discussion of the risks associated with Pennsylvania Municipal Securities.
The concentration of investments in New Jersey Municipal Securities by the
New Jersey Municipal Bond Fund raises special investment considerations that are
discussed under the caption 'Special Risk Factors--New Jersey Municipal
Securities' in the Statement of Additional Information. In particular, changes
in economic conditions and governmental policies of the State of New Jersey and
its municipalities could adversely affect the value of the Fund and the
portfolio securities held by it.
Global Bond Fund is also subject to currency risk and other risks
associated with investing in the securities of foreign companies, as described
above with respect to International Growth Fund.
MONEY MARKET FUNDS
Securities held by Cash Reserve and Treasury Reserve may be subject, on a
limited basis, to credit risk. The credit risk of an investment portfolio is a
function of its underlying securities, and in general, securities of somewhat
lower credit quality provide correspondingly higher yields.
Securities held by Tax-Free Reserve may be subject, on a limited basis, to
several types of investment risk, including market risk (or interest rate risk),
credit risk and call risk (or income risk).
/X/
DISTRIBUTIONS
Shareholders of each Fund are entitled to dividends and distributions arising
from the net investment income and capital gains, if any, earned on investments
held by such Fund. Class C Shares of the Money Market Funds begin earning
dividends on the business day on which the purchase order for the shares is
executed and continue to earn dividends through, and including, the day before
the redemption order for such shares is executed. Class A Shares of the
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Distributions 57
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INFORMATION ON THE FUNDS (CONTINUED)
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Fixed Income Funds begin earning dividends on the business day following the day
on which the purchase order for the shares is executed and continue to earn
dividends through, and including, the day on which the redemption order for such
shares is executed.
Dividends are paid in the form of additional Class A and Class C Shares of
a Fund unless a shareholder selects one of the following options on the Account
Application Form: Cash Dividend Option--to receive dividends in cash and capital
gains distributions in additional shares of the Fund at net asset value; All
Cash Option--to receive both dividends and capital gains distributions in cash.
In the absence of either of these selections on the Account Application Form,
each purchase of shares is made upon the condition and understanding that the
Fund's agent is automatically appointed to receive the dividends and
distributions upon all shares in the shareholder's account and 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. Dividends and distributions are
automatically paid in cash (along with any redemption proceeds) not later than
seven business days after a shareholder closes an account with the Fund.
The dividends from Class Y Shares are normally higher than those of Class
A or Class C Shares because of the distribution and incremental transfer agent
expenses charged to Class A or Class C Shares.
The Funds maintain different dividend and capital gain distributions
policies. These are:
EQUITY FUNDS
Growth Equity Fund
Equity Fund
Special Equity Fund
Balanced Fund
Dividends from the net investment income of each of these Funds are declared and
paid to shareholders on a quarterly basis. Distributions of any capital gains
will be made at least annually.
International Growth Fund
The net investment income of this Fund is periodically declared and paid as a
dividend. Distributions of any capital gains will be made at least annually.
FIXED INCOME FUNDS
MONEY MARKET FUNDS
The net investment income of each of these Funds except Global Bond Fund is
declared daily as a dividend to its shareholders and paid monthly. Global Bond
Fund will distribute its net investment income in the form of quarterly
dividends. Capital gains distributions, if any, will be made by the Fixed Income
Funds and Money Market Funds at least annually.
If any capital gains are realized from the sale of underlying securities,
the Funds normally distribute such gains with the last dividend for the calendar
year.
In all Funds except the Money Market Funds, undistributed net investment
income is included in the Fund's net assets for the purpose of calculating net
asset value per share. Therefore, on the 'ex-dividend' date, the net asset value
per share excludes the dividend (i.e., is reduced by the per share amount of the
dividend). Dividends paid shortly after the purchase of shares by an investor,
although in effect a return of capital, are taxable as ordinary income.
/X/
TAXES
The following is only a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. No attempt
has been made to present a detailed
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58 Taxes
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explanation of the federal, state or local income tax treatment of the Funds or
their shareholders, and this discussion is not intended as a substitute for
careful tax planning. Potential investors in the Funds are urged to consult
their tax advisers with specific reference to their own tax situations.
The following summary is based on current tax laws and regulations, which
may be changed by legislative, judicial or administrative action.
ALL FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with any of CoreFunds' other portfolios. Each Fund intends to
qualify for the favorable tax treatment afforded a 'regulated investment
company' under the Code. This requires, among other things, that a Fund
distribute to its shareholders at least 90% of its net investment income.
Provided a Fund meets this 90% distribution and certain other requirements, it
will be relieved of federal income tax on that part of its net investment income
and any net capital gains (the excess of net long-term capital gain over net
short-term capital loss) distributed to shareholders.
Whether paid in cash or in additional shares, dividends attributable to a
Fund's net investment income (including ordinary income and net short-term
capital gains), including any dividends attributable to taxable net investment
income of Tax-Free Reserve or Intermediate Municipal Bond Fund, will be taxable
to shareholders as ordinary income. Capital gains distributions of all Funds
will be taxable as long-term capital gain, regardless of how long a shareholder
has held shares.
Dividends declared by a Fund in October, November, or December of any year
and payable to shareholders of record on a date in such a month will be deemed
to have been paid by the Fund and received by the shareholders on December 31 of
that year, if paid by the Fund during the following January.
INTERNATIONAL GROWTH FUND
GLOBAL BOND FUND
International Growth Fund and Global Bond Fund will receive dividends and
interest paid by foreign issuers which are frequently subject to withholding
taxes by foreign governments. Provided that more than 50% of the value of the
total assets of either International Growth Fund or Global Bond Fund at the
close of any taxable year consists of equity or debt securities of foreign
corporations, such Fund may elect (for U.S. federal income tax purposes) to
treat each shareholder as having additional income equal to a proportionate
amount of such foreign taxes paid by the Fund and as having directly paid such
foreign taxes. In addition, if a Fund makes such an election, shareholders will
be treated as having directly earned a portion of the Fund's gross income from
foreign sources. The Fund will make such an election only if it deems it to be
in the best interests of its shareholders and will notify shareholders
accordingly.
TAX-FREE RESERVE
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
Each of these Funds expects 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
----
Taxes 59
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INFORMATION ON THE FUNDS (CONTINUED)
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the value of its total assets consists of obligations the interest on which is
exempt from regular federal income tax. Tax-exempt interest dividends may
generally be treated by such Fund's shareholders as items of income excludible
from their gross income under the Code unless, under the circumstances
applicable to the particular shareholder, exclusion would be disallowed. Exempt-
interest dividends may also have certain collateral federal income tax
consequences, including Alternative Minimum Tax consequences. Current federal
tax law limits the types and volume of bonds qualifying for the federal income
tax exemption of interest, which may have an effect on the ability of these
Funds to purchase sufficient amounts of tax-exempt securities to satisfy the
Code's requirements for the payment of 'exempt-interest' dividends.
Interest on indebtedness incurred or continued by a shareholder in order
to purchase or carry shares of these Funds is not deductible for federal income
tax purposes. Furthermore, these Funds may not be an appropriate investment for
persons (including corporations and other business entities) who are
'substantial users' (or persons related to 'substantial users') of facilities
financed by industrial development or private activity bonds. Such persons
should consult their tax advisers before purchasing shares. A 'substantial user'
is defined generally to include 'certain persons' who regularly use in their
trade or business a part of a facility financed from the proceeds of such bonds.
Except as noted below, tax-exempt interest dividends and other
distributions paid by these Funds may be taxable to investors as dividend income
under state or local law even though a substantial portion of such distributions
may be derived from interest on tax-exempt obligations which, if received
directly, would be exempt from such income taxes.
CASH RESERVE
TREASURY RESERVE
TAX-FREE RESERVE
With respect to investments in STRIPS and Receipts which are sold at original
issue discount and thus do not make periodic cash interest payments, a Fund will
be required to include as part of its current income the imputed interest on
such obligations even though the Fund has not received any interest payments on
such obligations during that period. Because each Fund distributes all of its
net investment income to its shareholders, a Fund may have to sell portfolio
securities to distribute such imputed income, which may occur at a time when the
investment adviser would not have chosen to sell such securities and which may
result in a taxable gain or loss.
PENNSYLVANIA TAX CONSIDERATIONS
For purposes of the Pennsylvania Personal Income Tax and the Philadelphia School
District Investment Net Income Tax, distributions which are attributable to
interest received by the Pennsylvania Municipal Bond Fund from its investments
in Pennsylvania Municipal Securities or in direct obligations of the United
States, its territories and certain of its agencies and instrumentalities
('Federal Securities'), including obligations issued by U.S. possessions, are
not taxable. Distributions by the Fund to a Pennsylvania resident that are
attributable to most other sources may be subject to the Pennsylvania Personal
Income Tax and (for residents of Philadelphia) to the Philadelphia School
District Investment Net Income Tax.
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60 Taxes
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Shares of the Pennsylvania Municipal Bond Fund are exempt from
Pennsylvania county personal property taxes and (as to residents of Pittsburgh)
from personal property taxes imposed by the City of Pittsburgh and the School
District of Pittsburgh to the extent that the Fund's portfolio consists of
Pennsylvania Municipal Securities and Federal Securities, including obligations
issued by U.S. possessions.
To the extent that gain on the disposition of a share represents gain
realized on Pennsylvania Municipal Securities held by the Pennsylvania Municipal
Bond Fund, such gain may be subject to the Pennsylvania Personal Income Tax and
the School District Tax, except that gain realized with respect to a share held
for more than six months is not subject to the School District Tax.
NEW JERSEY TAX CONSIDERATIONS
Investors of the New Jersey Municipal Bond Fund will not be subject to the New
Jersey Gross Income Tax on distributions from the Fund attributable to interest
income from (and net gain, if any, from the disposition of) New Jersey Municipal
Securities or Federal Securities held by the Fund, either when received by the
Fund or when credited or distributed to the investors, provided that the Fund
meets the requirements for a qualified investment fund by: (i) maintaining its
registration as a registered investment company; (ii) investing at least 80% of
the aggregate principal amount of the Fund's investments, excluding cash and
cash items, in New Jersey Municipal Securities or Federal Securities; and (iii)
investing 100% of its assets in interest-bearing obligations, discount
obligations, and cash, including receivables.
For New Jersey Gross Income Tax purposes, net income or gains and
distributions derived from investments in other than New Jersey Municipal
Securities and Federal Securities, and distributions from net realized capital
gains in respect of such investments, will be taxable.
Gain on the disposition of shares of this Fund is not subject to New
Jersey Gross Income Tax, provided that the Fund meets the requirements for a
qualified investment fund set forth above.
BACK-UP WITHHOLDING
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.
IN GENERAL
The sale or redemption of shares of a mutual fund is a taxable event to the
selling or redeeming shareholder. Gains or losses (if any) may also be realized
from an ordinary redemption of shares, as described herein, or on a telephone
exchange among the CoreFunds portfolios.
In the opinion of counsel, shares of the Funds are exempt from current
Pennsylvania Personal Property Taxes.
Shareholders will be advised at least annually as to the federal income
tax status of distributions made during the year. See
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Taxes 61
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INFORMATION ON THE FUNDS (CONTINUED)
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the Statement of Additional Information for further information regarding taxes.
/X/
VALUATION OF SHARES
NET ASSET VALUE ________________________________________________________________
EQUITY FUNDS
FIXED INCOME FUNDS
The shares of these Funds will fluctuate in value as a result of changes in the
value of their portfolio investments. Shares in the Funds will realize capital
gains or losses as portfolio investments are sold above or below costs,
respectively.
The net asset value per share of these Funds for purposes of pricing
purchase and redemption orders is normally determined as of 4:00 p.m. (Eastern
time) (the 'Valuation Time') on each business day of the Funds. A 'business day'
of a Fund is a day on which the New York Stock Exchange is open for trading, and
any other day (other than a day on which no shares of the Fund are tendered for
redemption and no order to purchase any shares is received) during which there
is a sufficient degree of trading in securities or instruments held by the Fund
such that the Fund's net asset value per share might be materially affected. Net
asset value per share is calculated by dividing the value of all of the Fund's
portfolio securities and other assets, less liabilities, by the number of
outstanding shares of the Fund at the time of the valuation. The result
(adjusted to the nearest cent) is the net asset value per share.
MONEY MARKET FUNDS The net asset value per share of each of these Funds for
purposes of pricing purchase and redemption orders is normally determined as of
12:00 noon (Eastern time) on each business day of the Funds. These Funds are
managed to maintain a stable price per share of $1.00.
PORTFOLIO PRICING ______________________________________________________________
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. 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. 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.
INTERNATIONAL GROWTH FUND
GLOBAL BOND FUND
Securities listed on a foreign exchange are valued at the most recent closing
price available before the time when assets are valued. All prices of listed
securities are taken from the exchange where the security is primarily traded.
Securities regularly traded in the over-the-counter market for which market
quotations are readily available will be valued at the current bid price.
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. 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.
In addition, all assets and liabilities initially expressed in foreign
currencies will be translated into U.S. dollars at the bid price of such
currencies against U.S. dollars last quoted by a major bank or by a broker. If
such quotations are not available as of the close of the Exchange, the rate of
exchange will be determined in accordance with the policies established in good
faith by the Board of Directors.
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62 Valuation of Shares
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/X/ COREFUND
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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.
MONEY MARKET FUNDS The assets in the Money Market Funds are valued based upon
the amortized cost method, based on rules promulgated under the Investment
Company Act. Under this method of valuation, the value of a Fund's shares
normally will not change in response to fluctuating interest rates. In
connection with its use of this valuation method, however, each Fund monitors
the deviation between the amortized cost value of its assets and their market
value (which can be expected to vary inversely with changes in prevailing
interest rates). Although each Fund seeks, through its use of amortized cost
valuation, to maintain its net asset value per share at $1.00, there can be no
assurance that the net asset value will not vary.
/X/
MANAGEMENT
The business and affairs of each Fund are managed under the direction of
CoreFunds' Board of Directors.
INVESTMENT ADVISER,
SUB-ADVISERS ___________________________________________________________________
CoreStates Advisers has overall responsibility for portfolio management for each
of the Funds. CoreStates Advisers is a wholly-owned subsidiary of CoreStates
Bank, itself a wholly-owned subsidiary of CoreStates Financial Corp ('CoreStates
Corp'). CoreStates Corp, based in Philadelphia, Pennsylvania, is one of the 20
largest bank holding companies in the United States, and leads the region in
investing corporate cash. CoreStates Corp currently has over $45 billion in
assets and discretionary management over $22 billion in customer accounts
through a variety of banking activities at over 355 domestic and foreign
locations. CoreStates Corp's leading subsidiary, CoreStates Bank, currently
ranks thirty-second in the management of discretionary trust assets.
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Management 63
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INFORMATION ON THE FUNDS (CONTINUED)
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CoreStates Advisers is an adviser registered under the Investment Advisers
Act of 1940. It performs most investment management and advisory functions for
the trust departments of CoreStates Corp's banking subsidiaries, related
investment advisory, research, trading, and fund management functions, and also
provides similar services to customers unrelated to CoreStates Corp. CoreStates
Advisers currently manages discretionary and nondiscretionary client security
portfolios with a total aggregate market value of over $16 billion, for
individuals, corporations, institutions, and municipalities. CoreStates Advisers
has extensive experience in the management of money market, tax-free, fixed
income, equity, and international investments. CoreStates Advisers' principal
offices are located at 1500 Market Street, P.O. Box 7558, Philadelphia, PA
19102.
As investment adviser, CoreStates Advisers manages the investment
portfolio of each Fund, makes decisions with respect to and places orders for
all purchases and sales of a Fund's portfolio securities, and maintains certain
records relating to such purchases and sales. CoreStates Advisers pays all
expenses incurred by it in connection with its investment advisory activities,
other than the cost of securities (including any brokerage commissions)
purchased for the Funds and the cost of obtaining market quotations for
portfolio securities held by the Funds.
CoreStates Advisers has delegated some of its portfolio management
functions with respect to International Growth Fund to Martin Currie and
Aberdeen Managers, and with respect to Global Bond Fund to Alpha Global Fixed
Income Managers, Inc. ('Alpha Global') pursuant to separate Sub-Advisory
Agreements between CoreStates Advisers and each of Martin Currie, Aberdeen
Managers and Alpha Global.
Martin Currie, a New York corporation located in Edinburgh, Scotland, is a
wholly-owned subsidiary of Martin Currie, Ltd., which is wholly-owned by its
full-time working executives and is one of Scotland's largest independent
investment management groups. Martin Currie was founded in order to provide
foreign investment advisory services to U.S. funds seeking diversification into
international markets. Although Martin Currie has had extensive experience in
managing a variety of international equity investment companies, International
Growth Fund is the first U.S. registered investment company for which Martin
Currie has acted in an investment advisory capacity. Martin Currie is located at
Saltire Court, 20 Castle Terrace, Edinburgh EH 2ES, Scotland.
Aberdeen Managers, a Delaware corporation located in Ft. Lauderdale,
Florida, is a wholly-owned subsidiary of Aberdeen Trust PLC ('Aberdeen PLC'),
publicly traded in the U.K., which is owned by four institutional investors,
including a subsidiary of CoreStates Financial Corp which owns 14% of Aberdeen
PLC. Aberdeen was formed in 1876 and has been managing investment funds since
1986. It formed Aberdeen Managers in 1995 and it provides foreign investment
advisory services in the U.S. Although Aberdeen Managers has had extensive
experience in managing a variety of international equity investment companies,
International Growth Fund is the first U.S. registered investment company for
which Aberdeen Managers has acted in an investment advisory capacity. Aberdeen
Managers is located at Nations Bank Tower, 22nd Floor, Ft. Lauderdale, Florida
33394.
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64 Management
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Alpha Global 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 $130 billion. Alpha Global 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. Alpha Global is located at 25/28 Old Burlington Street,
London WIX 1LB, England.
As sub-advisers to International Growth Fund and Global Bond Fund, Martin
Currie and Aberdeen Managers, and Alpha Global manage the investment portfolio
of their respective Funds, make decisions with respect to and place orders for
the majority of the purchases and sales of such Fund's portfolio securities, and
maintain certain records relating to such purchases and sales. Martin Currie and
Aberdeen Managers, and Alpha Global pay all expenses incurred by them in
connection with their sub-advisory activities, other than the cost of securities
(including any brokerage commissions) purchased for a Fund and the cost of
obtaining market quotations for portfolio securities held by a Fund.
ADVISORY FEES
For the services provided and expenses assumed as investment adviser of each
Fund, CoreStates Advisers is entitled to receive an annual fee from each of the
Funds, computed daily and paid monthly, at the annual rate of .74% of the
average daily net assets of Equity Fund; .75% of the average daily net assets of
Growth Equity Fund; .80% of the average daily net assets of International Growth
Fund; 1.50% of the average daily net assets of Special Equity Funds; .70% of the
average daily net assets of Balanced Fund; .74% of the average daily net assets
of the Bond Fund and Short Term Income Fund, respectively; .60% of the average
daily net assets of Global Bond Fund; .50% of the average daily net assets of
Short-Intermediate Bond Fund, Intermediate Municipal Bond Fund, Government
Income Fund, Pennsylvania Municipal Bond Fund and New Jersey Municipal Bond
Fund, respectively; and .40% of the average daily net asset of Treasury Reserve,
Cash Reserve, and Tax-Free Reserve, respectively. CoreStates Advisers may, from
time to time and at its discretion, voluntarily waive all or a portion of its
investment advisory fees in order to assist the Funds in maintaining competitive
expense ratios.
For the services provided as sub-advisors to the International Growth
Fund, Martin Currie and Aberdeen Managers are each entitled to receive a fee
from CoreStates Advisers, computed daily and paid monthly, at the annual rate of
.50% of such portion of the Fund's assets managed. For the services provided as
Global Bond Fund's sub-adviser, Alpha Global is entitled to receive a fee from
CoreStates Advisers, computed daily and paid monthly, at the annual rate of .30%
of such Fund's average net assets.
FUND MANAGERS __________________________________________________________________
The following individuals are primarily responsible for managing the investment
portfolios of the Funds:
GROWTH EQUITY FUND Timothy R. Stives, a Senior Managing Director of CoreStates
Advisers, manages Growth Equity Fund. Prior to joining CoreStates Advisers, Mr.
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Management 65
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INFORMATION ON THE FUNDS (CONTINUED)
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Stives was Vice President of Chancellor Capital Management. Prior to joining
Chancellor, he was a securities analyst and portfolio manager with CitiCorp. Mr.
Stives has managed growth stock portfolios, including corporate and public
pension fund portfolios, since 1988. Mr. Stives holds an M.B.A. from Rutgers
University and a B.A. from Pennsylvania State University.
EQUITY AND SPECIAL EQUITY FUNDS Joseph E. Stocke, CFA, is a Senior Managing
Director of CoreStates Advisers and manages the Equity and Special Equity Funds.
Previously, he was a Senior Vice President and Senior Equity Manager with
Meridian Investment Company. Mr. Stocke had been with Meridian Investment
Company (or a predecessor) since 1983. Mr. Stocke began his investment career in
1982 and obtained his B.S. in Economics attending The Wharton School, and
University of Pennsylvania and completed graduate courses at New York
University. Mr. Stocke has been part of Meridian's Equity Unit Committee
overseeing the Equity Fund and the Special Equity Fund since their inception,
INTERNATIONAL GROWTH FUND Michael J. Gibson, Director of Client Services for
Martin Currie, is the lead director of an investment team responsible for
managing International Growth Fund. Mr. Gibson has 21 years experience of
portfolio investment in international stock markets. A graduate of the
University of Oxford, England, he spent seven years as an investment manager
with British Investment Trust in Edinburgh and a further four years with The
Bank of Scotland in the same capacity. He joined Martin Currie in 1983 where he
worked initially in the North American Investment team and was then made
responsible for the firm's investments in Continental Europe. He became Director
of Client Services in 1992.
Beverly Hendry, Director of Aberdeen Managers, is the lead director of an
investment team responsible for managing International Growth Fund.
BALANCED FUND Steve Dalton, a Vice President of CoreStates Advisers, is
portfolio manager of the Balanced Fund. Mr. Dalton has been a senior portfolio
manager of balanced portfolios since 1986 and a member of the Equity Policy
Committee since 1990. Since 1988 he has been responsible for management of
CoreStates' oldest commingled trust, the CoreStates Balanced Trust. In addition,
Mr. Dalton has managed balanced portfolios for employee benefit customers for
the last seven years, and has been a securities analyst responsible for the
health care, pharmaceutical, entertainment and broadcasting industries since
joining CoreStates in 1984. Prior to that, he was employed by Girard Bank as a
security analyst. He received a B.S. degree in Psychology from Cornell.
SHORT-INTERMEDIATE BOND FUND
Craig A. Moyer, a Senior Managing Director of CoreStates Advisers, is
Portfolio Manager of the Short-Intermediate Bond Fund. Mr. Moyer previously, was
with Meridian Investment Company since 1977. He began his investment career in
1974 and obtained his B.A. from Pennsylvania State University.
GOVERNMENT INCOME FUND
William T. Lawrence, a Vice President of CoreStates Advisers, is portfolio
manager for the Government Income Fund. Mr. Lawrence is also involved in
specialized fixed income products including GIC and Mortgage Backed Securities.
Prior to joining CoreStates Advisers, he was Vice President, Fixed Income Sales
for First Boston Corp. He has an M.B.A. in Finance from the Wharton School and a
B.A. in Economics and English from Bucknell University.
BOND FUND Leslie M. Varrelman is a Vice President of CoreStates Advisers. She
formerly was a Vice President and Fixed Income Manager with Meridian Investment
Company, since January 1994. Prior to her position with Meridian, Ms. Varrelman
was Vice President of CoreStates Investment Advisers where she managed the
commingled fixed income funds and managed the Limited Maturity Products area.
Ms. Varrelman obtained her B.S. in Business Administration from Juniata College
in 1981. Ms. Varrelman is directly responsible for management of the Bond Fund.
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66 Management
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SHORT TERM INCOME FUND Cathy L. Rahab is an Assistant Vice President of
CoreStates Advisers. She formerly was an Assistant Vice President and Portfolio
Manager with Meridian Investment Company. Ms. Rahab began her investment career
in 1986 and obtained her B.S. in Business Administration from Villanova
University. Ms. Rahab joined the Fixed Income Unit of Meridian in 1994. Ms.
Rahab is directly responsible for management of the Short Term Income Fund.
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
Joseph R. Baxter manages these Funds. Mr. Baxter, a Vice President of CoreStates
Advisers, is head of the Tax-Advantaged unit at CoreStates Advisers. He is
directly responsible for management of the CoreStates Pennsylvania Tax Exempt
Common Trust Fund. Mr. Baxter graduated from LaSalle University with a Bachelor
of Science Degree majoring in Finance and Marketing. In June 1980, he joined a
stock brokerage firm, Elkins & Co., in an operations capacity and came to
Philadelphia National Bank in May 1982 as an operations supervisor. In October
1984, he joined the Investment Management Division as a corporate cash manager
and in 1986 assumed responsibility for the tax exempt common trust funds.
GLOBAL BOND FUND George McNeill, President and Chief Executive Officer of Alpha
Global, is portfolio manager for Global Bond Fund. Together with United Asset
Management Corporation of Boston, Mr. McNeill founded Alpha Global and has
overall responsibility for its operations. After graduating from Edinburgh
University with degrees in Political Economy and Economic History, he joined the
investment department of Scottish Equitable Life Assurance Society. He then
joined Wallace Brothers Bank where he spent nine years, including seven years as
a Director with principal responsibility for the bank's fixed income
investments. Since 1977, he has worked as Managing Director of the investment
management operating company of Gillett Brothers, and for eight years as
Managing Director of Reserve Asset Managers, a specialist fixed income manager.
In 1989 Mr. McNeill joined Axe-Houghton, Ltd., the London subsidiary of USF&G
Corporation, as Director and Chairman of the Investment Strategy Committee.
CASH RESERVE Rosemary B. Crowley, a Senior Investment Officer of CoreStates
Advisers, is responsible for managing Cash Reserve. Ms. Crowley also manages the
CoreStates Liquidity Fund, as well as individually managed fixed income
portfolios. She is pursuing a Bachelor's Degree at the Wharton Evening School,
University of Pennsylvania. Ms. Crowley joined the Philadelphia National Bank in
1980 in the Institutional Sales Department and in 1981 transferred to the
Investment Management Division.
TREASURY RESERVE Ronald R. Brasten, a Senior Investment Officer of CoreStates
Advisers, manages Treasury Reserve. He also manages the CoreFund Fiduciary
Treasury Reserve and has investment responsibility for individually managed
corporate and personal accounts. After receiving his B.S. in Accounting from
Drexel University, Mr. Brasten joined the Financial Division of CoreStates in
1984. In 1986, he transferred
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Management 67
<PAGE>
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INFORMATION ON THE FUNDS (CONTINUED) /X/ COREFUND
- --------------------------------------------------------------------------------
to the Asset and Liability group as an ALCO analyst. Mr. Brasten joined
CoreStates Advisers in August 1989.
TAX-FREE RESERVE Folu Abiona, Senior Investment Officer, is portfolio manager of
the Tax-Free Reserve portfolio. Ms. Abiona also manages the Fiduciary Tax-Free
Reserve portfolio. She joined CoreStates Advisers in 1985 and became fixed
income portfolio manager in 1990. Prior to that, she was a mutual fund
administrator with CoreStates' Institutional Custody Division. Ms. Abiona holds
an M.B.A. from Temple University and B.Sc. from the University of Ife, Nigeria.
ADMINISTRATOR __________________________________________________________________
SEI Financial Management Corporation ('SFMC' or the 'Administrator'), with
principal offices at 680 East Swedesford Road, Wayne, PA 19087, acts as each
Fund's administrator. For its administrative services, SFMC is entitled to
receive a fee from each Fund, computed daily and paid monthly, at the annual
rate of .25% of such Fund's average daily net assets. As Administrator, SFMC
generally assists in the Funds' administration and operations. State Street Bank
and Trust Company located at 225 Franklin Street, Boston, MA 02110, serves as
each Fund's transfer agent (the 'Transfer Agent') and dividend paying agent.
DISTRIBUTOR ____________________________________________________________________
SEI Financial Services Company ('SFS' or the 'Distributor'), with principal
offices at 680 East Swedesford Road, Wayne, PA 19087, serves as each Fund's
distributor pursuant to a Distribution Agreement which applies to Class Y, Class
A and Class C Shares. Class A and Class C Shares are also subject to a separate
distribution plan (the 'Distribution Plan') approved by the Board of Directors
on April 13, 1992. The Distribution Plan provides that CoreFunds will pay the
Distributor an annual fee, calculated on an average daily net basis and paid
monthly, of up to .25% of the average daily net assets of Class A or Class C
Shares of each Fund. The Distributor may use this fee as compensation for its
distribution-related services or to compensate Participating Broker/Dealers and
Shareholder Servicing Agents for performing distribution-related or shareholder
services.
The services provided by Participating Broker/Dealers or Shareholder
Servicing Agents may include establishing and maintaining customer accounts and
records; aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with the Distributor;
automatically investing customer account cash balances; providing periodic
statements to customers; arranging for bank wires; answering routine customer
inquiries concerning their investments; assisting customers in changing dividend
options, account designations and addresses; performing sub-accounting
functions; processing dividend payments on behalf of customers; forwarding
certain shareholder communications from the Funds to customers; and providing
other similar services.
With respect to the Money Market Funds, the Distributor may, from time to
time and at its own expense, provide promotional incentives, in the form of cash
or other compensation, to certain financial institutions whose representatives
have sold or are expected to sell significant amounts of the shares of these
Funds.
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68 Performance Information
<PAGE>
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/X/ COREFUND
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Persons selling Class A or Class C Shares will receive different
compensation with respect to Class A or Class C Shares than Class Y Shares.
EXPENSES The Funds' expenses are accrued daily and are deducted from total
income before dividends are paid. Except as noted herein and in the Statement of
Additional Information, the Funds' service contractors bear all expenses
incurred in connection with the performance of their services on behalf of the
Funds. Similarly, the Funds bear the expenses incurred in their operations.
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 Series B 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.
In addition, certain state securities laws may require banks and other
institutional investors purchasing shares on behalf of their customers in such
states to register as dealers pursuant to state law.
/X/
PERFORMANCE
INFORMATION
TOTAL RETURN AND YIELD _________________________________________________________
From time to time, in advertisements or reports to shareholders, the performance
of the Funds may be quoted and compared to that of other mutual funds with
similar investment objectives and to relevant indices.
The Funds may calculate their performance on a total return basis for
various periods. The total return basis combines principal changes, income
dividends, and capital gains distributions paid during the period. Principal
changes are based on the difference between the beginning and closing net asset
values for the period and assume reinvestment of income dividends and capital
gains distributions paid during the period. The Funds may calculate their
performance for periods since commencement of operations and for calendar or
fiscal year periods (including multiple years). See 'Total Return' in the
Statement of Additional Information.
FIXED INCOME FUNDS
MONEY MARKET FUNDS
In addition to quoting total return, the Fixed Income Funds and Money Market
Funds may advertise 'yield' and 'effective yield.' Both yield figures are based
on historical earnings and are not intended to indicate future performance. The
'yield' of a Fund refers to the income generated by an investment in the Fund
over a 30-day period (which period will be stated in the advertisement). This
income is then 'annualized.' That is, the amount of income
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Performance Information 69
<PAGE>
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INFORMATION ON THE FUNDS (CONTINUED)
- --------------------------------------------------------------------------------
generated by the investment during that month is assumed to be generated each
month over a 12-month 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 the 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. See 'Yields' in the Statement of Additional
Information.
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund and Tax-Free Reserve may also advertise their
'taxable equivalent yield,' which is calculated by taking into account the
investor's current tax bracket. This is the yield an investor 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.
IN GENERAL _____________________________________________________________________
The Funds will include performance data for Class Y and Class A or Class C, as
appropriate, in any advertisement or information including performance data of
the Funds. Total return and performance data concerning Class A Shares will
reflect the sales charge and distribution and incremental transfer agent
expenses borne exclusively by Class A Shares. Total return and performance data
concerning Class C Shares will reflect the distribution and incremental transfer
agent expenses borne exclusively by Class C Shares.
The performance of any investment will generally reflect market
conditions, portfolio quality and maturity, type of investment, and operating
expenses. Each Fund's performance will fluctuate and is not necessarily
representative of future results. A Fund's performance would be favorably
affected by any investment advisory fee waivers on the part of CoreStates
Advisers. Shareholders will receive unaudited semi-annual reports
describing the Funds' investment operations and annual financial
statements audited by independent auditors.
EXPENSE RATIOS OF INTERNATIONAL GROWTH FUND AND GLOBAL BOND FUND Investors
should understand that the expense ratios of International Growth Fund and
Global Bond Fund can be expected to be higher than the expense ratios of funds
that invest only in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of advisory fees relating to foreign
portfolios are generally higher.
/X/
DESCRIPTION
OF SHARES
CoreFunds has set up Class A Shares representing the following portfolios:
Growth Equity, Equity, Special Equity, Equity Index, International Growth,
Balanced, Short-Intermediate Bond, Short Term Income Bond, Government Income,
Intermediate Municipal Bond, Pennsylvania Municipal Bond, New Jersey Municipal
Bond and Global Bond. In addition, CoreFunds has also set up Class C Shares
representing the Cash Reserve, Treasury Reserve and Tax-Free Reserve Portfolios.
CoreFunds offers two classes of shares of each portfolio except for Equity Index
Fund, CoreFund Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund
Elite Treasury Reserve, Fiduciary Reserve, Fiduciary Tax-Free Reserve, and
Fiduciary Treasury Reserve. In total, CoreFunds presently offers shares in
twenty-three different portfolios. CoreFunds may in the future create one or
more additional portfolios, or one or more classes of
- ----
70 Description of Shares
<PAGE>
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/X/ COREFUND
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shares within a portfolio. Class Y Shares -- Institutional and shares of Equity
Index Fund, Elite Cash Reserve, Elite Government Reserve, Elite Treasury
Reserve, Fiduciary Reserve, Fiduciary Treasury Reserve, and Fiduciary Tax-Free
Reserve, are offered in separate prospectuses. This Prospectus solely relates to
Classes A and C Shares -- Individual.
Class A Shares differ from Class Y Shares in that Class A Shares are
subject to a sales load and distribution and transfer agent expenses for certain
additional shareholder services they receive. Class C Shares also differ from
Class Y Shares in that Class C Shares are subject to distribution and transfer
agent expense for certain additional shareholder services, but unlike Class A
Shares, are not subject to a sales load. Class A and Class C Shares also have
voting rights which Class Y Shares do not, in connection with the Distribution
Plan affecting Class A and Class C Shares. The distribution and transfer agent
expenses charged to Class A and Class C Shares result in having different
dividends and performance results from Class Y Shares. In addition, the minimum
initial investment for Class Y Shares is substantially higher than that required
for Class A and Class C Shares, with the exception of the Equity Index Fund.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO CLASS A AND CLASS C SHARES OF THE FUNDS AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER
MATTERS RELATING TO SUCH SHARES. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION
REGARDING OTHER COREFUND PORTFOLIOS MAY OBTAIN PROSPECTUSES DESCRIBING SUCH
PORTFOLIOS BY CONTACTING THE DISTRIBUTOR AT 1-800-355-CORE.
Except for differences between classes of shares of some of CoreFunds'
portfolios pertaining to distribution costs, incremental transfer agency fees
and any other incremental expenses identified that should be properly allocated
to a class, each share in each Fund represents an equal proportionate interest
in that Fund with each other share of the same Fund and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
such Fund as are declared in the discretion of the Board of Directors.
CoreFunds' shareholders are entitled to one vote for each full share held,
and fractional votes for fractional shares held, and will vote in the aggregate
and not by portfolio or class except as otherwise expressly required by law or
when the Board of Directors determines that the matter to be voted upon affects
only the interests of the shareholders of a particular portfolio or class. See
the Statement of Additional Information under 'Description of Shares' for
examples where the Investment Company Act requires voting by portfolio or class.
Voting rights are not cumulative and, accordingly, the holders of more than 50%
of the aggregate number of shares of all of the Funds may elect all of the
directors if they choose to do so and, in such event, the holders of the
remaining shares would not be able to elect any person or persons to the Board
of Directors.
As used in this Prospectus, a 'vote of a majority of the outstanding
shares' of a Fund means the affirmative vote of the
----
Description of Ratings 71
<PAGE>
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INFORMATION ON THE FUNDS (CONTINUED)
- --------------------------------------------------------------------------------
lesser of (a) more than 50% of the outstanding shares of a Fund, or (b) at least
67% of the shares of a Fund present at a meeting at which the holders of more
than 50% of the outstanding shares of such Fund are represented in person or by
proxy.
/X/
GENERAL
INFORMATION
In accordance with the Maryland General Corporation Law, CoreFunds is not
required to hold annual meetings of shareholders unless the Investment Company
Act requires the shareholders to elect members of the Board of Directors.
However, a meeting of shareholders may be called for any purpose upon the
written request of the holders of at least 10% of the outstanding shares of
CoreFunds, or of a Fund with respect to matters affecting only such Fund.
As used in this Prospectus, 'assets belonging to the Fund' means the
consideration received by CoreFunds upon the issuance or sale of shares in a
Fund, together with all income, earnings, profits and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, and any funds or CoreFunds' other portfolios.
Assets belonging to a Fund are charged with the direct liabilities in respect of
that Fund and with a share of the general liabilities of CoreFunds allocated in
proportion to the relative asset values of each of CoreFunds' portfolios at the
time the expense or liability is incurred. The management of CoreFunds makes
determinations with respect to a Fund as to liabilities when they are incurred
and as to assets when they are acquired. Such determinations are reviewed and
approved annually by the Board of Directors and are conclusive.
/X/
DESCRIPTION
OF RATINGS
DESCRIPTION OF MUNICIPAL AND
CORPORATE BOND RATINGS _________________________________________________________
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
Debt rated A by S&P 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.
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.
Bonds which are rated Aaa by Moody's 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 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
- ----
72 General Information
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/X/ COREFUND
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issues. Bonds rated Aa by Moody's are judged by Moody's to be of high quality by
all standards. Together with bonds rated Aaa, 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 risks appear somewhat larger than in Aaa
securities.
Bonds which are rated A by Moody's 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.
Bonds which are rated Baa by Moody's 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.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions liable to only slight market fluctuation other than through changes
in the money rate. The prime feature of an AAA bond is a showing of earnings
several times or many times interest requirements, with such stability of
applicable earnings that safety is beyond reasonable question whatever changes
occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose merits are not unlike
those of the AAA class, but whose margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured but influenced
as to rating by the lesser financial power of the enterprise and more local type
market.
Bonds rated Duff-1 are judged by Duff to be of the highest credit quality
with negligible risk factors, only slightly more than U.S. Treasury debt. Bonds
rated Duff-2, 3 and 4 are judged by Duff to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.
Obligations rated AAA by IBCA have 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 significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. 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.
DESCRIPTION OF MUNICIPAL NOTE RATINGS __________________________________________
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for
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Description of Ratings 73
<PAGE>
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INFORMATION ON THE FUNDS (CONTINUED)
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their servicing or from established and broad-based access to the market for
refinancing or both. Short-term municipal securities rated MIG-2 or VMIG-2 are
of high quality. Margins of protection are ample although not so large as in the
preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment.
/ / Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
/ / 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).
S&P NOTE RATING SYMBOLS ARE AS FOLLOWS:
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.
SP-2 Satisfactory capacity to pay principal and interest.
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Description of Ratings 74
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SHAREHOLDER SERVICES GUIDE /X/ COREFUND
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<S> <C>
OPENING AN ACCOUNT AND To open a new account, either by mail or by wire, simply complete and return an Account
PURCHASING SHARES Application Form. Your purchase must be equal to or greater than the $500 minimum initial
investment requirement for each Fund. There is no minimum initial investment requirement for
Automatic Investment Plans. Shares of the Funds are only offered to residents of states in which
the shares are eligible for purchase. If you need assistance with the Account Application Form or
have any questions about the Funds, please call 1-800-355-CORE.
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</TABLE>
<TABLE>
<S> <C> <C>
PURCHASING NEW ACCOUNT ADDITIONAL INVESTMENTS TO EXISTING ACCOUNTS
BY MAIL: Mail the Account Application Form and a check Mail your check with the return stub from your
Complete and sign the payable to CoreFunds, Inc. (Fund name) in at confirmation or statement to:
enclosed Account least the minimum initial purchase amount to:
Application Form.
COREFUNDS, INC.,
P.O. BOX 470
WAYNE, PA 19087-0470
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</TABLE>
<TABLE>
<S> <C>
PURCHASING CORESTATES PHIL,
BY WIRE: Philadelphia, PA
Money should be wired ABA 031000011,
to: for credit to
COREFUNDS
A/C 0169-0541
ACCOUNT NUMBER
BEFORE WIRING: The wire instructions must include the investor's account number. An order to purchase shares by
Please contact Federal Funds wire will be deemed to have been received on the business day of the wire, provided
CoreFunds Investor that investors notify CoreFunds Investor Services at 1-800-355-CORE by 12:00 p.m. (Eastern Time)
Services of their intentions to wire money.
(1-800-355-CORE)
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PURCHASING You may open an account or purchase additional shares by making an exchange from an existing
BY CoreFunds account. Call CoreFunds Investor Services at 1-800-355-CORE. For further information
EXCHANGE: regarding exchanges, please refer to page 81.
(from a CoreFund
account)
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Shareholder Services 75
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SHAREHOLDER SERVICES GUIDE (CONTINUED)
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AUTOMATIC INVESTMENT A shareholder or prospective shareholder may arrange for periodic investments in a fund through
PLAN automatic deductions by ACH from a checking account by completing the appropriate section on the
application or the account change form. There is no minimum initial investment amount for AIPS;
however, the minimum pre-authorized investment amount is $50 per month per account. An
Application Form or account change form may be obtained by calling 1-800-355-core.
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SYSTEMATIC WITHDRAWAL Corefunds offers a systematic withdrawal plan which may be used by shareholders who wish to
PLAN receive regular distributions from their account. Upon commencement of the SWP, the account must
have a current value of $5,000 or more. Shareholders may elect to receive automatic payments via
check or ACH of $50 or more on a monthly, quarterly, semi-annual, or annual basis. Automatic
withdrawals are normally processed on the 25th day of the applicable month or, if such day is not
a business day, on the previous business day, and are paid promptly thereafter. To arrange a SWP,
complete the appropriate section on the application or the account change form. Either of these
forms may be obtained by calling 1-800-355-core. Shareholders should realize that if withdrawals
exceed income dividends, their invested principal in the account will be depleted. Thus,
depending upon the frequency and amounts of the withdrawal payments and/or any fluctuations in
the net asset value per share, their original investment could be exhausted entirely. To
participate in the SWP, shareholders must have their dividends automatically reinvested.
Shareholders may change or cancel the SWP at any time, upon written notice to CoreFunds Investor
Services or the Transfer Agent.
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EXECUTION OF ORDERS An order received before 4:00 p.M. For an Equity or Fixed Income Fund, or prior to 12:00 p.M. For
a Money Market Fund, on any business day, and in accordance with the procedures described below,
will be executed on the date of receipt at the net asset value determined as of 4:00 p.M. (12:00
P.M. For a Money Market Fund) on such date, plus any applicable sales charge. An order received
after 4:00 p.M. On any business day for an Equity or Fixed Income Fund, or after 12:00 p.M. For a
Money Market Fund, will be executed on the next business day of the Fund. An order is deemed to
be received when received by the transfer agent and the execution of purchase orders by the
Transfer Agent will be delayed for the period of time that the order is in transit from CoreFunds
investor service to the Transfer Agent. Special procedures may be established by a Fund to
expedite the receipt of orders from institutional investors. Institutional investors purchasing
or
</TABLE>
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76
<PAGE>
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/X/ COREFUND
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<TABLE>
<S> <C>
holding shares on behalf of their customers are responsible for the transmission of purchase and
redemption orders (and the delivery of funds) to a Fund on a timely basis. The Funds strongly
recommend that investors of substantial amounts use Federal Funds to purchase shares. Every
shareholder of record will receive a confirmation of each new share transaction with a Fund,
which will show the total number of shares being held in safekeeping by the Transfer Agent for
the account of the shareholder. Shareholders may rely on these statements in lieu of
certificates. Beneficial ownership of shares held of record by institutional investors on behalf
of their customers will be recorded by the institutions and reflected in the regular account
statements provided by them to their customers.
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SALES The sales charges for Class A Shares are as follows:
CHARGES
</TABLE>
<TABLE>
<S> <C> <C> <C>
SALES CHARGE AS
SALES CHARGE AS PERCENTAGE OF BROKER
AMOUNT OF PERCENTAGE OF NET AMOUNT DEALER
PURCHASE OFFERING PRICE INVESTED REALLOWANCE
- -----------------------------------------------------------------------------------------------------------
Less than $100,000 ....................... 3.25% 3.36% 2.75%
$100,000 but less than $250,000 .......... 2.50% 2.56% 2.00%
$250,000 but less than $500,000 .......... 1.75% 1.78% 1.25%
$500,000 but less than $1,000,000 ........ 1.00% 1.01% 0.50%
$1,000,000 and above ..................... 0% 0% 0%
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</TABLE>
<TABLE>
<S> <C>
The Reallowances shown in the above table apply to sales through financial institutions. Under
certain circumstances, the Distributor may use its own funds to compensate financial institutions in
amounts that are additional to the reallowances shown in the table. In addition, the Distributor
may, from time to time and at its own expense, provide promotional incentives, in the form of cash
or other compensation, to certain financial institutions whose representatives have sold or are
expected to sell significant amounts of the shares of a Fund.
Brokers, dealers, or financial institutions that receive a reallowance of 100% of the sales charge
may be considered underwriters for purposes of the federal securities laws.
</TABLE>
<TABLE>
<S> <C>
The following classes of shareholders will be exempted from paying any sales charge: (a) employees
(including members of their immediate families and significant others) of CoreStates Corp, Martin
Currie, Alpha Global, Aberdeen Managers and their affiliates and those persons engaged in the sale
and
</TABLE>
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Shareholder Services 77
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SHAREHOLDER SERVICES GUIDE (CONTINUED)
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<TABLE>
<S> <C>
distribution of CoreFunds; (b) employees of the Administrator and Distributor; (c) Directors and
officers of CoreFunds; (d) customers who purchase their shares under a shareholder servicing
arrangement between CoreFunds and CoreStates Corp or its affiliates, having met specific standards
which CoreStates Corp or its affiliates will publish periodically and which qualify those customers
as customers of the Private Banking Groups; (e) Individual Retirement Account rollovers from
qualified employee benefit plans, Keogh plans, and Simplified Employee Benefit plans, and Simplified
Employee Benefit Plans where CoreStates Corp or its affiliate serves as trustee or investment
manager; (f) any retirement plan qualified under Section 401(a) of the Code or any other non-
qualified benefit plan; (g) any participant-directed retirement plan qualified under Section 401(a)
of the Code or any participant-directed non-qualified defined compensation plan described in Section
457 of the Code; and (h) persons purchasing shares directly through a payroll deduction program
administered by CoreStates Corp or its affiliates. In addition, the initial sales charge will be
waived for (a) investors who are transferring shares from another investment company which has a
broker/dealer relationship with CoreFunds for which they have already paid a sales charge since
October 26, 1992, (b) customers converting from CoreStates Personal Financial Services Asset
Allocation Program (CorePath) to Class A and Class C Shares of a Fund and (c) shareholders who have
purchased shares of a mutual fund through an asset allocation program offered by a company which has
been acquired by CoreStates Financial Corp, and who wish to transfer those shares to Class A and
Class C Shares of a Fund. Subsequent investments in the Funds by these investors will be subject to
the applicable sales charge.
The sales charge will not apply to purchases made through reinvested dividends and distributions.
The sales charge also will not apply to exchanges between portfolios of CoreFunds to the extent that
a shareholder has credit for previously paid sales charges on purchases of any of the portfolios of
CoreFunds.
1. RIGHT OF ACCUMULATION
</TABLE>
<TABLE>
<S> <C>
A shareholder who purchases additional Class A and Class C Shares may obtain a 'Right of
Accumulation.' This Right allows an investor to combine the current purchase of Class A and Class C
Shares with the total market value or net investment, whichever is higher, of all shares held of any
portfolio of CoreFunds which assesses a sales charge. To obtain the reduced sales charge through a
Right of Accumulation, the shareholder must provide the Distributor, either directly or through
CoreStates Securities Corp or a Participating Broker/Dealer, as applicable, with sufficient
information to verify that the
</TABLE>
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78 Shareholder Services
<PAGE>
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/X/ COREFUND
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<TABLE>
<S> <C>
shareholder has such a right. CoreFunds may amend or terminate this Right of Accumulation at any
time as to subsequent purchases.
2. LETTER OF INTENT
An investor may also obtain the reduced sales charge shown above by executing a 'Letter of Intent'
which states the investor's intention to invest not less than $100,000 within a 13 month period in
Class A and Class C Shares. Each purchase under a Letter of Intent will be made at the offering
price applicable at the time of such purchase to the full amount indicated on the Letter of Intent.
The Letter of Intent may apply to purchases made up to ninety days before the date of the Letter.
Any redemptions made during the 13 month period will be subtracted from the amount of purchases in
determining whether the terms of the Letter of Intent have been met. During the term of the Letter
of Intent, the Transfer Agent will hold Class A and Class C Shares representing 5% of the specified
amount in escrow for payment of a higher sales charge if the full amount specified is not purchased.
The escrowed shares will be released when the full amount specified has been purchased. If the full
amount specified is not purchased within the 13 month period, the investor will be required to pay
an amount equal to the difference in the dollar amount of sales charge actually paid and the amount
of sales charge the investor would have had to pay on his or her aggregate purchases if the total of
such purchases had been made at a single time. See 'Terms and Conditions' included in the Letter of
Intent. An investor who wishes to enter into a Letter of Intent in conjunction with an investment in
Class A and Class C Shares should complete the appropriate section of the application or contact the
Distributor, CoreStates Securities Corp or a Participating Broker/Dealer.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
SELLING YOUR You may withdraw any portion of the funds in your account by redeeming shares at any time. You may
SHARES initiate a request by writing or by telephoning. Your redemption proceeds may be sent via mail, wire
or ACH. With respect to shares held by institutional investors on behalf of their customers'
accounts, however, all or part of the shares beneficially owned by a customer must be redeemed in
accordance with instructions and limitations pertaining to their account at the institution.
----------------------------------------------------------------------------------------------------
REDEMPTION A written request for redemption must be received by the Transfer Agent in order to constitute a
BY MAIL: valid tender for redemption by mail. Requests should be mailed to:
COREFUNDS, INC.
P.O. BOX 470
WAYNE, PA 19087-0470
The Transfer Agent may require that the signature on the written request be guaranteed by a
commercial bank or by a member firm of a domestic stock
----------------------------------------------------------------------------------------------------
</TABLE>
----
Shareholder Services 79
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES GUIDE (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
exchange. Signature guarantees will be required if: (a) the redemption request is an amount in
excess of $25,000; (b) redemption proceeds are to be sent to a name and/or address that differs from
the registered name or address of record; or (c) a transfer of registration is requested. Otherwise,
written redemption requests by mail may be accepted without a signature guarantee.
----------------------------------------------------------------------------------------------------
REDEMPTION Shareholders wishing to make redemptions by telephone must provide the information requested in the
BY Account Application form. Thereafter, telephone redemption requests may be made by calling CoreFunds
TELEPHONE: Investor Services at 1-800-355-CORE. Payment for telephone redemptions will normally be transmitted
on the next business day following receipt of a valid request for redemption. You may have the
proceeds sent to you either by mail or wire.
</TABLE>
<TABLE>
<S> <C> <C>
BY WIRE: Shareholders of record may have their telephone redemption requests paid by a direct
wire to a domestic commercial bank account previously designated by the shareholder
on the Account Application Form. The Transfer Agent may deduct its then-current wire
fee from the proceeds for wire redemptions. As of the date of this Prospectus, such
fee was $10.00 for each wire redemption. There is no minimum for telephone
redemptions paid by wire.
</TABLE>
<TABLE>
<S> <C> <C>
BY MAIL: Redemption proceeds may be paid by a check mailed to the name and address in which
the shareholder's account is registered with a Fund. There is no minimum for
telephone redemptions paid by check.
Shareholders may not close their accounts by telephone.
------------------------------------------------------------------------------------------------------
REDEMPTION The Money Market Funds will provide shareholders of record, upon request to CoreFunds Investor
BY CHECK: Services or the Transfer Agent and without charge, with checks drawn on these Funds that will clear
Money Market Funds only through CoreStates Bank of Delaware, N.A. (the 'Clearing Bank'). Shareholders will be required to sign
signature cards and will be subject to any applicable rules and regulations of the Clearing Bank
relating to such check redemption privileges. Banks, corporations, trusts, and other organizations
should contact the Funds before submitting signature cards, since corporate resolutions or other
supporting documents may be required before the checkwriting privilege may be used.
Checks drawn on the Money Market Funds may be made payable to the order of any payee in an amount of
$250 or more. Shareholders should be aware that, as is the case with regular bank checks, certain
banks may not provide cash at the time of deposit, but will wait until they have received payment from
the Clearing Bank. When a check is presented to the Clearing Bank for
- ----
80 Shareholder Services
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
- --------------------------------------------------------------------------------
payment, subject to a Fund's acceptance of the check, the Clearing Bank, as agent, causes the Fund
to redeem, at the net asset value next determined after such presentation, a sufficient number of
full and fractional shares in the shareholder's account with the Fund to cover the amount of the
check. Checks will be returned by the Clearing Bank if there are insufficient shares to meet the
withdrawal amount. Shareholders of record wishing to use this method of redemption should check the
appropriate box in the Account Application form, fill out the signature card available from
CoreFunds Investor Services, and mail the complete Form and signature card to CoreFunds, Inc., P.O.
Box 470, Wayne, PA 19087-0470. There is no charge for the clearance of any checks, although the
Clearing Bank will impose its customary overdraft fee in connection with returning any checks as to
which there are insufficient shares to meet the withdrawal amount. As of the date of this
Prospectus, the overdraft fee is $20.00.
Cancelled checks will ordinarily not be returned to the shareholder, although a shareholder may
obtain copies of cancelled checks drawn on the Funds by requesting them in writing from CoreFunds
Investor Services.
</TABLE>
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------------
REDEMPTION You may sell shares of the Fund by making an exchange into another CoreFunds account. For more
BY information, please see below.
EXCHANGE:
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
IMPORTANT / / Shareholders should be careful that fluctuations in the net asset value per share of a Fund
REDEMPTION have not caused the value of their account to fall below the amount of the intended redemption.
INFORMATION:
/ / Redemption orders for the Fixed Income and Equity Funds are executed at the net asset value per
share at 4:00 p.m. that day if received by 4:00 p.m. that day. Redemption orders for the Money
Market Funds are executed at the net asset value per share at 12:00 p.m. that day if received
by 12:00 p.m. that day. An order is deemed to be received when received by the Transfer Agent
and the execution of redemption orders by the Transfer Agent will be delayed for the period of
time that the redemption order is in transit from SEI Financial Management Corporation to the
Transfer Agent. Except as stated in the following paragraph, payment to shareholders for
redeemed shares will be made not later than seven business days after receipt by the Transfer
Agent of the request for redemption, absent extraordinary circumstances. However, to the
largest extent possible, the Funds will try to honor requests from shareholders for next-day
payment, if such payment would be consistent with a Fund's need for liquidity and stability.
</TABLE>
----
Shareholder Services 81
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES GUIDE (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
/ / Shareholders should note that payment for the redemption of shares which were purchased by
check may not be made until a Fund can verify that the payment for such purchase has been, or
will be, collected, which may take up to eight business days after the date of purchase. The
Funds intend to pay cash for all shares redeemed, but under abnormal conditions which make
payment in cash unwise, a Fund may make payment wholly or partly in 'readily marketable'
portfolio securities at their then market value equal to the redemption price. In such cases,
a shareholder may incur brokerage costs in converting such securities to cash.
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
MINIMUM Because of the relatively high cost of handling small investments, the Funds reserve the right to
ACCOUNT redeem, at net asset value, the shares of any shareholder whose account decreases to a value of less
BALANCE than $500. Accordingly, a shareholder making redemptions from a Fund may be subject to such
REQUIREMENT involuntary redemption. A shareholder will not be subject to such involuntary redemption if the
value of the shareholder's account falls below $500 solely because of market action. Before a Fund
redeems such shares and sends the proceeds to the shareholder, the shareholder will be given notice
that the value of the shares in the account is less than the minimum amount and will be allowed
sixty days to make an additional investment in an amount which will increase the value of the
account to at least $500.
- ------------------------------------------------------------------------------------------------------------------------------
EXCHANGING Shares of a Fund held by a shareholder of record may be exchanged for shares in any of CoreFunds'
SHARES other retail portfolios. Shareholders wishing to use this telephone exchange privilege must check
EXCHANGING the appropriate box on the Account Application Form or on the account change form. Exchange requests
BY should be directed to CoreFunds Investor Services at 1-800-355-CORE. Telephone exchange privileges
TELEPHONE: are only available in states where exchanges from one CoreFunds portfolio to another can lawfully be
Call CoreFunds made.
Investor Services
(1-800-355-CORE) The Fund undertakes to amend the section entitled 'Exchanging Shares Exchanging by Telephone' by
adding the following language: Redemption orders may be placed by telephone. Neither the Fund nor
the Transfer Agent will be responsible for any loss, liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it reasonably believes to be genuine. The Fund and
the Transfer Agent will each employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. To ensure the authenticity of redemption or exchange instructions received
by telephone, the Transfer Agent examines each shareholder request by verifying the account number
and/or tax identification number at the time such request is made. The Transfer Agent subsequently
sends confirmations of both
- ----
82 Shareholder Services
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
- --------------------------------------------------------------------------------
exchange sales and exchange purchases to the shareholder for verification. If reasonable procedures
are not employed, the Fund and the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent telephone transactions.
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
EXECUTION OF Telephone exchange requests received prior to 4:00 p.m. for an Equity or Fixed Income Fund, or prior
EXCHANGE to 12:00 p.m. for a Money Market Fund, on any business day will be processed on the date of receipt.
REQUESTS 'Processing' a telephone exchange request means that shares in the fund from which the shareholder
is making an exchange will be redeemed at the net asset value per share determined as of 4:00 p.m.
(12:00 p.m. for a Money Market Fund) on the date of receipt. Purchases of shares of the fund into
which the shareholder is making an exchange will be effected on the same business day, at such other
fund's net asset value per share determined as of 4:00 p.m. (12:00 p.m. for a Money Market Fund) on
such business day. Telephone exchange requests received after 4:00 p.m. for an Equity or Fixed
Income Fund, or after 12:00 p.m. for a Money Market Fund, will be processed on the next business day
in the manner described above. CoreFunds will not be responsible for the authenticity of redemption
or exchange instructions received by telephone and the investor will bear the risk of loss. To
ensure the authenticity of such instructions, the Transfer Agent examines each shareholder request
by verifying the shareholder account number and/or tax identification number at the time such
request is made. The Transfer Agent subsequently sends confirmations of both exchange sales and
exchange purchases to the shareholder for verification.
----------------------------------------------------------------------------------------------------
IMPORTANT Before you make an exchange, you should consider the following:
EXCHANGE / / Shareholders may not exchange into a series of a portfolio for which they would not have been
INFORMATION initially eligible, and investors who exchange into any portfolio which imposes a sales charge
may be subject to such sales charge, if applicable and not previously paid.
/ / Shareholders should consider the investment objective, policies, and restrictions of the Fund
into which the shareholder is making an exchange, as set forth in the applicable prospectus. A
copy of the prospectus for any of the CoreFunds portfolios may be obtained by calling
1-800-355-CORE.
/ / Any telephone exchange must satisfy the requirements relating to the minimum initial investment
amounts of the Fund involved.
/ / The Company reserves the right to reject any telephone exchange request and to modify or
terminate the exchange privilege at any time, upon sixty days' written notice to Shareholders.
----
Shareholder Services 83
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES GUIDE (CONTINUED)
- --------------------------------------------------------------------------------
/ / Telephone exchanges may be subject to limitations as to amount or frequency, and to other
restrictions that may be established from time to time to ensure that such exchanges do not
disadvantage any Fund or its shareholders. There are no such limitations or restrictions in
effect as of the date hereof. Shareholders may obtain the terms of any such limitations or
restrictions, which may be revised at any time, from SEI Financial Management Corporation.
----------------------------------------------------------------------------------------------------
TAXES For federal income tax purposes, an exchange between Funds is a taxable event and, accordingly, a
capital gain or loss may be realized. Before making a telephone exchange request, shareholders
should consult a tax or other financial adviser to determine whether the redemption of shares of one
Fund or investment in shares of another Fund would be appropriate.
----------------------------------------------------------------------------------------------------
</TABLE>
- ----
84 Shareholder Services
<PAGE>
NOTES
<PAGE>
EQUITY FUNDS
(Stocks)
GROWTH EQUITY FUND seeks capital growth by investing primarily in the equity
securities of companies believed by management to show the potential for
growth of earnings over time.
EQUITY FUND seeks capital growth by investing principally in a diversified
portfolio of common stocks of companies with large, medium or small
capitalizations.
SPECIAL EQUITY FUND seeks capital growth by investing principally in a
diversified portfolio of common stocks of domestic companies expected to
experience growth in earnings and price.
INTERNATIONAL GROWTH FUND seeks long-term capital appreciation by investing
primarily in appreciation-oriented equity securities of companies located
outside the United States.
BALANCED FUND seeks to provide total return while preserving capital by
investing in a combination of common stocks and fixed income securities.
FIXED INCOME FUNDS
(Bonds)
SHORT-INTERMEDIATE BOND Fund seeks income through investment in a diversified
portfolio of intermediate term, fixed income obligations with an expected
average weighted maturity of two to five years.
BOND FUND seeks to maximize long-term total return by investing principally
in a diversified portfolio of debt securities.
SHORT TERM INCOME FUND seeks to obtain consistent current income with
relative stability of principal by investing principally in a diversified
portfolio of investment grade debt securities.
GOVERNMENT INCOME FUND seeks to provide current income while preserving
principal value and maintaining liquidity by investing exclusively in
securities of the United States government and its agencies.
INTERMEDIATE MUNICIPAL BOND FUND seeks a high level of income generally
exempt from federal income taxes by investing at least 80% of its assets in
tax-exempt municipal securities.
PENNSYLVANIA MUNICIPAL BOND FUND seeks to provide a high rate of current
income that is exempt from both federal income taxes and (for Pennsylvania
residents) Pennsylvania state income taxes. The Fund invests primarily in
highly-rated, long-term municipal bonds issued by state, county, and local
agencies within the Commonwealth of Pennsylvania.
There is no assurance that the Funds will achieve their respective objectives.
<PAGE>
NEW JERSEY MUNICIPAL BOND FUND seeks to provide a high rate of current income
that is exempt from both federal income taxes and
for New Jersey residents) New Jersey state income taxes. The Fund invests
primarily in highly-rated, long-term municipal bonds issued by state, county,
and local agencies within the state of New Jersey.
GLOBAL BOND FUND seeks to provide capital appreciation and current income
through investment primarily in fixed income securities of United States and
foreign issuers denominated in United States dollars and in other currencies.
MONEY MARKET FUNDS
CASH RESERVE seeks to obtain maximum current income consistent with the
preservation of principal and maintenance of liquidity by investing in a
diversified portfolio of money market instruments of the highest quality,
including a broad range of U.S. dollar-denominated government, bank, and
commercial paper obligations.
TREASURY RESERVE seeks to provide current interest income, liquidity and
safety of principal by investing in direct obligations of the U.S. Treasury
and repurchase agreements relating to such obligations.
TAX-FREE RESERVE seeks a high level of income exempt from federal income
taxes through investment of at least 80% of its total
assets in tax-free securities.
There is no assurance that the Funds will achieve their respective objectives.
<PAGE>
COREFUND(R)
FAMILY OF
MUTUAL FUNDS
Individual Shares
Prospectus
April 22, 1996
COREFUNDS, INC.
DIRECTORS
Emil J. Mikity, Chairman
George H. Strong
Erin Anderson
OFFICERS
David G. Lee, President
James W. Jennings, Secretary
INVESTMENT ADVISER
Corestates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Financial Management Corporation
Wayne, PA 19087
DISTRIBUTOR
SEI Financial Services Company
Wayne, PA 19087
LEGAL COUNSEL
Morgan, Lewis & Bockius Llp
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
Investment Adviser
[CORESTATES LOGO]
CoreStates
Investment Advisers
For current performance, purchase, redemption and
other information, call 1-800-355-CORE (2673)
9513 (11/95) COR-F-046-04
<PAGE>
COREFUND(R)
EQUITY
INDEX
FUND
PROSPECTUS
COREFUNDS, INC.
APRIL 22, 1996
CoreFunds, Inc. (the "Company") is an open-end management investment
company presently offering shares in twenty-three diversified and non-
diversified portfolios that offer a variety of investment opportunities. These
portfolios are managed by CoreStates Investment Advisers, Inc. ("CoreStates
Advisers"). CoreFund Equity Index Fund (the "Fund") is a portfolio offered by
the Company. The Fund's investment objective is to provide its shareholders with
investments results that achieve price and yield performance similar to the S&P
500 Index, thereby tracking with reasonable accuracy the performance of the
stock market as a whole. This Prospectus relates solely to shares in the Fund.
This Prospectus gives you information about the Funds that you should be
aware of before investing. Additional information about the Funds, contained in
a Statement of Additional Information dated April 22, 1996, has been filed with
the Securities and Exchange Commission. It is incorporated in this Prospectus by
reference. To obtain a copy without charge, call or write:
CoreFunds, Inc.
680 East Swedesford Road
Wayne, PA 19087
1-800-355-CORE
Keep this Prospectus for future reference.
SHARES IN THE FUNDS ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS 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.
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS /X/ COREFUND
<TABLE>
<S> <C>
Transaction and Operating Expense Table.................3 Financial Highlights.................................... 4
Highlights.............................................. 5
</TABLE>
_____________________ FUNDAMENTALS OF MUTUAL FUND INVESTING ____________________
<TABLE>
<S> <C>
Types of investment vehicles............................. 7
How to invest in stocks, bonds, and money market
instruments............................................ 9
Developing your investment strategy...................... 14
</TABLE>
- ------------------------------------------
- ------------------------------------------
INFORMATION ON THE FUND
<TABLE>
<S> <C>
Investment Objective of the Fund...................... 18 Valuation of Shares.................................... 24
Investment Policies................................... 18 Net Asset Value........................................ 24
Other Investment Practices of the Portfolio Pricing...................................... 25
Fund................................................ 20 Management............................................. 25
Investment Restrictions............................... 21 Investment Adviser, Sub-Advisers....................... 25
Investor Considerations............................... 22 Administrator.......................................... 26
Investment Suitability.............................. 22 Distributor............................................ 26
Investment Risks.................................... 22 Performance Information................................ 26
Distributions......................................... 23 How to Purchase and Redeem Shares...................... 27
Taxes................................................. 23 Description of Shares.................................. 28
General Information.................................... 30
</TABLE>
<TABLE>
<S> <C>
No person is authorized by CoreFunds, Inc. to give any
information or make any representation other than those
contained in this Prospectus or in other printed or written
- ---- material issued by CoreFunds, Inc., and you should not rely
2 Table of Contents on any other information or representation.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION AND OPERATING EXPENSE TABLE /X/ COREFUND
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the Fund.
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases..................................................................... none
Maximum Sales Load Imposed on Reinvested Dividends.......................................................... none
Deferred Sales Load......................................................................................... none
Redemption Fee.............................................................................................. none
Exchange Fee................................................................................................ none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets):
Investment Advisory Fees After Fee Waivers1................................................................. .12%
12b-1 Fees.................................................................................................. none
Administrative Fees After Fee Waivers2...................................................................... .16%
Other Expenses3............................................................................................. .09%
Net Annual Fund Operating Expenses4......................................................................... .37%
EXAMPLE
You would pay the following 1 year $ 4
expenses on a $1,000 investment, 3 years 12
assuming (1) a 5% annual return 5 years 21
and (2) redemption at the end 10 years 47
of each time period.5
</TABLE>
- --------------------------------------------------------------------------------
1 Absent voluntary waivers, the Adviser's investment advisory fee is calculated
at the annual rate of .40% of the average net assets of the Fund.
2 Absent voluntary waivers, the Administrator's fee is calculated at the annual
rate of .25% of the Fund's average net assets.
3 Includes (among others) legal, auditing, and printing fees.
4 The Adviser and the Administrator have voluntarily waived a portion of their
fees in order to assist the Fund in maintaining a competitive expense ratio.
The expense ratios noted herein are net of investment advisory and
administrative fee waivers expected to be in effect during the fiscal period
ending June 30, 1996. Absent any fee waivers, such expense ratio would have
been 0.74%. The service providers for the Fund have been voluntarily waiving a
portion of their fees since inception. However, during this year, these
providers may change this waiver so that the Fund's expense ratio will
approach the contractually mandated ratio.
5 Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one year, three years, five years and ten years
would be $8, $24, $41 and $92 respectively.
<TABLE>
<S> <C>
Transaction and Operating Expense Table 3
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS /X/ COREFUND
The table that follows presents information about the investment results of
the shares of the Fund. The financial highlights for each of the periods
presented have been audited by Ernst & Young LLP, independent certified public
accountants, whose report thereon appears in CoreFunds' annual report which
accompanies the Statement of Additional Information.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30,
<TABLE>
<CAPTION>
- -------------
EQUITY INDEX
- -------------
Realized
and Net
Unrealized Assets,
Net Asset Net Gains Dividends Distribution End of Ratio of
Value, Net or (Losses) from Net from Net Asset Period Expenses to
Beginning Investment on Investment Capital Value End Total (000 Average Net
of Period Income Securities Income Gains of Period Return omitted) Assets
----------- ----------- ----------- ----------- ----------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS Y
1995*
(unaudited) $ 23.79 $ 0.26 $ 3.12 $ (0.26) $ (0.79) $ 26.12 14.27%+ $ 137,350 0.37%
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45 112,553 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
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of
Expenses to Net Income
Ratio of Net Average Net to Average
Income to Assets Net Assets Portfolio
Average Net (Excluding (Excluding Turnover
Assets Waivers) Waivers) Rate
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS Y
1995*
(unaudited) 2.02% 0.76% 1.63% 11%
1995 2.48 0.76 2.09 27
1994 2.63 0.75 2.23 13
1993 2.82 0.88 2.43 4
1992 2.66 1.06 2.17 27
19911 1.79 1.20 1.56 --
</TABLE>
- --------------------------------------------------------------------------------
+ Returns are for the period indicated and have not been annualized.
* Ratios for the six-month period ended December 31, 1995, have been annualized.
(1) Equity Index commenced operations on June 1, 1991. All ratios for the period
have been annualized.
<TABLE>
<S> <C> <C>
4 Financial Highlights
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS /X/ COREFUND
<TABLE>
<S> <C>
COREFUNDS CoreFunds, Inc. ('CoreFunds') is an open-end management investment company presently offering shares
in twenty-three diversified and non-diversified portfolios. This Prospectus offers Class Y Shares in
the Equity Index Fund. Class Y Shares are primarily offered to various types of institutional
investors, which may include CoreStates Bank and its affiliate and corresponding banks, for the
investment of their own funds or for funds for which they serve in a fiduciary, agency or custodial
capacity. The shares offered in this Prospectus are not subject to a sales load or 12b-1 charges.
Materials relating to the other Class Y Shares or Class A and C Shares of the Funds may be obtained
by calling 1-800-355-CORE or by writing to CoreFunds, Inc., 680 E. Swedesford Road, Wayne PA 19087.
Prior to the date of this Prospectus, all Class A Shares were known as Series B -- Individual for all
portfolios other than the Money Market Funds; Class C Shares were known as Series B -- Individual for
the Money Market Funds; and Class Y Shares were known as Series A -- Institutional. CoreFunds has
changed their designation to conform to the standard designations suggested by the Investment Company
Institute.
- -------------------------------------------------------------------------------------------------------------------------------
FUNDAMENTALS OF MUTUAL This section will assist you in appreciating investments generally. It describes the three basic
FUND INVESTING types of investments--stocks, bonds, and money market investments--as well as mutual funds which
employ one or more of these instruments. The various types of mutual funds available and the
advantages of mutual fund investing are also discussed.
PAGE 7
- -------------------------------------------------------------------------------------------------------------------------------
RISK CHARACTERISTICS Investment in the Fund involves a number of risks, including possible loss of principal. Certain risk
factors applicable to the Fund are described below.
The Equity Index Fund is subject to market risk and fund risk. Market risk is the possibility that
stock prices in general will decline over short or even extended periods of time. Stock markets tend
to be cyclical, with periods when stock prices generally rise and periods when stock prices generally
decline. Fund risk is the possibility that a Fund's performance during a specific period may not meet
or exceed that of the stock market as a whole. Therefore, investors should consider their holdings in
the Equity Index Fund to be a long-term investment.
PAGE 22
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT CoreStates Investment Advisers, Inc. ('CoreStates Advisers') serves as the investment adviser for the
ADVISER Fund. CoreStates Advisers has extensive experience in the management of money market, tax-free, fixed
income, equity, and international investments. It currently manages discretionary and
non-discretionary client security portfolios with a total aggregate market value exceeding $16
billion, for individuals, corporations, institutions and municipalities.
PAGE 25
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Highlights 5
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS (CONTINUED) /X/ COREFUND
<TABLE>
<S> <C>
DIVIDEND Shareholders of the Fund are entitled to dividends and distributions arising from the net investment
POLICY income and capital gains, if any, earned on investments held by the Fund.
PAGE 23
- ------------------------------------------------------------------------------------------------------------------------------
TAXES The sale or redemption of shares of a mutual fund is a taxable event to the selling or redeeming
shareholder. In addition, any receipt of dividends which represent capital gain distributions will
be subject to federal and state income taxes. However, receipt of other dividends will generally not
be subject to federal income taxes. Ordinary dividends also will be subject to state income taxes.
PAGE 23
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASING The minimum initial investment amount for retail investors investing in Equity Index Fund is $500.
SHARES The minimum initial investment for institutional investors is $1,000,000 for each Fund which amount
may be waived at the discretion of the distributor. There is no minimum for subsequent investments.
Institutional investors may acquire Class Y Shares of the Fund for their own account or as a record
holder on behalf of fiduciary, agency or custody accounts by placing orders with the Fund's
distributor.
PAGE 27
- ------------------------------------------------------------------------------------------------------------------------------
SELLING With respect to shares held by institutional investors on behalf of their customer accounts, all or
SHARES part of the shares beneficially owned by a customer may be redeemed in accordance with instructions
and limitations pertaining to their account at the institution. The share price of the Fund is
expected to fluctuate and may at redemption be more or less than at the time of initial purchase,
resulting in a gain or loss.
PAGE 28
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6 Highlights
<PAGE>
FUNDAMENTALS OF MUTUAL FUND INVESTING / / COREFUND
AN INTRODUCTORY
GUIDE FOR INVESTORS
This section is devoted to those who are unfamiliar or uncomfortable with the
concepts of mutual fund investing, as well as those who are interested in
developing a coordinated strategy which can help them reach their financial
goals.
It describes the three basic types of investment vehicles -- stocks,
bonds, and money market instruments -- as well as mutual funds which employ one
or more of these investments.
Of course, no guide alone can help you determine how or when to invest.
That's why we recommend that you work closely with an investment representative
to develop a solid program which is designed specifically for your goals and
risk tolerance.
PART I:
TYPES OF INVESTMENT VEHICLES
For details on how each of these instruments is used in mutual funds, please
see the section entitled, "What types of mutual funds are available?"
The three most popular types of investments are stocks, bonds, and money market
instruments. The following is an introduction to what they are and how they
work.
WHAT IS A STOCK?
Also known as equities, stocks represent an ownership position in a business
entity, such as a company or corporation. Each share of stock represents a
proportionate "share" of ownership in the business entity. As a result, stocks
offer individual investors the opportunity to take part in the economic future
of business.
Stocks are bought and sold on the open market, through a variety of
stock exchanges in the U.S. and around the world. This system allows any
individual to purchase and sell shares through stock brokers, who are licensed
to participate in the exchange.
The price for a share of stock is established by an "auction" system,
in which the broker for the buyer negotiates with the broker for the seller.
When the demand for a stock is low, its price will most likely fall; when demand
is high, the stock's price will most likely rise.
Because each share of stock represents a share in the company's
earnings, one of the most common factors affecting the price of the stock is the
direction of the company's earnings. In theory, the more a company earns, or is
expected to earn, the higher the price of its shares.
ALSO SEE: "Equity Mutual Funds" And "What are balanced funds?"
However, a number of other factors can cause a stock's price to go up
or down, including events which will positively or negatively affect the
company's future, changes in the overall economy, changes in the mood of the
market, and the market's perceptions of the company or its stock.
Fundamentals 7
<PAGE>
For definitions of investment terms,
please see the glossary following
this section.
WHAT IS A BOND?
When a corporation, government or government agency needs money for a certain
project, it often borrows money by issuing bonds to investors. So, in the
simplest terms, a bond is an IOU. The investor who purchases a bond is acting as
the lender.
Rather than offering an ownership share in business, as stocks do,
bonds are simply an agreement to repay the investor the amount loaned, also
known as principal, on a certain date. In addition, the issuer commits to making
periodic fixed interest payments to the lender until the loan is repaid.
When the bond is issued by a state or municipality, the interest paid
to investors is generally free of federal income taxes.
Like stocks, bonds are also traded in the open market. The value of a
bond can fluctuate due to changing market conditions. For example, when interest
rates in the market fall, the prices of bonds tend to rise. On the other hand,
when interest rates rise, the value of bonds falls.
ALSO SEE: "Fixed Income Mutual Funds"
Generally, the longer the maturity of a bond, the higher its yield and
the greater its price volatility. The shorter the maturity, the lower the yield
and the greater its price stability.
Price of the
same bond if
Price of a 7% the yield
coupon bond increases to 8%
Years to now trading to to keep pace with Percent change
maturity yield 7% rising interest rates in price
1 year $100.00 $99.06 - 0.94%
3 years 100.00 97.38 - 2.62%
10 years 100.00 93.20 - 6.80%
30 years 100.00 88.69 - 11.31%
During times when overall interest rates are falling, fixed-income investors
generally enjoy higher prices for their bonds. Conversely, rising interest
rates tend to reduce the value of bonds. Longer maturity bonds experience a
greater change in price, as shown above.
WHAT IS A MONEY MARKET INSTRUMENT
Simply put, money market instruments are short-term bonds, with maturities
typically ranging from overnight to 13 months. They pay investors a rate of
interest which is generally lower than that of longer-term bonds.
Money market securities are issued by a number of sources, including
the U.S. Government, its agencies and large, reputable banks and corporations.
ALSO SEE: "Money Market Mutual Funds"
Money market instruments are generally quite stable, due to their short
maturities. Therefore, they are chosen by investors who wish to maintain the
safety of their investment.
8 Fundamentals
<PAGE>
/ /
PART II:
HOW TO INVEST IN STOCKS, BONDS, AND MONEY
MARKET INSTRUMENTS
Now that you've reviewed the basic types of investment vehicles available,
here's a discussion of how mutual funds can help you invest in stocks, bonds,
and money market securities.
WHAT IS A MUTUAL FUND?
Simply defined, a mutual fund pools the money of many investors and invests it
toward a specific goal, such as stability of principal, regular income, or
long-term growth. The fund's professional managers choose investments that, in
their judgment, will help the fund achieve its goal. As an investor, you share
in the fund's gains, losses, income, and expenses on a proportional basis.
An equity fund pools its money to purchase stocks, a fixed-income fund
purchases bonds, and a money market fund purchases short-term debt instruments.
ADVANTAGES OF MUTUAL FUND INVESTING.
While many investors enjoy excellent results by purchasing individual stocks or
bonds, most investors find that mutual funds offer a more viable alternative,
for the following reasons:
PROFESSIONAL MANAGEMENT: With individual securities, you or your broker
must do the extensive research necessary to choose from among the thousands of
securities available. With mutual funds, you enjoy having a professional money
manager uncover opportunities and research them to make sure the investment is
appropriate for the needs of the fund.
LOW COSTS: With mutual funds, trading costs are modest because they are
shared by all investors in the fund.
DIVERSIFICATION: When investing, it's important to not put all your
eggs in one basket, so that you will be protected against an excessive loss in
any one investment. But only the wealthiest investors can afford to purchase the
wide range of individual securities to achieve true diversification. With mutual
funds, however, you can enjoy immediate diversification with even a very limited
amount of money, because investment risk is spread over many different
securities for greater stability and safety of your investment.
LIQUIDITY: With individual securities, it can sometimes be difficult to
redeem your investment due to market conditions and other factors. Mutual fund
shares, however, are easily redeemed at their current market value.
WHAT TYPES OF MUTUAL FUNDS ARE AVAILABLE?
The three basic categories of mutual funds are as follows:
EQUITY (STOCK) MUTUAL FUNDS A stock fund consists of selected
securities traded on the stock market. The fund changes in value as the prices
of the stocks in the fund change. Although these funds tend to rise or fall in
price more than other types of mutual funds, they have traditionally rewarded
investors with higher returns over the long run.
Fundamentals 9
<PAGE>
FIXED INCOME (BOND) MUTUAL FUNDS A fixed income fund is a mutual fund
which invests in a pool of bonds. Bonds generally pay a fixed rate of interest.
While fixed income mutual funds buy bonds, it's important to note that the
income paid by a bond fund will fluctuate as individual securities are added to
or subtracted from the pool.
In addition, fixed income funds are subject to changes in net asset
value due to changing market conditions. Like individual bonds, fixed income
funds will tend to increase in value during times of decreasing interest rates,
and will generally decrease in value when interest rates rise.
There are a wide range of fixed-income funds to choose from, each with
its own investment objectives. These objectives range from stability of
principal, to maximum yield, to tax-free income.
MONEY MARKET FUNDS Of the basic mutual fund categories, money market
funds are managed to maintain the greatest stability of principal. They are
managed to maintain a value of $1 per share.
Money market funds invest in short-term money market securities, such
as U.S. Treasury Bills, certificates of deposit from large banks, and commercial
paper. Because the interest rates paid on these securities fluctuate with market
conditions, the yield for money market funds will also change.
WHAT ARE TAX-FREE FUNDS?
Tax-free funds, which include both fixed income (bond) and money market funds,
invest in securities which are issued by state, county, and local governments
and their agencies. The proceeds from these securities are used to finance a
variety of public-works projects, such as the building of roads, schools, and
sewers.
Under current tax laws, the interest paid to investors in these
securities is generally exempt from Federal income taxes. Therefore, they are
frequently purchased by investors who wish to shelter their investment income
from taxes. However, Congress from time to time reviews this aspect of the tax
code and may at any time repeal the exemption on any or all of these securities.
If this were to occur, it would have a negative impact on any affected
securities, as well as the mutual funds in which they were held.
It's Easy to Compare Tax-Free and Taxable Yields:
Tax-Free Yield
--------------
1 - Tax Rate = Taxable Yield
10 Fundamentals
<PAGE>
WHAT ARE BALANCED FUNDS?
In addition to the types of mutual funds already described, there are also funds
which blend investments in stock, bond, and money market securities.
These are commonly known as balanced funds.
The returns for balanced funds are typically greater than those of bond
and money market funds, but lower than those of pure stock funds. Investing in
all three types of securities means the value of your principal should fluctuate
less than it would in a stock or bond fund alone.
Typically, the fund's professional manager has the flexibility to
change the investment mix based on current economic conditions.
COMPARING THE PERFORMANCE OF STOCK, BOND, AND MONEY MARKET INVESTMENTS
In order to balance risks and rewards, it's helpful to see how stocks, bonds,
and money market investments have performed over time.
Mutual fund performance is stated in terms of total return. The total
return of a mutual fund or any other investment consists of the combination of
capital appreciation (or loss) and investment income.
Capital appreciation (or loss) is a change in the market value. Income
is made up of dividends earned on stocks, and interest paid on bonds or money
market investments. In general, stocks have the highest total return, because
over long periods of time they have achieved the greatest capital appreciation.
Bonds have provided the greatest income or interest, but because their
prices are more stable they have less potential than stocks for capital
appreciation. Therefore, they have a lower total return potential over time than
stocks.
Of course, past returns are no guarantee of future results. But
historical data tells a story which surprises many investors.
As the chart on the right shows, for the forty-year period between
January 1956 and December 1995, stocks have averaged annual returns of 10.8%,
while long-term bonds have averaged 6.4%, intermediate-term bonds have averaged
7.0%, and money market instruments have averaged 5.7%. During this same period,
inflation averaged 4.5%. Therefore, bonds and money market investments actually
delivered very little growth in excess of inflation.
Stocks, on the other hand, averaged more than double the rate of
inflation. What about the price fluctuations? Well, it's true that stocks do
fluctuate -- and probably always will. But as the accompanying chart shows,
stocks have consistently rewarded long-term investors.
Since money market funds are managed to have a constant $1 share price,
their total return consists only of the interest earned on their investments.
Fundamentals 11
<PAGE>
GROWTH
OF $1,000
(Historical
Performance
of Stocks,
Bonds and
Cash)
In the printed version, a line graph depicting the historical performance of
stocks, bonds and cash based on total dollars in thousands related to year ends
ranging from 1956 to 1991 broken into the following categories: Large Stocks,
Long-Term Gov't Bonds, Intermediate-Term Gov't Bonds, T-Bills and Inflation. The
figures below are the plot points.
Dollars in Thousands
<TABLE>
<S> <C> <C> <C> <C> <C>
1965 3.77 1.34 1.19 1.19 1.35
1967 3.39 1.4 1.23 1.23 1.41
1968 4.2 1.46 1.27 1.12 1.42
1969 4.66 1.54 1.33 1.12 1.49
1970 4.27 1.64 1.41 1.06 1.48
1971 4.44 1.75 1.49 1.19 1.73
1972 5.07 1.82 1.54 1.35 1.88
1973 6.04 1.89 1.59 1.42 1.97
1974 5.15 2.02 1.73 1.41 2.07
1975 3.79 2.19 1.94 1.47 2.18
1976 5.19 2.31 2.08 1.6 2.35
1977 6.43 2.43 2.18 1.87 2.66
1978 5.97 2.56 2.32 1.86 2.69
1979 6.36 2.74 2.53 1.84 2.79
1980 7.53 3.02 2.87 1.82 2.9
1981 9.97 3.36 3.23 1.74 3.02
1982 9.48 3.86 3.51 1.78 3.3
1983 11.51 4.26 3.65 2.49 4.26
1984 14.1 4.64 3.79 2.51 4.58
1985 14.99 5.09 3.94 2.9 5.22
1986 19.82 5.48 4.09 3.8 6.28
1987 23.48 5.82 4.14 4.73 7.23
1988 24.7 6.14 4.32 4.6 7.44
1989 28.85 6.53 4.51 5.04 7.89
1990 37.94 7.08 4.72 5.96 8.94
1991 36.73 7.63 5 6.33 9.81
1992 47.93 8.06 5.16 7.55 11.33
1993 51.62 8.34 5.31 8.15 12.14
1994 56.78 8.58 5.45 9.64 13.51
1995 57.52 8.92 5.6 8.89 12.81
1996 60.013 11.862 5.719 9.289 15.062
</TABLE>
This chart shows how the major types of investments have performed over the past
40 years. More stable money market investments have produced the lowest annual
returns, while stocks have produced the greatest growth even though their value
fluctuates more.
HISTORICAL
ANNUALIZED
RETURN
(January 1956-December 1995)
Stocks 10.8%
Long-Term Government Bonds 6.4
Intermediate-Term Government Bonds 7.0
Cash 5.7
Inflation 4.5
Assumptions for the table and charts shown on this page: Returns based on
historical performance, which is no guarantee of future results. Stock
returns represent total return of the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500 Index"). Fixed income, or bonds, is composed of
intermediate- and long-term Government Bonds. Cash represents 30-day Treasury
Bills. Source: SEI Financial Services Company.
RANGE OF STOCK RATES OF RETURN FOR ONE AND FIVE YEAR ROLLING PERIODS
(1956-1995)
In the printed version a bar graph depicting annual (one year) returns and
rolling five-year periods rates of return for stock rates is plotted using the
following percentages.
Percent
Annual Returns Rolling Five-Year Periods
37.2% 17.9%
-10.9% 1.4%
Many individuals are concerned about the risks associated with investing in
stocks. Many do not realize, however, that despite the fluctuation of annual
returns, investors who held stocks for a full five years historically earned a
positive return in more than ninety-five percent of the cases. Best and worst
case scenarios presented in this illustration represent the fifth and
ninety-fifth percentile of the historical return distribution. Source: SEI
Financial Services Company.
12 Fundamentals
<PAGE>
WHAT ARE INTERNATIONAL FUNDS?
International funds invest primarily in stock, bond and money market securities
issued by corporations, governments and banks worldwide.
International equity funds invest in the equity (stock) securities of
companies based outside the United States. Today, international markets account
for over 62% of the world's equity capitalization, as measured by the Morgan
Stanley World Index in February, 1996. This indicates that many investment
opportunities now exist globally. Likewise, international bond funds may invest
in government and corporate debt obligations from around the world with the aim
of providing income and the potential for capital appreciation. Investing in
international equity (stock) and fixed income (bond) funds provides investors
with a way to participate in a diversified portfolio of many international
securities of many countries.
GROWTH
OF $1,000
(Performance
of International
and Domestic Stocks)
In the printed version a line graph depicting the performance of international
and domestic stocks based on total dollars in thousands related to year ends
ranging from 1976 to 1994 broken into the following categories: S&P 500 and MSCI
EAFE (the Morgan Stanley Capital International Europe, Australia and Far East
Index) indexes. The plot points are indicated below.
Dollars in Thousands
1976 1.4223 1.6985
1977 1.6986 1.5762
1978 2.2812 1.6803
1979 2.4222 1.9894
1980 3.014 2.634
1981 2.9829 2.505
1982 2.9573 3.041
1983 3.6851 3.7252
1984 3.9749 3.9599
1985 6.2296 5.235
1986 10.586 6.2035
1987 13.226 6.5291
1988 17.007 7.6225
1989 18.843 10.024
1990 14.473 9.7028
1991 16.281 12.662
1992 14.352 13.637
1993 19.08 15.001
1994 20.618 15.196
1995 16.775 15.229
Growth of $1,000 in international and domestic stocks. MSCI EAFE (the Morgan
Stanley Capital International Europe Australia And Far East Index) represents
the growth of an investment in international stocks, and the S&P 500 Index
represents an investment in domestic stocks.
A
COMPARISON OF FOREIGN
GOV'T
BOND
RETURN
PERFORMANCE
1995
In the printed version a bar graph comparing the total return in U.S. dollars
for foreign government bonds broken into the following categories; Japan, United
Kingdom, Australia, France, Canada, United States and Germany. The plot points
are indicated by the following table.
Total Return in U.S. Dollars
Japan 9.57%
U.K. 15.62%
Australia 14.94%
France 27.69%
Canada 23.45%
U.S. 18.3%
Germany 25.91%
Source: SEI Financial services company
Although investing internationally can reward investors (see graphs
above), there is an added dimension to the risks involved in investing in
domestic securities. Currency fluctuations in the countries in which
international stock and bond securities are issued can negatively impact the
value of these securities, as well as the mutual funds in which they are held.
Fundatmentals 13
<PAGE>
PART III:
DEVELOPING YOUR
INVESTMENT STRATEGY
Now that you have a basic understanding of the investments available to you,
let's look at how these investments can be used to help you achieve your goals.
Everyone, whatever their income level, has financial goals. Perhaps
yours include a comfortable retirement, education for your children or
grandchildren, a new home, or simply the accumulation of wealth.
Whatever your personal goals, the best way to achieve them is to take
control of your financial future. And one of the best ways to do that is through
a coordinated program of saving and investing.
Saving money provides the foundation for reaching your goals, while
investing builds on that foundation by using the money you save to make even
more money.
Mutual funds provide one of the most convenient and rewarding means of
saving and investing.
Mutual funds are particularly well-suited to long-term goals such as
education and retirement, because they offer a convenient way to invest
regularly in a diversified portfolio of securities.
Once you've decided to use mutual funds to help reach your goals, here
are some very simple steps to follow:
STEP 1:
SET WELL-DEFINED GOALS.
Whether you're investing for retirement, education, wealth accumulation, or
regular income, start by determining how much you will need to satisfy your
goals. When making this assessment, you may want to seek the guidance of an
investment professional. Also take into account the effects of inflation, which
historically has reduced purchasing power by an average of 4.5% per year.
Short-term goals will require a greater initial investment and a more
conservative investment approach. Longer-term goals will require a smaller
initial investment and a more aggressive approach, including investments in
stock and bond funds which are expected to yield higher returns over the long
run.
Once you determine your primary and secondary goals, you'll then need
to calculate how soon you will need your money.
STEP 2:
ESTABLISH YOUR TIME HORIZON.
For each of your goals, determine how soon you will need the money you're
investing. If it's a shorter-term goal, such as a new home in a few years,
you'll want investments that offer fairly predictable results in a short time.
If it is a longer-term goal, such as education for young children, you can plan
for longer-term results. Accordingly, the type of investments you choose for
retirement will depend on whether your retirement is a few years away, or a few
decades.
14 Fundamentals
<PAGE>
STEP 3:
UNDERSTAND THE REAL RISKS.
Most people think of an investment as "risky" or "safe" based only on how much
the value of their principal can fluctuate. But in the long run, there is more
to risk than whether your principal goes up or down. It's just as important to
consider the following risks:
THE RISK OF INFLATION. To achieve any real increase in your wealth,
your investment return must outstrip inflation, or you may end up actually
losing purchasing power in the long run. To beat inflation, consider investing
some of your money where values and return are not fixed, but grow with the
economy. Experience shows that stock-based investments such as equity mutual
funds offer this type of performance potential.
THE RISK OF NOT REACHING YOUR GOAL. Another potential risk that many
investors tend to overlook is the risk that an investment strategy will not
enable them to reach their goal. To properly assess this risk, you first need to
define your goals, and then strike a balance between the risk of principal
volatility and the risk of failing to reach your goals.
For example, statistics show that at age 70 you can expect to live
another 20 years. To achieve the many years of comfortable retirement you want,
you must have the discipline to set aside enough money during your working years
and invest it wisely.
STEP 4:
DECIDE ON AN INVESTMENT MIX.
When you are selecting specific investments, choose those which offer the
greatest potential for reaching your short-term and long-term goals, and which
are within your risk tolerance.
Many investors find that they are most comfortable with a mix of
investments, including stocks, bonds, and money market funds. This approach
offers the advantage of not putting all your eggs in one basket, and also allows
you to enjoy the distinct advantages of each type of investment.
If you use this approach, known as "asset allocation", the key is
deciding how much to allocate to each type of investment. To make this decision
easier, you can select a balanced fund, which combines stock, bond, and money
market investments under the guidance of professional investment managers.
As this chart below suggests, bonds and money markets fluctuate less in
the short term, and there is less chance of experiencing a loss. History has
shown, however, that the longer you stay invested, the more stocks have provided
a higher return, with a decreasing potential for loss.
Fundamentals 15
<PAGE>
REDUCTION OF RISK OVER TIME
In the printed version a bar graph depicting the average annual return of
stocks, long-term bonds, intermediate-term bonds, cash and inflation for one
year, five year, ten year and twenty year period. The following percentages
are plotted in the graph.
1 Year
Stocks 43.36 -26.5
LT 40.36 -9.18
Int 29.1 -5.14
Cash 14.71 1.5
Inflation 13.31 0.4
5 Years
Stocks 20.4 -2.36
LT 21.62 -2.14
Int 16.98 0.96
Cash 11.12 2.33
Inflation 10.06 1.24
10 Years
Stocks 17.59 1.24
LT 15.56 1.13
Int 13.13 2.92
Cash 9.17 2.58
Inflation 7.67 1.57
20 Years
Stocks 14.59 6.53
LT 10.45 1.94
Int 9.85 3.98
Cash 7.72 4
Inflation 6.36 3.37
The longer you hold any particular asset class (stocks, bonds, money market
instruments), the less the variation in return. While stocks have fluctuated in
value much more than other investments, they have also delivered higher returns
over the long run. In addition, the longer an investor remains invested in
stocks, the less the chance there is for a capital loss. The best- and
worst-case scenarios presented in this illustration represent the absolute
highest and lowest reruns from January 1956 to 1995. Source: based on historical
data on the S&P 500 INDEX, intermediate- and long-term Government bonds, and
30-day Treasury Bills For rolling one-, five-, 10-, and 20-year periods between
1956 and 1995. Past results do not guarantee future performance.
STEP 5:
GET STARTED.
Don't make the mistake of waiting until tomorrow. With mutual funds, you don't
need a large investment to start your program. All it takes is a small amount of
money, and a strong desire to reach your goals.
For full details on how the principles of mutual fund investing can
work for you, please contact your investment representative.
STEP 6:
BE DISCIPLINED.
Once you have a good strategy, stay with it. Avoid sudden changes in reaction to
temporary market trends. Remember, you're interested in long-term performance.
In mutual fund investing, particularly with equity funds, one of the
surest ways to maximize the value of your investment is through a regular
program of monthly contributions. By adding to your account each month, you'll
be purchasing shares during both "up" markets and "down" markets. This
technique, known as "dollar cost averaging", has been shown to yield optimum
results over the long run.
16 Fundamentals
GLOSSARY
OF KEY INVESTMENT TERMS
CAPITAL GAIN: The profit made from the sale of securities due to an increase
in share value.
CURRENT YIELD: The income paid annually on mutual fund shares, expressed
as a percentage of the current price per share.
DISTRIBUTION: Payment of capital gains to shareholders of a mutual fund.
For tax purposes, distributions are separate from
interest income or dividends.
DOLLAR COST AVERAGING: Investing a fixed dollar amount at regular intervals over
a long period of time to reduce the average cost per share of a mutual fund.
INCOME DIVIDENDS: Regular payments from mutual funds to their shareholders, made
up of dividends, interest, and short-term capital gains earned from the fund's
portfolio of securities. May be distributed annually, bi-annually, quarterly, or
monthly, with operating expenses deducted.
MATURITY: The date on which the issuer is scheduled to return the amount
borrowed to the lender, or investor.
MUNICIPAL BOND: A debt obligation issued by a city, state, or municipality.
Interest from these bonds is generally exempt from federal income tax.
NET ASSET VALUE: The dollar value of one share of a mutual fund. This value is
generally calculated at least once each day, and is the price at which the fund
will redeem its shares from investors.
PRINCIPAL, OR PAR VALUE: Also known as face value, this is the amount loaned to
the issuer of a bond.
PROSPECTUS: A booklet distributed by the issuer of a security or mutual fund, in
compliance with SEC regulations. A mutual fund prospectus must include the
fund's investment objectives, all expenses and fees including management and
sales fees, a description of shareholder services offered, and information on
how to buy shares.
REDEMPTION PRICE: Also known as "bid price", this is the price at which
mutual funds buy back their shares. It is usually the net asset price of the
fund.
TOTAL RETURN: The combined return of capital appreciation and income
(interest and dividends) that an investment earns. (See page 26).
Fundamentals 17
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS
/X/
INVESTMENT
OBJECTIVE
OF THE FUND
The objectives of the Fund are fundamental and may only be changed by the
affirmative vote of a majority of the outstanding shares of the Fund. You may
want to pursue more than one objective by investing in other portfolios offered
by CoreFunds.
As investment adviser of the Fund, CoreStates Advisers manages the Fund's
portfolio of investments in a manner which it believes will best accomplish the
Fund's stated objective. However, there can be no assurance that a Fund will
meet its objective.
EQUITY INDEX FUND The Equity Index Fund's investment objective is to provide its
shareholders with investment results that achieve price and yield performance
similar to the S&P 500 Index, thereby tracking with reasonable accuracy the
performance of the stock market as a whole.
/X/
INVESTMENT
POLICIES
The policies which the Fund follows to achieve its investment objective are
described below. These are non-fundamental policies which may be changed without
a shareholder vote.
The Fund intends, under normal market conditions, to hold at least 90% of
its total assets in equity securities that as a group reflect a composite of
those represented in the S&P 500 Index. To mirror and confine the holdings to
relatively large, well-known companies within the S&P 500 Index, CoreStates
Advisers utilizes a computer model that closely monitors industry weightings of
the S&P 500 Index. While common stocks represented in the S&P 500 Index are the
primary securities utilized to achieve Equity Index Fund's objective, CoreStates
Advisers may also invest in other types of securities, consistent with the
objective and policies described herein. Equity Index Fund is not sponsored by
nor affiliated with Standard & Poor's Corporation ('S&P').
The S&P 500 Index consists of 500 common stocks, most of which are listed
on the New York Stock Exchange. In choosing the 500 stocks which are included in
the S&P 500 Index, S&P considers market values and industry diversification.
Most of the stocks in the S&P 500 Index are issued by companies which are among
the largest, in terms of the aggregate market value of their outstanding stock,
measured by the market price per share multiplied by the number of shares
outstanding. Stocks that are not among the five hundred largest are included in
the S&P 500 Index for diversification purposes.
Traditional methods of mutual fund investment management typically involve
frequent changes in a portfolio of securities on the basis of economic,
financial, and market analyses. Index funds such as Equity Index Fund are not
managed in this manner, however. Instead, CoreStates Advisers only purchases and
sells securities with respect to the Fund in an attempt to duplicate the total
return of the S&P 500 Index, taking into account redemptions, sales of
additional Fund shares, and other adjustments as described below.
18 Investment Objective
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/X/ COREFUND
Consistent with its investment objective, Equity Index Fund's investment
portfolio will at any time consist of common stocks of as many issuers listed in
the S&P 500 Index as is feasible, consistent with the policies stated herein.
Accordingly, the Fund invests in both dividend-paying and non-dividend-paying
securities that are not included in the S&P 500 Index. While Equity Index Fund
may own about 350 names, the largest 50 companies within the S&P 500 Index
generally represent nearly 85% of the value of the S&P 500 Index, and the
largest 200 companies represent nearly 95%. The number of companies owned by the
Fund is determined in an effort to minimize the impact of transaction costs and
balance these costs with tracking error.
Generally, Equity Index Fund only trades securities to reflect changes in
the S&P 500 Index, to carry out appropriate rebalancing for diversification
purposes, or to more closely track the return of the S&P 500 Index. This Fund
invests in equity securities that, as a group, reflect the composite performance
of the S&P 500 Index based on a computer-based financial model that tracks the
performance of the various stocks in the S&P 500 Index. As the Fund grows in
total assets, its portfolio may eventually include all 500 stocks in the S&P 500
Index. This decision would be made by CoreStates Advisers, based on its
financial model.
Although CoreStates Advisers does not screen securities for investment by
this Fund by traditional methods of financial and market analyses, it monitors
the Fund's investments with a view toward removing stocks of companies which
exhibit extreme financial distress or which may impair for any reason the Fund's
ability to achieve its investment objective. Therefore, an investor
participating in the Fund bears the risk of such adverse market conditions. The
Fund expects that its return will match the S&P 500 Index, prior to the
deduction of brokerage and other transaction costs, other Fund expenses, and
tracking errors.
Common stocks purchased by the Fund are initially selected in accordance
with their market capitalizations. Market capitalization is calculated by
multiplying the market price of an issuer's stock by the number of outstanding
shares of its common stock. The issues selected for this Fund are then ranked
and weighted accordance to their respective market capitalizations. The weighted
market capitalization of each issuer selected is determined by dividing the
issuer's market capitalization by the total market capitalizations of all
issuers listed.
The industry sector diversification of the issuers selected for inclusion
in Equity Index Fund according to their weighted market capitalizations is then
compared with the industry sector diversification of the issuers of all common
stocks publicly traded in the United States.
CoreStates Advisers will include in the Fund certain 'balancing
securities,' which are common stocks of companies with smaller market
capitalizations which are added to complete the portfolio to provide broad
industry representation. As indicated, 'balancing securities' are issued by
issuers whose market capitalizations are such that they would not otherwise be
eligible for inclusion in the Fund, and replace the securities of issuers in
over-represented sectors in the Fund.
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Investment Policies 19
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INFORMATION ON THE FUNDS (CONTINUED)
OTHER INVESTMENT PRACTICES OF THE FUND _________________________________________
In addition to the investments described above, the Fund may engage in a number
of additional investment practices, as discussed below:
REPURCHASE AGREEMENTS
Under certain circumstances, the Fund may enter into repurchase agreements with
respect to portfolio securities. Under the terms of a repurchase agreement, the
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 Fund's 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 the 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 CoreFunds' custodian in the Federal Reserve
book-entry system. Default by the seller could, however, expose a Fund to loss
in the event of adverse market action or delay in connection with the
disposition of the underlying securities. Repurchase agreements are considered
to be loans by a Fund under the Investment Company Act of 1940 (the 'Investment
Company Act').
REVERSE REPURCHASE AGREEMENTS
The Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements. Pursuant to such agreements, the 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. The Fund
enters into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
the Fund enters into a reverse repurchase agreement, it places in a segregated
custodial account liquid assets such as U.S. Government securities or other
liquid high-grade debt securities 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 the 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 Fund under
the Investment Company Act.
OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of other investment companies. Such shares
will be purchased by the Fund within the limits prescribed by the Investment
Company Act. Such investments will be limited to amounts not in excess of 5% of
a Fund's total assets at the time of purchase.
LENDING OF SECURITIES
The Fund may lend their portfolio securities to qualified brokers, dealers,
banks, and other financial institutions for the purpose of realizing additional
net investment income through the receipt of interest on the loan. The Fund may
lend portfolio securities with a value of up to 33 1/3% of its total assets.
Such loans may be terminated at any time. The Fund will receive 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
20 Investment Policies
<PAGE>
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/X/ COREFUND
collateral received by the Fund will be invested in short-term debt securities.
The Fund will retain most rights of beneficial ownership including
dividends, interest or other distributions on the loaned securities. Voting
rights pass with the lending. The Fund will call loans to vote proxies if a
material issue affecting the investment is to be voted upon. Loans will be made
only to borrowers deemed by CoreStates Advisers to be of good standing.
Such loans would involve risk of delay in receiving additional collateral
in the event the value of the collateral decreased below the value of the
securities loaned, or risk of delay in recovering the securities loaned or even
loss of rights in the collateral should the borrower of the securities fail
financially.
TEMPORARY INVESTMENTS
On occasion, the Fund may be unable to achieve its investment objective due to
market conditions. Under such circumstances, the Fund is permitted to make
certain temporary investments which deviate from the investment policies
described above. Such investments may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions, or to take a
temporary defensive position against potential or serious stock market declines.
Although the Fund normally seeks to remain fully invested in equity
securities, it may invest all or a portion of its assets temporarily in certain
short-term and fixed income vehicles, in accordance with the investment
restrictions described herein. Money market instruments, such as commercial
paper, and fixed income securities, such as bonds, musts be assigned, or
determined by the adviser to be equal to, certain minimum ratings in each
category by either Moody's or S&P at the time of purchase by the Fund. Temporary
investments may include money market instruments, U.S. government obligations,
fixed income securities and/or repurchase agreements.
/X/
INVESTMENT
RESTRICTIONS
Investment policies of the Fund that are not fundamental may be changed by the
Board of Directors without shareholder approval, provided such changes are
deemed to be consistent with the Fund's objective and in the best interests of
its shareholders. However, the investment objectives of each Fund, along with
the restrictions and limitations described herein and in the Statement of
Additional Information, are fundamental and may be changed only by the
affirmative vote of a majority of the outstanding shares of such Fund. See
'Description of Shares.'
THE FUND MAY NOT:
1. Make loans, except that the Fund may purchase or hold certain debt
instruments and enter into repurchase agreements, in accordance with its
policies and limitations.
2. Borrow money or issue senior securities, except that the Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts not to exceed 10% of the value of its 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 its total assets at the time
of such borrowing. The Fund will not purchase any securities while its
borrowings (including
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Investment Restrictions 21
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INFORMATION ON THE FUNDS (CONTINUED)
reverse repurchase agreements) are outstanding.
3. Invest more than 10% of its total assets in illiquid securities,
including repurchase agreements maturing in more than seven days or the lending
of securities which provide for settlement more than seven days after notice.
4. Purchase securities of any one issuer (other than obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities) if, immediately after such purchase, more than 5% of the
value of the Fund's total assets would be invested in such issuer and/or more
than 10% of the voting securities of such issue would be held by the Fund,
except that up to 25% of the value of the Fund's total assets may be invested
without regard to such 5% limitation.
5. Invest 25% or more of its total assets in any one industry. For
purposes of this limitation, 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 their parents, and utilities will be
divided according to their services-for example, gas, gas transmission, electric
and gas, electric, and telephone will each be considered a separate industry.
PORTFOLIO TURNOVER It is not a policy of the Fund to purchase or sell securities
for trading purposes. However, the advisers manage the Fund without regard
generally to restrictions on portfolio turnover, except those imposed by
provisions of the federal tax laws regarding short-term trading. Generally, the
Fund 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 Fund's annual portfolio turnover rates will not exceed 100%. A
100% rate of turnover would occur, for example, if all of a portfolio's
securities are replaced within a one year period.
High rates of portfolio turnover necessarily result in correspondingly
heavier brokerage and portfolio trading costs which are paid by a Fund. In
addition to portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. As a general rule, net gains are
distributed to shareholders and will be taxable at ordinary income tax rates,
for federal income tax purposes, regardless of long- or short-term capital gains
status. See 'Distributions' and 'Taxes' for more information on taxation. The
tables set forth in 'Financial Highlights' present the Funds' historical
portfolio turnover rates.
/X/
INVESTOR
CONSIDERATIONS
INVESTMENT SUITABILITY _________________________________________________________
The Fund is suitable for those who want to participate in the equity market's
superior long-term performance without the near-term commitment and risks
associated with choosing a particular investment style which may or may not be
out of favor during any period of time. Investors generally can expect returns
in line with the S&P 500 Index, which is tracked closely by the Fund.
INVESTMENT RISKS _______________________________________________________________
Different funds differ significantly in terms of risk. Because of the concerns
listed below, the Fund should not be considered a complete investment program.
Most investors should maintain diversified holdings of securities with different
risk characteristics--including common stocks, bonds and different types of
money market instruments. Investors may also wish to complement an investment
22 Investor Considerations
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/X/ COREFUND
in the Fund with other portfolios offered by CoreFunds.
The Fund is subject to market risk and fund risk. Market risk is the
possibility that stock prices in general will decline over short or even
extended periods of time. Stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when stock prices generally decline.
Fund risk is the possibility that a Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole. Therefore, investors
should consider their holdings in equity mutual funds to be long-term
investments.
/X/
DISTRIBUTIONS
Shareholders of the Fund are entitled to dividends and distributions arising
from the net investment income and capital gains, if any, earned on investments
held by such Fund. Shares of the Fund begin earning dividends on the business
day on which the purchase order for the shares is executed and continue to earn
dividends through, and including, the day before the redemption order for such
shares is executed.
Dividends are paid in the form of additional shares of the Fund unless a
shareholder selects one of the following options on the Account Application
Form: Cash Dividend Option--to receive dividends in cash and capital gains
distributions in additional shares of the Fund at net asset value; All Cash
Option-- to receive both dividends and capital gains distributions in cash. In
the absence of either of these selections on the Account Application Form, each
purchase of shares is made upon the condition and understanding that the Fund's
agent is automatically appointed to receive the dividends and distributions upon
all shares in the shareholder's account and 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. Dividends and distributions are automatically
paid in cash (along with any redemption proceeds) not later than seven business
days after a shareholder closes an account with the Fund.
The net investment income of each of this Fund is declared and paid to
shareholders on a quarterly basis. Distributions of any capital gains will be
made by the Fund at least annually.
If any capital gains are realized from the sale of underlying securities,
the Funds normally distribute such gains with the last dividend for the calendar
year.
/X/
TAXES
The following is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareholders. No attempt
has been made to present a detailed explanation of the federal, state or local
income tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. Potential investors in the
Funds are urged to consult their tax advisers with specific reference to their
own tax situations. The following summary is based on current tax laws and
regulations which may be changed by legislative, judicial or administrative
action.
The Fund is treated as a separate entity for federal income tax purposes
and is not combined with any of CoreFunds' other portfolios. Each Fund intends
to qualify for the favorable tax treatment afforded a 'regulated investment
company' under the Code. This requires, among other things,
Taxes 23
<PAGE>
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INFORMATION ON THE FUNDS (CONTINUED)
that a Fund distribute to its shareholders at least 90% of its net investment
income. Provided a Fund meets this 90% distribution and certain other
requirements, it will be relieved of federal income tax on that part of its net
investment income and any net capital gains (the excess of net long-term capital
gain over net short-term capital loss) distributed to shareholders.
Whether paid in cash or in additional shares, dividends attributable to a
Fund's net investment income (including ordinary income and net short-term
capital gains, if any) will be taxable to shareholders as ordinary income.
Capital gains distributions of all Funds will be taxable as long-term capital
gain, regardless of how long a shareholder has held shares.
Dividends declared by a Fund in October, November, or December of any year
and payable to shareholders of record on a date in such a month will be deemed
to have been paid by the Fund and received by the shareholders on December 31 of
that year, if paid by the Fund during the following January.
BACK-UP WITHHOLDING
Generally, the Fund is 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.
IN GENERAL
The sale or redemption of shares of a mutual fund is a taxable event to the
selling or redeeming shareholder. Gains or losses (if any) may also be realized
from an ordinary redemption of shares, as described herein, or on a telephone
exchange among the CoreFunds portfolios.
In the opinion of counsel, shares of the Fund are exempt from current
Pennsylvania Personal Property Taxes.
Shareholders will be advised at least annually as to the federal income
tax status of distributions made during the year. See the Statement of
Additional Information for further information regarding taxes.
/X/
VALUATION OF SHARES
NET ASSET VALUE ________________________________________________________________
The shares of the Fund will fluctuate in value as a result of changes in the
value of its portfolio investments. Shares in the Fund will realize capital
gains or losses as portfolio investments are sold above or below costs,
respectively.
The net asset value per share of the Fund for purposes of pricing purchase
and redemption orders is normally determined as of 4:00 p.m. (Eastern time) (the
'valuation time') on each business day of the Fund. A 'business day' of the Fund
is a day on which the New York Stock Exchange is open for trading, and any other
day (other than a day on which no shares of the Fund are tendered for redemption
and no order to purchase any shares is received) during which there is a
sufficient degree of trading in securities or instruments held by the Fund such
that the Fund's net asset value per share might be materially affected. Net
asset value per share is calculated by dividing the value of all of the Fund's
portfolio securities and other assets, less liabilities, by the number of
outstanding shares of the Fund at the time of the valuation. The result
(adjusted to the nearest cent) is the net asset value per share.
24 Valuation of Shares
<PAGE>
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/X/ COREFUND
PORTFOLIO PRICING ______________________________________________________________
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. 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. 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.
/X/
MANAGEMENT
The business and affairs of the Fund are managed under the direction of its
Board of Directors.
INVESTMENT ADVISER,
SUB-ADVISERS ___________________________________________________________________
CoreStates Advisers has overall responsibility for portfolio management for the
Fund. CoreStates Advisers is a wholly-owned subsidiary of CoreStates Bank,
itself a wholly-owned subsidiary of CoreStates Corp. CoreStates Corp, based in
Philadelphia, Pennsylvania, is one of the 30 largest bank holding companies in
the United States, and leads the region in investing corporate cash. CoreStates
Corp currently has over $29 billion in assets and discretionary management over
$22 billion in customer accounts through a variety of banking activities at over
355 domestic and foreign locations. Corestates Corp's leading subsidiary,
CoreStates Bank, currently ranks thirty-second in the management of
discretionary trust assets.
CoreStates Advisers is an adviser registered under the Investment Advisers
Act of 1940. It performs most investment management and advisory functions for
the trust departments of CoreStates Corp's banking subsidiaries, related
investment advisory, research, trading, and fund management functions, and also
provides similar services to customers unrelated to CoreStates Corp. CoreStates
Advisers currently manages discretionary and nondiscretionary client security
portfolios with a total aggregate market value of over $16 billion, for
individuals, corporations, institutions, and municipalities. CoreStates Advisers
has extensive experience in the management of money market, tax-free, fixed
income, equity, and international investments. CoreStates Advisers has principal
offices at 1500 Market Street, P.O. Box 7558, Philadelphia, PA 19102.
As investment adviser, CoreStates Advisers manages the investment
portfolio of the Fund, makes decisions with respect to and places orders for all
purchases and sales of the Fund's portfolio securities, and maintains certain
records relating to such purchases and sales. CoreStates Advisers pays all
expenses incurred by it in connection with its investment advisory activities,
other than the cost of securities (including any brokerage commissions)
purchased for the Fund and the cost of obtaining market quotations for portfolio
securities held by the Fund.
ADVISORY FEES
For the services provided and expenses assumed as investment adviser of the
Fund, CoreStates Advisers is entitled to receive an annual fee from the Fund,
computed daily and paid monthly, at the annual rate of .40% of the average daily
net assets of Equity Index Fund. CoreStates Advisers may, from to time and at
its discretion, voluntarily waive all or a portion of its investment advisory
fees in order to assist
<TABLE>
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Management 25
</TABLE>
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INFORMATION ON THE FUNDS (CONTINUED)
the Funds in maintaining competitive expense ratios.
FUND MANAGER
Lary Aasheim, C.F.A., a Vice President of CoreStates Advisers, is portfolio
manager of the Fund. In addition, he is a securities analyst with responsibility
for the technology and telecommunications equipment industries, paper, forest
products and building material industries. Prior to joining CoreStates Advisers
in 1990, Mr. Aasheim worked as an analyst at First Fidelity Bank/Fidelity Bank,
First Pennsylvania Bank and Bear Stearns in New York. He received his B.S.
degree in Economics from The Wharton School, University of Pennsylvania. He also
has earned his CFA from the Institute of Chartered Financial Analysts.
ADMINISTRATOR __________________________________________________________________
SEI Financial Management Corporation ('SFMC' or the 'Administrator'), with
principal offices at 680 East Swedesford Road, Wayne, PA 19087, acts as the
Fund's administrator. For its administrative services, SFMC is entitled to
receive a fee from the Fund, computed daily and paid monthly, at the annual rate
of .25% of the Fund's average daily net assets. As Administrator, SFMC generally
assists in the Funds' administration and operations. State Street Bank and Trust
Company located at 225 Franklin Street, Boston, MA 02110, serves as each Fund's
transfer agent (the 'Transfer Agent') and dividend paying agent.
DISTRIBUTOR ____________________________________________________________________
SEI Financial Services Company ('SFS' or the 'Distributor'), with principal
offices at 680 East Swedesford Road, Wayne, PA 19087, serves as the Fund's
distributor pursuant to a Distribution Agreement.
EXPENSES The Fund's expenses are accrued daily and are deducted from total
income before dividends are paid. Except as noted herein and in the Statement of
Additional Information, the Fund's service contractors bear all expenses
incurred in connection with the performance of their services on behalf of the
Fund. Similarly, the Fund bears the expenses incurred in their operations.
GLASS-STEAGALL ACT CoreStates Corp and its banking subsidiaries are permitted to
perform the services contemplated by the investment advisory agreements with the
Fund and to engage in certain activities in connection with the investment of
their customer accounts in Shares of the Fund 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 was thereby
prohibited from serving as investment adviser to the Fund, the Board of
Directors would promptly seek to retain another qualified investment adviser for
the Fund.
In addition, certain state securities laws may require banks and other
institutional investors purchasing shares on behalf of their customers in such
states to register as dealers pursuant to state law.
/X/
PERFORMANCE
INFORMATION
TOTAL RETURN AND YIELD _________________________________________________________
From time to time, in advertisements or reports to shareholders, the performance
of the Fund may be quoted and compared to that of other mutual funds with
similar investment objectives and to relevant indices.
26 Performance Information
<PAGE>
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/X/ COREFUND
The Fund may calculate its performance on a total return basis for various
periods. The total return basis combines principal changes, income dividends,
and capital gains distributions paid during the period. Principal changes are
based on the difference between the beginning and closing net asset values for
the period and assume reinvestment of income dividends and capital gains
distributions paid during the period. The Fund may calculate its performance for
periods since commencement of operations and for calendar or fiscal year periods
(including multiple years). See 'Total Return' in the Statement of Additional
Information.
The performance of any investment will generally reflect market
conditions, portfolio quality and maturity, type of investment, and operating
expenses. The Fund's performance will fluctuate and is not necessarily
representative of future results. The Fund's performance would be favorably
affected by any investment advisory fee waivers on the part of CoreStates
Advisers. Shareholders will receive unaudited semi-annual reports describing the
Funds' investment operations and annual financial statements audited by
independent auditors.
/X/
HOW TO
PURCHASE
AND REDEEM
SHARES
PURCHASE OF SHARES _____________________________________________________________
Shares of the Funds are sold on a continuous basis by the Distributor with
principal offices located at 680 East Swedesford Road, Wayne, Pennsylvania
19087. Shares may also be purchased through CoreStates Securities Corp.
Institutional investors may acquire Shares of the Fund (Class Y) for their
own account or as a record owner on behalf of fiduciary, agency, or custody
accounts by placing orders with the Distributor. Purchases may be made on any
business day of the Fund at the net asset value per share (see 'Valuation of
Shares') next determined after receipt by the Fund of an order to purchase
shares. Shares of the Fund are offered only to residents of states in which the
shares are eligible for purchase.
An order received before the valuation time on any business day will be
executed on the date of receipt at the net asset value determined as of the
valuation time on such date so long as federal funds are transmitted or
delivered to the Fund's custodian by close of business on the next business day.
An order received after the valuation time on any business day will be executed
on the next business day of the Fund at the net asset value determined on such
date. An order is deemed to be received when received by the Transfer Agent and
the execution of purchase orders by the Transfer Agent will be delayed for the
period of time that the order is in transit from SEI Financial Management
Corporation to the Transfer Agent.
Funds should be wired to CORESTATES PHIL, Philadelphia, PA ABA #031000011,
for credit to COREFUNDS-A/C #0169-0541. The wire instructions must also include
the account number. Before wiring any funds however, an investor must call
CoreFunds Investor Services at 1-800-355-CORE in order to confirm the wire
instructions for the Transfer Agent, State Street Bank and Trust
How to Purchase and Redeem Shares 27
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INFORMATION ON THE FUNDS (CONTINUED)
Company. An order to purchase shares by federal funds wire will be deemed to
have been received by the Fund on the business day that investors notify
CoreFunds Investor Services by 12:00 p.m. (Eastern time) of their intentions to
wire money provided that federal funds are received by the custodian on the
following business day.
The minimum investment amount is $1,000,000 for the initial purchase of
shares by an investor which amount may be waived at the discretion of the
Distributor. However, the minimum initial investment amount for retail investors
investing in Equity Index Fund is $500. There is no minimum for subsequent
investments.
The Fund reserves the right to reject any order for the purchase of shares
in whole or in part.
Every shareholder of record will receive a confirmation of each new share
transaction with the Fund, which will also show the total number of shares being
held in safekeeping by the Transfer Agent for the account of the shareholder.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing shares of the Funds will not be issued.
Beneficial ownership of shares held of record by institutional investors
on behalf of their customers will be recorded by the institutions and reflected
in the regular account statements provided by them to their customers.
REDEMPTION OF SHARES ___________________________________________________________
Shares may ordinarily be redeemed in accordance with the procedures described
below.
With respect to shares held by institutional investors on behalf of their
customer accounts, all or part of the shares beneficially owned by a customer
may be redeemed in accordance with instructions and limitations pertaining to
their account at the institution.
Shareholders who desire to redeem Shares of the Fund must place their
redemption orders with CoreFunds Investor Services for the Transfer Agent, State
Street Bank and Trust Company prior to 4:00 p.m. (Eastern time) on any business
day (12:00 p.m. for the Money Market Funds). Payment will be made the next
business day after proper receipt by the Transfer Agent by transfer of federal
funds. An order is deemed to be received when received by the transfer agent and
the execution of redemption orders by the Transfer Agent will be delayed for the
period of time that the redemption order is in transit from SEI Financial
Management Corporation to the Transfer Agent. Otherwise, the redemption order
will be effective the next business day.
The Fund intends to pay cash for all shares redeemed but under abnormal
conditions which make payment in cash unwise, the Fund may make payment wholly
or partly in portfolio securities at their then market value equal to the
redemption price. In such cases, a shareholder may incur brokerage costs in
converting such securities to cash.
/X/
DESCRIPTION
OF SHARES
CoreFunds has set up the following twenty-three portfolios: Growth Equity,
Equity, Special Equity, Equity Index, International Growth, Balanced,
Short-Intermediate Bond, Bond, Short Term Income, Government Income,
Intermediate Municipal Bond, Pennsylvania Municipal Bond, New Jersey Municipal
Bond, Global Bond, Cash Reserve, Treasury Reserve, Tax-Free Reserve, Fiduciary
Reserve, Fiduciary Treasury Reserve, Fiduciary Tax-Free Reserve, CoreFund Elite
Cash
28 Description of Shares
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
Reserve, CoreFund Elite Government Reserve and CoreFund Elite Treasury Reserve.
CoreFunds offers two classes of each portfolio except for Equity Index Fund,
CoreFund Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite
Treasury Reserve, Fiduciary Reserve, Fiduciary Tax-Free Reserve, and Fiduciary
Treasury Reserve. CoreFunds may in the future create one or more additional
portfolios, or one or more classes of shares within a portfolio. Class Y Shares-
Institutional, Class A and C Shares-Individual and shares of CoreFund Elite Cash
Reserve, CoreFund Elite Government Reserve, CoreFund Elite Treasury Reserve,
Fiduciary Reserve, Fiduciary Treasury Reserve, and Fiduciary Tax-Free Reserve,
are offered in separate prospectuses. In addition to this prospectus, the Shares
of the Equity Index Fund (Class Y Shares) are also offered in the CoreFunds
Class Y Shares-Institutional prospectus.
Class A Shares differ from Class Y Shares in that Class A Shares are
subject to a sales load and distribution and transfer agent expenses for certain
additional shareholder services they receive. Class C Shares also differ from
Class Y Shares in that Class C Shares are subject to distribution and transfer
agent expense for certain additional shareholder services, but unlike Class A
Shares, are not subject to a sales load. Classes A and C Shares also have voting
rights which Class Y Shares do not, in connection with the Distribution Plan
affecting Class A and C Shares. In addition, the distribution and transfer agent
expenses charged Class A and C Shares result in Class A and C Shares having
different dividends and performance results from Class Y Shares. In addition,
the minimum initial investment for Class Y Shares is substantially higher than
that required for Class A or Class C Shares with the exception of the Equity
Index Fund.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO CLASS Y SHARES OF THE EQUITY INDEX FUND AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER
MATTERS RELATING TO SUCH SHARES. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION
REGARDING OTHER COREFUNDS PORTFOLIOS MAY OBTAIN PROSPECTUSES DESCRIBING SUCH
PORTFOLIOS BY CONTACTING THE DISTRIBUTOR AT 1-800-355-CORE.
Except for differences between classes of some of CoreFunds' portfolios
pertaining to distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class,
each share in each Fund represents an equal proportionate interest in that Fund
with each other share of the same Fund and is entitled to such dividends and
distributions out of the income earned on the assets belonging to such Fund as
are declared in the discretion of the Board of Directors.
CoreFunds' shareholders are entitled to one vote for each full share held,
and fractional votes for fractional shares held, and will vote in the aggregate
and not by portfolio or class except as otherwise expressly required by law or
when the Board of Directors determines that the matter to be voted upon affects
only the interests of the shareholders of a particular portfolio or class. See
the Statement of Additional Information under 'Description of Shares' for
examples where the
Description of Shares 29
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS (CONTINUED) /X/ COREFUND
Investment Company Act requires voting by portfolio or class. Voting rights are
not cumulative and, accordingly, the holders of more than 50% of the aggregate
number of shares of all of the Funds may elect all of the directors if they
choose to do so and, in such event, the holders of the remaining shares would
not be able to elect any person or persons to the Board of Directors.
As used in this Prospectus, a 'vote of a majority of the outstanding
shares' of a Fund means the affirmative vote of the lesser of (a) more than 50%
of the outstanding shares of a Fund, or (b) at least 67% of the shares of a Fund
present at a meeting at which the holders of more than 50% of the outstanding
shares of such Fund are represented in person or by proxy.
/X/
GENERAL
INFORMATION
In accordance with the Maryland General Corporation Law, CoreFunds is not
required to hold annual meetings of shareholders unless the Investment Company
Act requires the shareholders to elect members of the Board of Directors.
However, a meeting of shareholders may be called for any purpose upon the
written request of the holders of at least 10% of the outstanding shares of
CoreFunds, or of a Fund with respect to matters affecting only such Fund.
As used in this Prospectus, 'assets belonging to the Fund' means the
consideration received by CoreFunds upon the issuance or sale of shares in the
Fund, together with all income, earnings, profits and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of CoreFunds
not belonging to the Fund or CoreFunds' other portfolios. Assets belonging to
the Fund are charged with the direct liabilities in respect of that Fund and
with a share of the general liabilities of CoreFunds allocated in proportion to
the relative asset values of each of CoreFunds' portfolios at the time the
expense or liability is incurred. The management of CoreFunds makes
determinations with respect to the Fund as to liabilities when they are incurred
and as to assets when they are acquired. Such determinations are reviewed and
approved annually by the Board of Directors and are conclusive.
30 General Information
<PAGE>
EQUITY FUNDS
(Stocks)
GROWTH EQUITY FUND seeks capital growth by investing primarily in the equity
securities of companies believed by management to show the potential for growth
of earnings over time.
EQUITY FUND seeks capital growth by investing principally in a diversified
portfolio of common stocks of companies with large, medium or small
capitalizations.
SPECIAL EQUITY FUND seeks capital growth by investing principally in a
diversified portfolio of common stocks of domestic companies expected to
experience growth in earnings and price.
EQUITY INDEX FUND seeks to track the price and yield performance of the
Standard & Poor's 500 Composite Stock Price Index.
INTERNATIONAL GROWTH FUND seeks long-term capital appreciation by investing
primarily in appreciation-oriented equity securities of companies located
outside the United States.
BALANCED FUND seeks to provide total return while preserving capital by
investing in a combination of common stocks and fixed income securities.
FIXED INCOME FUNDS
(Bonds)
SHORT-INTERMEDIATE BOND FUND seeks income through investment in a diversified
portfolio of intermediate term, fixed income obligations with an expected
average weighted maturity of two to five years.
BOND FUND seeks to maximize long-term total return by investing principally in a
diversified portfolio of debt securities.
SHORT TERM INCOME FUND seeks to obtain consistent current income with relative
stability of principal by investing principally in a diversified portfolio of
investment grade debt securities.
GOVERNMENT INCOME FUND seeks to provide current income while preserving
principal value and maintaining liquidity by investing exclusively in securities
of the United States government and its agencies.
INTERMEDIATE MUNICIPAL BOND FUND seeks a high level of income generally exempt
from federal income taxes by investing at least 80% of its assets in tax-exempt
municipal securities.
PENNSYLVANIA MUNICIPAL BOND FUND seeks to provide a high rate of current income
that is exempt from both federal income taxes and (for Pennsylvania residents)
Pennsylvania state income taxes. The Fund invests primarily in highly-rated,
long-term municipal bonds issued by state, county, and local agencies within the
Commonwealth of Pennsylvania.
There is no assurance that the Funds will achieve their respective
objectives.
<PAGE>
FIXED
INCOME
FUNDS
(Bonds)
NEW JERSEY MUNICIPAL BOND FUND seeks to provide a high rate of current income
that is exempt from both federal income taxes and (for New Jersey residents) New
Jersey state income taxes. The Fund invests primarily in highly-rated, long-term
municipal bonds issued by state, county, and local agencies within the state of
New Jersey.
GLOBAL BOND FUND seeks to provide capital appreciation and current income
through investment primarily in fixed income securities of United States and
foreign issuers denominated in United States dollars and in other currencies.
MONEY MARKET FUNDS
CASH RESERVE seeks to obtain maximum current income consistent with the
preservation of principal and maintenance of liquidity by investing in a
diversified portfolio of money market instruments of the highest quality,
including a broad range of U.S. dollar-denominated government, bank, and
commercial paper obligations.
TREASURY RESERVE seeks to provide current interest income, liquidity and safety
of principal by investing in direct obligations of the U.S. Treasury and
repurchase agreements relating to such obligations.
TAX-FREE RESERVE seeks a high level of income exempt from federal income taxes
through investment of at least 80% of its total assets in tax-free securities.
There is no assurance that the Funds will achieve their respective objectives.
<PAGE>
NOTES
<PAGE>
COREFUND(R)
EQUITY
INDEX
FUND
PROSPECTUS
APRIL 22, 1996
COREFUNDS, INC.
DIRECTORS
Emil J. Mikity, Chairman
George H. Strong
Erin Anderson
OFFICERS
David G. Lee, President
James W. Jennings, Secretary
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Financial Management Corporation
Wayne, PA 19087
DISTRIBUTOR
SEI Financial Services Company
Wayne, PA 19087
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
Investment Adviser
[CoreStates LOGO]
CORESTATES
INVESTMENT ADVISERS
For current performance, purchase, redemption and
other information, call 1-800-355-CORE (2673)
COR-F-052-02
<PAGE>
PROSPECTUS
COREFUND FIDUCIARY TAX-FREE RESERVE
680 East Swedesford Road For current performance, purchase,
Wayne, PA 19087 redemption, and other information,
Call: 1-800-355-CORE
CoreFund Fiduciary Tax-Free Reserve (the 'Fund') is a portfolio offered by
CoreFunds, Inc. (the 'Company'), a no-load, diversified, open-end management
investment company.
The Fund's investment objective is to provide its shareholders with as high a
level of current interest income that is exempt from federal income taxes as is
consistent with liquidity and relative stability of principal. The Fund intends
to achieve this objective by investing substantially all of its assets in a
diversified portfolio of tax-exempt obligations of the highest quality, with
remaining maturities of 397 days or less. While the Fund may also invest in
short-term taxable obligations, under normal market conditions, at least 80% of
the Fund's total assets will be invested in obligations exempt from federal
income tax.
THE FUND WILL ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.00,
HOWEVER, AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES IN THE FUND ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR GUARANTEED
OR ENDORSED BY, CORESTATES BANK, N.A., THE PARENT CORPORATION OF THE FUND'S
INVESTMENT ADVISER, OR ANY OF ITS AFFILIATES. SUCH SHARES ARE ALSO NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
Subject to the Fund's investment objective and policies stated above, the Fund
will attempt to invest its assets, to the extent practicable, in tax-exempt
obligations issued by the Commonwealth of Pennsylvania and its political
subdivisions ('Pennsylvania Municipal Securities'). The Fund cannot predict what
portion of its assets will be invested in Pennsylvania Municipal Securities,
although such investments may exceed 25% of the Fund's total assets.
This Prospectus sets forth certain information about the Fund that a prospective
investor ought to know before investing. Investors should read this Prospectus
and retain it for future reference.
Additional information about the Fund, contained in a Statement of Additional
Information, has been filed with the Securities and Exchange Commission and is
available upon request without charge by writing to the Fund at its address. The
Statement of Additional Information bears the same date as this Prospectus and
is incorporated by reference in its entirety into this Prospectus.
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April 22, 1996.
<PAGE>
2
The Fund's Investment Adviser is 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'). SEI Financial Management Corporation (the
'Administrator') serves as the Fund's Administrator and SEI Financial Services
Company (the 'Distributor') serves as the Fund's Distributor.
Shares of the Fund ('Shares') are sold only to various types of Institutional
Investors ('Institutional Investors'), including but not limited to affiliate
and subsidiary banks of CoreStates Corp. Shares may be purchased by
Institutional Investors for investment of their own funds, or for funds of their
customer accounts ('Customer Accounts') for which they serve in a fiduciary,
agency, or custodial capacity. Shares are sold and redeemed without the
imposition of a purchase or redemption charge by the Fund, although
Institutional Investors that are record owners of Shares for their Customer
Accounts may charge their Customers separate account fees. See 'How to Purchase
and Redeem Shares.'
FUND EXPENSES
The tables below set forth information concerning shareholder transaction
expenses and annual operating expenses of the Fund.
<TABLE>
<CAPTION>
FIDUCIARY TAX-FREE
SHAREHOLDER TRANSACTION EXPENSES RESERVE FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... 0%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........ 0%
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds, as
applicable)................................................................................. 0%
Redemption Fee................................................................................ None
Exchange Fee.................................................................................. None
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
FIDUCIARY TAX-FREE
ANNUAL FUND OPERATING EXPENSES (A) RESERVE FUND
- -------------------------------------------------------------------------------------------------------------------
12b-1 Fees.................................................................................... None
Investment Advisory Fee After Fee Waivers (B)................................................. .00%
Administrative Fee After Fee Waivers (C)...................................................... .11%
Other Expenses (D)............................................................................ .06%
Net Annualized Fund Operating Expenses (E).................................................... .17%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The Fund operating expenses as set forth in this table reflect expenses
expected to be incurred by the Fund for the fiscal period ending June 30,
1996, shown as a percentage of average net assets for such year.
(B) Absent voluntary waivers, CoreStates Advisers' investment advisory fee is
calculated at the annual rate of .20% of the Fund's average net assets.
(C) Absent voluntary waivers, the Administrator's administrative fee is
calculated at the annual rate of .25% of the Fund's average net assets.
(D) Includes (among others) legal and auditing fees.
(E) CoreStates Advisers and the Administrator may, from time to time and at
their discretion, voluntarily waive all or a portion of their fees. The
expense ratio of .17% is net of investment advisory and administrative fee
waivers in effect during the fiscal period. Absent any fee waivers, the
expense ratio would have been .81%.
<PAGE>
3
EXAMPLE
<TABLE>
<CAPTION>
FIDUCIARY TAX-FREE RESERVE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period: $2 $5 $10 $22
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of the tables is to assist the investor in understanding the various
costs and expenses that a Shareholder in the Fund will bear directly or
indirectly. For additional information regarding fees and other expenses, see
'Investment Adviser,' 'Administrator,' and 'Expenses.'
Absent the voluntary fee waivers by CoreStates Advisers and the Administrator,
the amounts in the Example above would be $8, $26, $45 and $100 for one year,
three years, five years and ten years, respectively.
THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
<PAGE>
4
FINANCIAL HIGHLIGHTS
The Company was organized as a Maryland corporation on September 11, 1984, under
the name of 'Red Oak Cash Reserve Fund, Inc.' The Company changed its name to
'CoreFunds, Inc.' on November 19, 1992, at a Special Meeting of Shareholders.
The Fiduciary Tax-Free Reserve Fund commenced operations on February 3, 1992.
The table that follows presents information about the investment results of the
Fund since its inception. The financial highlights for each of the periods
presented have been audited by Ernst & Young LLP, independent certified public
accountants, whose report thereon appears in CoreFunds' annual report with
respect to the Fund which accompanies the Statement of Additional Information.
FOR THE PERIOD ENDED JUNE 30,
FIDUCIARY TAX-FREE RESERVE
<TABLE>
<CAPTION>
NET
ASSET DIVIDENDS NET
VALUE NET FROM NET ASSET VALUE
BEGINNING INVESTMENT INVESTMENT END TOTAL
YEAR OF PERIOD INCOME INCOME OF PERIOD RETURN
- --------------------------------------------------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
1995** (unaudited)................................. $ 1.00 0.02 (0.02) $ 1.00 1.82%+
1995............................................... $ 1.00 0.03 (0.03) $ 1.00 3.41%
1994............................................... $ 1.00 0.02 (0.02) $ 1.00 2.32%
1993............................................... $ 1.00 0.02 (0.02) $ 1.00 2.48%
1992*.............................................. $ 1.00 0.02 (0.02) $ 1.00 1.50%+
NET RATIO RATIO OF
ASSET RATIO OF EXPENSES NET INCOME
END RATIO OF NET TO AVERAGE TO AVERAGE
OF PERIOD OF EXPENSES INCOME NET ASSETS NET ASSETS
(THOUSANDS TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
YEAR OMITTED) NET ASSETS NET ASSETS WAVIERS) WAIVERS)
- ------------------------------------------- ----------- --------------- --------------- --------------- ---------------
1995** (unaudited)......................... $ 76,881 0.18% 3.58% 0.82% 2.94%
1995....................................... $ 72,593 0.19% 3.37% 0.83% 2.73%
1994....................................... $ 78,219 0.17% 2.29% 0.82% 1.64%
1993....................................... $ 48,424 0.19% 2.45% 0.83% 1.81%
1992*...................................... $ 66,158 0.17% 3.00% 0.89% 2.28%
</TABLE>
- ------------------
+ Returns shown are for the period indicated and are not annualized.
* The Fiduciary Tax-Free Reserve commenced operations November 19, 1991. Ratios
for this period have been annualized.
** Rates for the six-month period ended December 31, 1995 have been annualized.
<PAGE>
5
PERFORMANCE INFORMATION
From time to time, in advertisements or reports to shareholders, the performance
of the Fund may be quoted and compared to that of other mutual funds with
similar investment objectives and to relevant indices.
The Fund may advertise its 'yield' and 'effective yield.' Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The 'yield' of the Fund refers to the income generated by an
investment in the 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 the 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. See 'Yields ' in the Statement of
Additional Information.
The Fund may also advertise its 'taxable equivalent yield,' which is calculated
by taking into account the investor's current tax bracket. This is the yield an
investor 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.
The performance of any investment will generally reflect market conditions,
portfolio quality and maturity, type of investment, and operating expenses. The
Fund's performance will fluctuate and is not necessarily representative of
future results. Any fees charged by Institutional Investors to their Customers
in connection with investments in Fund Shares are not reflected in the Fund's
performance, and such fees, if charged, will reduce the actual return received
by Customers on their investments. Conversely, the Fund's performance would be
favorably affected by any investment advisory or administrative fee waivers on
the part of CoreStates Advisers or SEI Financial Management Corporation.
Shareholders will receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements audited by independent
auditors.
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to provide as high a level of current
interest income that is exempt from federal income taxes as is consistent with
liquidity and relative stability of principal. Although there can be no
assurance that the Fund will meet its stated objective, the Fund intends, under
normal market conditions, to have at least 80% of its total assets invested in
the tax-free securities discussed herein.
The securities held by the Fund will have remaining maturities of 397 days or
less, although securities with optional or mandatory tender provisions, variable
rate demand obligations, securities subject to repurchase agreements, and
certain other securities may bear longer maturities. In addition, the
portfolio's average weighted maturity will not exceed 90 days.
MUNICIPAL SECURITIES
The Fund invests substantially all of its assets in a diversified portfolio
consisting of short-term obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia and
their political subdivisions, agencies, instrumentalities and authorities, the
interest on which, in the opinion of counsel to the issuer, is exempt from
federal income tax ('Municipal Securities'), except in extraordinary
circumstances (see 'Temporary Investments'). Municipal Securities will include,
but not be limited to, the following:
General Obligation Bonds and Notes
Bond and/or Grant Anticipation Notes
Construction Loan Notes
Revenue Bonds and Notes
Tax and/or Revenue Anticipation Notes
Tax-Exempt Commercial Paper
Variable Rate Demand Obligations
Municipal Securities in which the Fund invests will be determined by CoreStates
Advisers (as
<PAGE>
6
Investment Adviser) to present minimal credit risks, pursuant to guidelines
approved by CoreFunds' Board of Directors, and will, at the time of purchase, be
considered to be of the highest quality, according to the short-term ratings of
Moody's Investors Service, Inc. ('Moody's') and/or Standard & Poor's Corporation
('S&P'). Therefore, Municipal Securities purchased by the Fund must meet or
exceed the ratings set forth below:
MINIMUM RATINGS
MOODY'S S&P
--------- ---------
Notes "MIG-1" "SP-1"
Tax-Exempt Commercial Paper "Prime-1" "A-1"
Variable Rate
Demand Obligations "VMIG-1" "A-1"
Securities that have no short-term ratings at the time or purchase will be
determined to be of comparable quality by CoreStates Advisers, pursuant to
guidelines approved by the Fund's Board of Directors. To the extent that the
ratings accorded by Moody's or S&P may change as a result of changes in their
rating systems, the Fund will attempt to use comparable ratings as standards for
its investments, in accordance with the investment policies contained herein.
Where necessary to ensure that an instrument is of the highest quality, the Fund
will require that the issuer's obligation to pay the principal of, and the
interest on, the instrument be backed by insurance or by an unconditional bank
letter or line of credit, guarantee, or commitment to lend. In such event, the
underlying guarantee must be deemed by CoreStates Advisers to present minimal
credit risks. See the 'Appendix' to the Statement of Additional Information for
a description of applicable ratings.
Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Fund nor CoreStates
Advisers will review the proceedings relating to the issuance of Municipal
Securities or the basis for such opinions.
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. There can be no assurance that the current federal income
tax treatment accorded an investment in the Fund will not be adversely affected
by changes to statutes, regulations, rulings or judicial precedents upon which
such Federal Tax treatment is based. In the event of the enactment of such
legislation, which might materially affect the availability of Municipal
Securities for investment by the Fund and hence the value of the Fund's
portfolio, the Fund would re-evaluate its investment objective and policies and
consider changes in its structure or possible dissolution.
PENNSYLVANIA MUNICIPAL SECURITIES
In managing the Fund's portfolio, CoreStates Advisers intends to invest, when
possible, the Fund's assets in tax-exempt obligations issued by the Commonwealth
of Pennsylvania and its political subdivisions ('Pennsylvania Municipal
Securities'), provided the investment is consistent with the Fund's investment
objective and policies and its status as a diversified investment company.
Because of the relatively limited number of Pennsylvania municipal issuers and
restricted supply of outstanding Municipal Securities issued by them that meet
the Fund's investment criteria, CoreStates Advisers cannot predict precisely
what percentage of the Fund's portfolio will be invested in such issuers.
Except as stated above with respect to Pennsylvania Municipal Securities,
CoreStates Advisers does not intend on a regular basis to invest more than 25%
of the Fund's total assets in (i) Municipal Securities whose issuers are in the
same state, (ii) Municipal Securities, the interest on which is paid solely from
revenues of similar projects, and (iii) industrial development bonds, although
it may do so from time to time. To the extent the Fund's assets are so
concentrated, the Fund would be subject to the peculiar risks presented by the
laws and economic conditions relating to such states, projects, and bonds to a
greater extent than it would be if its assets were not so concentrated.
TYPES OF MUNICIPAL SECURITIES
The two principal classifications of Municipal Securities which may be held by
the Fund are 'general obligation' securities and 'revenue'
<PAGE>
7
securities. These are discussed below, along with other Municipal Securities in
which the Fund may invest.
1. General Obligation Securities
'General obligation' securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
2. Revenue Securities
'Revenue' securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or another specific revenue source such as the user of
the facility being financed. Industrial development and pollution control bonds
held by the Fund are in most cases revenue securities and are not payable from
the unrestricted revenues of the issuer. Consequently, the credit quality of
such revenue bonds is usually directly related to the credit standing of the
corporate user of the facility involved.
3. Moral Obligation Bonds
The Fund's portfolio may also include 'moral obligation' bonds, which are
normally issued by special-purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which created
the issuer.
4. Variable Rate Demand Obligations
Municipal Securities purchased by the Fund may include 'variable rate demand
obligations,' which are tax-exempt obligations upon which interest is payable at
a floating or variable rate. While there may be no active secondary market with
respect to a particular variable rate demand instrument purchased by the Fund,
the Fund may (at any time or at specified intervals not exceeding one year,
depending upon the obligation involved) demand payment of the principal of and
accrued interest on the obligation upon no more than seven days' notice and may
resell the obligation at any time to a third party. The absence of an active
secondary market, however, could make it difficult for the Fund to dispose of a
variable rate demand obligation if the issuer defaulted on its payment
obligation, and the Fund could, for this or other reasons, suffer a loss to the
extent of the default.
5. When-issued Securities
The Fund may also purchase Municipal Securities on a 'when-issued' basis.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield. The Fund will generally not pay for
such securities or start earning interest on them until they are received.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. The Fund expects that commitments to purchase when-issued securities will
not exceed 25% of the value of its total assets, absent unusual market
conditions. The Fund does not intend to purchase when-issued securities for
speculative purposes, but only in furtherance of its investment objective.
Because the 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 portfolio might be affected in the event its commitments to purchase
when-issued securities should ever exceed 25% of the value of its total assets.
TEMPORARY INVESTMENTS
The Fund may hold uninvested cash reserves which do not earn income (pending
investment) during temporary defensive periods or if, in the opinion of
CoreStates Advisers, suitable tax-exempt obligations are unavailable. There is
no percentage limitation on the amount of assets which may be held uninvested.
In addition, the Fund may invest from time to time, to the extent consistent
with its investment objective, a portion of its assets on a temporary basis or
for temporary defensive purposes in short-term money market instruments
('Temporary Investments'), the income from which is subject to federal income
tax.
Temporary Investments will generally not exceed 20% of the total assets of the
Fund except when made for temporary defensive purposes, and may include
obligations of the United States Government or its agencies or
instrumentalities; debt securities (including taxable commercial paper) of
issuers having been assigned, at the time of purchase, the
<PAGE>
8
highest quality rating of either Moody's or S&P; certificates of deposit or
bankers' acceptances of domestic branches of U.S. banks with total assets at the
time of purchase of $1 billion or more; repurchase agreements with respect to
such obligations; or reverse repurchase agreements.
Under the Investment Company Act of 1940, as amended (the 'Investment Company
Act'), repurchase agreements are considered to be loans by the Fund and
conversely, reverse repurchase agreements are considered to be borrowings by the
Fund. See the Statement of Additional Information for further discussion
regarding Temporary Investments.
LENDING OF SECURITIES--The Fund may lend their portfolio securities to
qualified brokers, dealers, banks, and other financial institutions for the
purpose of realizing additional net investment income through the receipt of
interest on the loan. The Fund may lend portfolio securities with a value of up
to 33 1/3% of its total assets. Such loans may be terminated at any time. The
Fund will receive 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 Fund will be invested in short-term debt securities.
The Fund will retain most rights of beneficial ownership including dividends,
interest or other distributions on the loaned securities. Voting rights pass
with the lending. The Fund will call loans to vote proxies if a material issue
affecting the investment is to be voted upon. Loans will be made only to
borrowers deemed by CoreStates Advisers to be of good standing.
Such loans would involve risk of delay in receiving additional collateral in the
event the value of the collateral decreased below the value of the securities
loaned, or risk of delay in recovering the securities loaned or even loss of
rights in the collateral should the borrower of the securities fail financially.
INVESTMENT RESTRICTIONS
Certain investment policies of the Fund may be changed at any time and from time
to time by the Board of Directors without shareholder approval, provided such
change is deemed to be consistent with the Fund's objective and in the best
interests of its shareholders. However, the Fund's investment objective, along
with the restrictions and limitations described herein and in the Statement of
Additional Information, are fundamental and may be changed only by the
affirmative vote of a majority of the outstanding Shares of the Fund. See
'Description of Shares.'
THE 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 securities of any one issuer (other than obligations of the U.S.
Government, its agencies or instrumentalities) if, as a result thereof, more
than 5% of the value of the Fund's total assets would be invested in such
issuer; provided, however, that the Fund may invest up to 25% of its total
assets without regard to this restriction as permitted by applicable law.
3. Purchase any securities which would cause 25% or more of the value of the
Fund's 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, provided that there is no limitation with respect to: (a) obligations
issued by any state, territory or possession of the United States, the District
of Columbia or any of their authorities, agencies, instrumentalities or
political subdivisions; (b) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; (c) domestic bank certificates of
deposit and bankers' acceptances; or (d) repurchase agreements secured by any of
the foregoing obligations.
4. Make loans, except that the Fund may purchase or hold certain debt
instruments and enter into repurchase agreements, in accordance with its
policies and limitations.
<PAGE>
9
5. Borrow money or issue senior securities, except that the Fund may borrow from
banks and enter into reverse repurchase agreements for temporary purposes in
amounts not to exceed 10% of the value of the 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 the Fund's total assets at
the time of such borrowing. The Fund will not purchase any securities while its
borrowings (including reverse repurchase agreements) are outstanding.
6. Knowingly invest more than 10% of its total assets in illiquid securities,
including illiquid variable rate demand obligations, and repurchase agreements
providing for settlement more than seven days after notice.
VALUATION OF SHARES
NET ASSET VALUE
The Fund's net asset value per Share for purposes of pricing purchase and
redemption orders is normally determined as of 4:00 P.M. (Eastern time) (the
'valuation time') on each business day of the Fund. A 'Business Day' of the Fund
is a day on which the New York Stock Exchange in open for trading, and any other
day (other than a day on which no Shares of the Fund are tendered for redemption
and no order to purchase any Shares is received) during which there is a
sufficient degree of trading in securities or instruments held by the Fund such
that the Fund's net asset value per Share might be materially affected. Net
asset value per Share is calculated by dividing the value of all of the Fund's
portfolio securities and other assets, less liabilities, by the number of
outstanding Shares of the Fund at the time of the valuation. The result
(adjusted to the nearest cent) is the net asset value per Share.
PORTFOLIO VALUATION
The assets in the Fund are valued based upon the amortized cost method, pursuant
to rules promulgated under the Investment Company Act. Under this method of
valuation, the portfolio value of the assets normally will not change in
response to fluctuating interest rates. In connection with its use of this
valuation method, however, the Fund monitors the deviation between the amortized
cost value of its assets and their market value (which can be expected to vary
inversely with changes in prevailing interest rates). Although the Fund seeks,
through its use of amortized cost valuation, to maintain its net asset value per
Share at $1.00, there can be no assurance that the net asset value will not
vary.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are sold on a continuous basis by the Fund's Distributor. The
principal offices of the Distributor are located at 680 East Swedesford Road,
Wayne, Pennsylvania, 19087.
The Distributor and the Fund are parties to a 'Distribution Agreement', although
no compensation is paid to the Distributor for the distribution services it
provides to the Fund.
PURCHASE OF SHARES
Institutional Investors may acquire Shares of the Fund for their own account or
as a record owner on behalf of fiduciary, agency, or custody accounts by placing
orders with the Distributor. Purchases may be made on any Business Day of the
Fund at the net asset value per Share (see 'Valuation of Shares') next
determined after receipt by the Fund of an order to purchase shares.
An order received before the valuation time on any Business Day will be executed
on the date of receipt at the net asset value determined as of the valuation
time on such date so long as Federal funds are transmitted or delivered to the
Custodian by close of business on the same day the order is placed. An order
received after the valuation time on any Business Day will be executed on the
next Business Day of the Fund at the net asset value determined on such date.
Funds should be wired to CORESTATES PHIL, Philadelphia, PA ABA #031000011, for
credit to COREFUNDS-A/C #0169-0541. The wire instructions must also include the
investor's account number. Before wiring any funds, however, an investor must
<PAGE>
10
call CoreFunds Investor Services at 1-800-355-CORE in order to confirm the wire
instructions for the transfer agent, State Street Bank and Trust Company (the
'Transfer Agent'). An order to purchase shares by Federal funds wire will be
deemed to have been received by the Fund on the Business Day of the wire,
provided that investors notify SEI Financial Management Corporation by 10:30
a.m. (Eastern time) of their intentions to wire money.
The minimum investment amount is $1 million for the initial purchase of Shares
by an investor which amount may be waived at the discretion of the Distributor.
There is no minimum for subsequent investments.
The Fund reserves the right to reject any order for the purchase of its Shares
in whole or in part.
Every shareholder of record will receive a confirmation of each new Share
transaction with the fund, which will also show the total number of Shares being
held in safekeeping by the Transfer Agent for the account of the shareholder.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing Shares of the Fund will not be issued.
Beneficial ownership of Shares held of record by Institutional Investors on
behalf of their Customers will be recorded by the institutions and reflected in
the regular account statements provided by them to their Customers.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed in accordance with the procedures described
below.
With respect to Shares held by Institutional Investors on behalf of their
Customer Accounts, all or part of the Shares beneficially owned by a Customer
may be redeemed in accordance with instructions and limitations pertaining to
their Account at the institution.
Shareholders who desire to redeem Shares of the Fund must place their redemption
orders with CoreFunds Investor Services for the Transfer Agent prior to 12:00
noon (Eastern time) on any Business Day. Payment will be made the same day after
proper receipt by the Transfer Agent by transfer of Federal funds. The execution
of redemption orders at net asset value by the Transfer Agent will be delayed
for the period of time that the redemption order is in transit from SEI
Financial Management Corporation. Otherwise, the redemption order will be
effective the next Business Day.
The Fund intends to pay cash for all Shares redeemed, but under abnormal
conditions which make payment in cash unwise, the Fund may make payment wholly
or partly in portfolio securities at their then market value equal to the
redemption price. In such cases, a shareholder may incur brokerage costs in
converting such securities to cash.
DIVIDENDS AND TAXES
DIVIDENDS
The net investment income of the Fund is declared daily as a dividend to its
shareholders. Capital gains distributions, if any, will be made at least
annually. Shares begin earning dividends on the day on which the purchase order
for the Shares is executed and continue to earn dividends through, and
including, the day before the redemption order for the Shares is executed.
Dividends are distributable monthly on the first business day of each month in
the form of additional Shares of the Fund, or, if specifically requested (in
writing) by the shareholder to CoreFunds Investor Services prior to the
distribution date, in cash. Dividends are automatically paid in cash (along with
any redemption proceeds) not later than seven business days after a shareholder
closes an account with the Fund.
TAXES
The Fund intends to qualify as a 'regulated investment company' under the
Internal Revenue Code of 1986, as amended (the 'Code'). This requires, among
other things, that the Fund 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. The
Fund contemplates declaring as dividends 100% of its net income (both taxable
and tax-exempt). The Fund also expects to qualify to pay exempt-interest
dividends to its shareholders by satisfying the
<PAGE>
11
Code's requirements that at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consists of obligations the interest
on which is exempt from regular federal income tax. Tax-exempt interest
dividends may generally be treated by the Fund's shareholders as items of income
excludible from their gross income under the Code unless, under the
circumstances applicable to the particular shareholder, exclusion would be
disallowed. Exempt-interest dividends may also have certain federal income tax
consequences, including Alternative Minimum Tax consequences. The Fund does not
expect to realize any net long-term capital gains and, therefore, does not
foresee paying any 'capital gain dividends' as described in the Code.
To the extent, if any, dividends paid to shareholders are derived from taxable
income (for example, from interest earned on Temporary Investments in non-
tax-exempt securities), or from long-term or short-term capital gains, such
dividends (whether paid in cash or in the form of additional, reinvested Shares)
will not be exempt from federal income tax. In addition, except as noted below,
tax-exempt interest dividends and other distributions paid by the Fund may be
taxable to investors as dividend income under state or local law even though a
substantial portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes. However, in the opinion of counsel, the Fund's Shares are exempt
from current Pennsylvania Personal Property Taxes.
In addition, the sale or redemption of shares of a mutual fund is a taxable
event to the selling or redeeming shareholder. Gains or losses (if any) may be
realized from an ordinary redemption of Shares, as described herein, or on a
telephone exchange among CoreFunds portfolios.
BACK-UP WITHHOLDING
Generally, the Fund is required to withhold 31% of taxable 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.
IN GENERAL
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareholders. No attempt
has been made to present a detailed explanation of the Federal, state or local
income tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. The foregoing summary is
based on current tax laws and regulations which may be changed by legislative,
judicial or administrative action.
Shareholders will be advised at least annually as to the federal income tax
status of distributions made during the year. See the Statement of Additional
Information for further information regarding taxes.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The directors and executive officers of the
Company, their addresses, principal occupations during the past five years, and
other affiliations are as follows:
ERIN ANDERSON--Director--INSEAD, Boulevard de Constance, 77305 Fountainebleau
Cedex, France. Professor of Marketing, INSEAD, Fountainebleau, France, since
1994. Associate Professor of Marketing, The Wharton School of the University of
Pennsylvania, prior to 1994.
EMIL J. MIKITY--Director--302 Country Club Drive, Wilmington, DE 19803. Retired;
Senior Vice President Investments, Atochem North America, 1979-89.
GEORGE H. STRONG--Director--946 Navesink Road, Locust, NJ 07760. Financial
Consultant since 1985; Director & Senior Vice President, Universal Health
Services, Inc., 1979-1984.
DAVID G. LEE--President--Senior Vice President of the Administrator and
Distributor since 1993. Vice
<PAGE>
12
President of the Administrator and Distributor since 1991. President, GW Sierra
Trust Funds prior to 1991.
CARMEN V. ROMEO--Treasurer, Assistant Secretary--Director, Executive Vice
President, Chief Financial Officer and Treasurer of SEI. Director and Treasurer
of the Administrator and Distributor since 1981.
JAMES W. JENNINGS (1)--Secretary--2000 One Logan Square, Philadelphia, PA 19103.
Partner of the Law firm of Morgan, Lewis & Bockius LLP, since 1970.
KEVIN P. ROBINS--Vice President, Assistant Secretary--Senior Vice President and
General Counsel of SEI and the Distributor since 1994. Vice President and
Assistant Secretary of the Administrator and the Distributor, 1992-1994.
Associate, Morgan, Lewis & Bockius LLP prior to 1992.
SANDRA K. ORLOW--Vice President, Assistant Secretary--Vice President and
Assistant Secretary of the Administrator and Distributor since 1983.
KATHRYN L. STANTON--Vice President, Assistant Secretary--Vice President and
Assistant Secretary of the Administrator and Distributor since 1994. Associate,
Morgan, Lewis & Bockius LLP, 1989-1994.
RICHARD J. SHOCH--Vice President and Assistant Secretary--Mr. Shoch has been
Vice President and Assistant Secretary of SEI Corporation since November 1995.
From 1990 to June 1995, Mr. Shoch was Regulatory Manager of SEI Corporation.
TODD CIPPERMAN--Vice President and Assistant Secretary--Mr. Cipperman has been
Vice President and Assistant Secretary of SEI Corporation 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.
JOSEPH M. LYDON--Vice President--Mr. Lydon has been Vice President, Director of
Business Administration--Fund Resources, a division of SEI Corporation since
November 1995. From 1989 to April 1995, Mr. Lydon was Vice President of Fund
Group. Vice President of the Advisor--Dreman Value Management, L.P. and
President of Dreman Financial Services, Inc.
STEPHEN G. MEYER--Controller--CPA--1995 to Present. Director--Internal Audit and
Risk Management--SEI--1992 to 1995. Coopers & Lybrand, Senior Associate--1990 to
1992. Vanguard Group of Investments, Internal Audit Supervisor-- Prior to 1990.
- ------------------
(1) Mr. Jennings is an 'interested person' of the Company as defined in the
Investment Company Act.
INVESTMENT ADVISER
1. ADVISORY AGREEMENT
Investment advisory services are currently provided to the Fund by CoreStates
Advisers pursuant to an Investment Advisory Agreement dated March 25, 1991 (the
'Investment Advisory Agreement'), between the Fund and CoreStates Advisers.
CoreStates Advisers is a wholly-owned subsidiary of CoreStates Bank, itself a
wholly-owned subsidiary of CoreStates Financial Corp ('CoreStates Corp').
CoreStates Corp, based in Philadelphia, Pennsylvania, is one of the 30 largest
bank holding companies in the United States, and leads the region in investing
corporate cash. CoreStates Corp currently has over $29 billion in assets and
discretionary management over $22 billion in customer accounts through a variety
of banking activities at over 355 domestic and foreign locations. CoreStates
Corp's leading subsidiary, CoreStates Bank, currently ranks thirty-second in the
management of discretionary trust assets.
CoreStates Advisers is an adviser registered under the Investment Advisers Act
of 1940. It performs most investment management and advisory functions for the
trust departments of CoreStates Corp's banking subsidiaries, related investment
advisory, research, trading, and fund management functions, and also provides
similar services to customers unrelated to CoreStates Corp. CoreStates Advisers
currently manages discretionary and non-discretionary client security portfolios
with a total aggregate market value of over $16 billion, for individuals,
corporations, institutions, and
<PAGE>
13
municipalities. CoreStates Advisers has extensive mutual fund experience in the
management of money market, tax-free, fixed-income, equity, and international
investments. CoreStates Advisers principal offices are located at 1500 Market
Street, P.O. Box 7558, Philadelphia, PA 19102.
As Investment Adviser, CoreStates Advisers manages the Fund's investment
portfolio, makes decisions with respect to and places orders for all purchases
and sales of the Fund's portfolio securities, and maintains certain records
relating to such purchases and sales. CoreStates Advisers pays all expenses
incurred by it in connection with its investment advisory activities, other than
the cost of securities (including any brokerage commissions) purchased for the
Fund and the cost of obtaining market quotations for portfolio securities held
by the Fund.
2. ADVISORY FEE
For the services provided and expenses assumed as the Fund's Investment Adviser,
CoreStates Advisers is entitled to receive a fee from the Fund, computed daily
and paid monthly, at the annual rate of .50% on the Fund's average net assets.
CoreStates Advisers may, from time to time and at its discretion, voluntarily
waive all or a portion of its investment advisory fees in order to assist the
Fund in maintaining a competitive expense ratio.
For the fiscal year ended June 30, 1995, CoreStates Advisers waived its entire
investment advisory fee.
3. PORTFOLIO MANAGER
Folu Abiona, Senior Investment Officer, is portfolio manager of the Fund. Ms.
Abiona is also portfolio manager of the Tax-Free Reserve portfolio. She joined
CoreStates in 1985 and became fixed income portfolio manager in 1990. Prior to
that, she was mutual fund administrator with CoreStates' Institutional Custody
Division. Ms. Abiona holds an M.B.A. from Temple University and a B.Sc. from
University of Ife, Nigeria.
ADMINISTRATOR
1. ADMINISTRATION AGREEMENT
SEI Financial Management Corporation acts as the Fund's Administrator pursuant
to an Administration Agreement dated October 30, 1992 (the 'Administration
Agreement'). State Street Bank and Trust Company located at 225 Franklin Street,
Boston, MA 02110, serves as the Fund's transfer agent and dividend paying agent.
The Administrator generally assists in the Fund's administration and operations.
See 'Administrator' in the Statement of Additional Information for a list of the
Administrator's specific services.
2. ADMINISTRATIVE FEES
For its administrative services, the Administrator is entitled to receive a fee
from the Fund, computed daily and paid monthly, at the annual rate of .25% on
the Fund's average net assets. For the fiscal year ended June 30, 1995, the
Administrator was entitled to a fee from the Fund, computed daily and paid
monthly, at the annual rate of .25% of the Fund's average net assets.
For the fiscal year ended June 30, 1995, the Fund paid the Administrator
administrative fees totalling .11% of its average daily net assets after fee
waivers.
EXPENSES
The Fund's expenses are accrued daily and are deducted from total income before
dividends are paid. Except as noted herein and in the Statement of Additional
Information, the Fund's service contractors bear all expenses incurred in
connection with the performance of their services on behalf of the Fund.
Similarly, the Fund bears the expenses incurred in its operations.
GLASS-STEAGALL ACT
CoreStates Corp and its banking subsidiaries are permitted to perform the
services contemplated by the Investment Advisory Agreement and to engage in
certain activities in connection with the investment of their Customer Accounts
in Fund Shares without violating the federal banking law commonly referred to as
the Glass-Steagall Act, or other applicable
<PAGE>
14
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 was thereby
prohibited from serving as Investment Adviser to the Fund, the Fund's Board of
Directors would promptly seek to retain another qualified investment adviser for
the Fund.
In addition, certain states securities laws may require banks and other
Institutional Investors purchasing Shares on behalf of their Customers in such
states to register as dealers pursuant to state law.
DESCRIPTION OF SHARES
CoreFunds has set up the following twenty-three portfolios: Growth Equity,
Equity, Special Equity, Equity Index, International Growth, Balanced, Short
Intermediate Bond, Bond, Short-Term Income, Government Income, Intermediate
Municipal Bond, Pennsylvania Municipal Bond, New Jersey Municipal Bond, Global
Bond, Cash Reserve, Treasury Reserve, Tax-Free Reserve, Fiduciary Reserve,
Fiduciary Treasury Reserve, Fiduciary Tax-Free Reserve, CoreFund Elite Cash
Reserve, CoreFund Elite Government Reserve and CoreFund Elite Treasury Reserve.
CoreFunds offers two classes of each portfolio except for Equity Index Fund,
CoreFund Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite
Treasury Reserve, Fiduciary Reserve, Fiduciary Tax-Free Reserve, and Fiduciary
Treasury Reserve. CoreFunds may in the future create one or more additional
portfolios, or one or more classes of shares within a portfolio. Class Y Shares
- -- Institutional, Classes A and C Shares -- Individual and shares of CoreFund
Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite Treasury
Reserve, Fiduciary Reserve, Fiduciary Treasury Reserve, and Fiduciary Tax-Free
Reserve, are offered in separate prospectuses. This prospectus solely relates to
Class Y Shares of Fiduciary Tax-Free Reserve.
Class A Shares differ from Class Y Shares in that Class A Shares are subject to
a sales load and distribution and transfer agent expenses for certain additional
shareholder services they receive. Class C Shares also differ from Class Y
Shares in that Class C Shares are subject to distribution and transfer agent
expense for certain additional shareholder services, but unlike Class A Shares,
are not subject to a sales load. Classes A and C Shares also have voting rights
which Class Y Shares do not, in connection with the Distribution Plan affecting
Class A and C Shares. In addition, the distribution and transfer agent expenses
charged Class A and C Shares result in Class A and C Shares having different
dividends and performance results from Class Y Shares. In addition, the minimum
initial investment for Class Y Shares is substantially higher than that required
for Class A or Class C Shares with the exception of the Equity Index Fund.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN
RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO SUCH SHARES.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING OTHER COREFUNDS
PORTFOLIOS MAY OBTAIN PROSPECTUSES DESCRIBING SUCH PORTFOLIOS BY CONTACTING THE
DISTRIBUTOR AT 1-800-355-CORE. Prior to the date of this Prospectus, all Class A
Shares were known as Series B -- Individual for all portfolios other than the
Money Market Funds; Class C Shares were known as Series B -- Individual for the
Money Market Funds; and Class Y Shares were known as Series A -- Institutional.
CoreFunds has changed their designation to conform to the standard designations
suggested by the Investment Company Institute.
Except for differences between classes of some of CoreFunds' portfolios
pertaining to distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class,
each share in each Fund represents an equal proportionate interest in that Fund
with each other share of the same Fund and is entitled to such dividends and
distributions out of the income earned on the assets belonging to such Fund as
are declared in the discretion of the Board of Directors.
CoreFunds' shareholders are entitled to one vote for each full share held, and
fractional votes for
<PAGE>
15
fractional shares held, and will vote in the aggregate and not by portfolio or
class except as otherwise expressly required by law or when the Board of
Directors determines that the matter to be voted upon affects only the interests
of the shareholders of a particular portfolio or class. See the Statement of
Additional Information under 'Description of Shares' for examples where the
Investment Company Act requires voting by portfolio or class. Voting rights are
not cumulative and, accordingly, the holders of more than 50% of the aggregate
number of shares of all of the Funds may elect all of the directors if they
choose to do so and, in such event, the holders of the remaining shares would
not be able to elect any person or persons to the Board of Directors.
As used in this Prospectus, a 'vote of a majority of the outstanding shares' of
a Fund means the affirmative vote of the lesser of (a) more than 50% of the
outstanding shares of a Fund, or (b) at least 67% of the shares of a Fund
present at a meeting at which the holders of more than 50% of the outstanding
shares of such Fund are represented in person or by proxy.
GENERAL INFORMATION
In accordance with the Maryland General Corporation Law, the Company is not
required to hold annual meetings of Shareholders unless the Investment Company
Act requires the Shareholders to elect members of the Board of Directors.
However, a meeting of Shareholders may be called for any purpose upon the
written request of the holders of at least 10% of the outstanding Shares of the
Company, or of a Fund with respect to matters affecting only such Fund.
As used in this Prospectus, 'assets belonging to the Fund' means the
consideration received by the Company upon the issuance or sale of Shares in the
Fund, together with all income, earnings, profits and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of the
Company not belonging to the Fund or the Company's other portfolios. Assets
belonging to the Fund are charged with the direct liabilities in respect of the
Fund and with a share of the general liabilities of the Company allocated in
proportion to the relative asset values of each of the Company's portfolios at
the time the expense or liability is incurred. The management of the Company
makes determinations with respect to the Fund as to liabilities when they are
incurred and as to assets when they are acquired. Such determinations are
reviewed and approved annually by the Company's Board of Directors and are
conclusive.
<PAGE>
/X/
COREFUND
FIDUCIARY
TAX-FREE
RESERVE
(COREFUNDS, INC.)
680 East Swedesford Road
Wayne, PA 19087
NEW INVESTOR INFORMATION
1-800-355-CORE
SHAREHOLDER SERVICES
1-800-323-3851
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
DISTRIBUTOR
SEI Financial Services Company
Wayne, PA 19087
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
CONTENTS
Introduction . . . 2
Fund Expenses . . . 2
Financial Highlights . . . 4
Performance Information . . . 5
Investment Objective and Policies . . . 5
Investment Restrictions . . . 8
Valuation of Shares . . . 9
How to Purchase and Redeem Shares . . . 9
Dividends and Taxes . . . 10
Management of the Fund . . . 11
Description of Shares . . . 14
General Information . . . 15
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION APRIL 22, 1996 INCORPORATED HEREIN BY REFERENCE, IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING
BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
COR-F-054-02
/X/
COREFUND
FIDUCIARY
TAX-FREE
RESERVE
(COREFUNDS, INC.)
PROSPECTUS
April 22, 1996
Investment Adviser
CORESTATES
CORESTATES
INVESTMENT ADVISERS
<PAGE>
PROSPECTUS
COREFUND FIDUCIARY RESERVE
680 East Swedesford Road For current performance, purchase,
Wayne, PA 19087 redemption, and other information,
Call: 1-800-355-CORE
CoreFund Fiduciary Reserve (the 'Fund') is a portfolio offered by CoreFunds,
Inc. (the 'Company'), a no-load, diversified, open-end management investment
company.
The Fund's investment objective is to provide its shareholders with as high a
level of current interest income as is consistent with liquidity and relative
stability of principal. The Fund intends to achieve this objective by investing
substantially all of its assets in a diversified portfolio of money market
instruments of the highest quality, with remaining maturities of 397 days or
less.
THE FUND WILL ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.00,
HOWEVER, AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES IN THE FUND ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR GUARANTEED
OR ENDORSED BY, CORESTATES BANK, N.A., THE PARENT CORPORATION OF THE FUND'S
INVESTMENT ADVISER, OR ANY OF ITS AFFILIATES. SUCH SHARES ARE ALSO NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
This Prospectus sets forth certain information about the Fund that a prospective
investor ought to know before investing. Investors should read this Prospectus
and retain it for future reference.
Additional information about the Fund, contained in a Statement of Additional
Information, has been filed with the Securities and Exchange Commission and is
available upon request without charge by writing to the Fund at its address. The
Statement of Additional Information bears the same date as this Prospectus and
is incorporated by reference in its entirety into this Prospectus.
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April 22, 1996.
<PAGE>
2
The Fund's Investment Adviser is 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'). SEI Financial Management Corporation (the
'Administrator') serves as the Fund's Administrator and SEI Financial Services
Company (the 'Distributor') serves as the Fund's Distributor.
Shares of the Fund ('Shares') are sold only to various types of Institutional
Investors ('Institutional Investors'), including but not limited to affiliate
and subsidiary banks of CoreStates Corp. Shares may be purchased by
Institutional Investors for investment of their own funds, or for funds of their
customer accounts ('Customer Accounts') for which they serve in a fiduciary,
agency, or custodial capacity. Shares are sold and redeemed without the
imposition of a purchase or redemption charge by the Fund, although
Institutional Investors that are record owners of Shares for their Customer
Accounts may charge their Customers separate account fees. See 'How to Purchase
and Redeem Shares.'
FUND EXPENSES
The table below sets forth information concerning shareholder transaction
expenses and annual operating expenses of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
FIDUCIARY RESERVE
FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... 0%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........ 0%
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds, as
applicable)................................................................................. 0%
Redemption Fee................................................................................ None
Exchange Fee.................................................................................. None
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (A)
<TABLE>
<CAPTION>
FIDUCIARY RESERVE
FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
12b-1 Fees.................................................................................... None
Investment Advisory Fee After Fee Waivers (B)................................................. .00%
Administrative Fee After Fee Waivers (C)...................................................... .11%
Other Expenses (D)............................................................................ .04%
Net Annual Fund Operating Expenses (E)........................................................ .15%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The Fund operating expenses as set forth in this table reflect the expenses
expected to be incurred by the Fund for the fiscal period ending June 30,
1996, shown as a percentage of average net assets for such year.
(B) Absent voluntary waivers, CoreStates Advisers' investment advisory fee is
calculated at the annual rate of .20% of the Fund's average net assets.
(C) Absent voluntary waivers, the Administrator's administrative fee is
calculated at the annual rate of .25% of the Fund's average net assets.
(D) Includes (among others), legal and auditing fees.
(E) CoreStates Advisers and the Administrator may, from time to time and at
their discretion, voluntarily waive all or a portion of their fees. The
expense ratio of .15% is net of investment advisory and administrative fee
waivers in effect during the fiscal period. Absent any fee waivers, the
expense ratio would have been .79%.
<PAGE>
3
EXAMPLE
<TABLE>
<CAPTION>
FIDUCIARY RESERVE FUND
- ----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:..... $2 $5 $8 $19
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of the tables is to assist the investor in understanding the various
costs and expenses that a Shareholder in the Fund will bear directly or
indirectly. For additional information regarding fees and other expenses, see
'Investment Adviser,' 'Administrator,' and 'Expenses.'
Absent the voluntary waiver of fees by CoreStates Advisers and the
Administrator, the amounts in the Example above would be $8, $25, $44 and $98
for one year, three years, five years and ten years, respectively.
THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
<PAGE>
4
FINANCIAL HIGHLIGHTS
The Company was organized as a Maryland Corporation on September 11, 1984 under
the name of 'Red Oak Cash Reserve Fund, Inc.' The Company changed its name to
'CoreFunds, Inc.' on June 23, 1987, at a Special Meeting of Shareholders. The
Fund commenced operations on August 7, 1989.
The table that follows presents information about the investment results of the
Shares of the Fund. The financial highlights for each of the periods presented
have been audited by Ernst & Young LLP, independent certified public
accountants, whose report thereon appears in CoreFunds' annual report with
respect to the Fund which accompanies the Statement of Additional Information.
FOR THE PERIOD ENDED JUNE 30,
FIDUCIARY RESERVE
<TABLE>
<CAPTION>
NET
ASSET DIVIDENDS NET
VALUE NET FROM NET ASSET VALUE
BEGINNING OF INVESTMENT INVESTMENT END TOTAL
YEAR PERIOD INCOME INCOME OF PERIOD RETURN
- ----------------------------------------------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
1995** (unaudited)............................. $ 1.00 0.03 (0.03) $ 1.00 2.89%+
1995........................................... $ 1.00 0.05 (0.05) $ 1.00 5.46%
1994........................................... $ 1.00 0.03 (0.03) $ 1.00 3.31%
1993........................................... $ 1.00 0.03 (0.03) $ 1.00 3.29%
1992........................................... $ 1.00 0.05 (0.05) $ 1.00 5.04%
1991........................................... $ 1.00 0.07 (0.07) $ 1.00 7.49%
1990*.......................................... $ 1.00 0.08 (0.08) $ 1.00 8.03%+
</TABLE>
<TABLE>
<CAPTION>
NET RATIO RATIO OF
ASSET RATIO OF EXPENSES NET INCOME
END RATIO OF NET TO AVERAGE TO AVERAGE
OF PERIOD OF EXPENSES INCOME NET ASSETS NET ASSETS
(THOUSANDS TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
YEAR OMITTED) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------------------------------- ----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1995** (unaudited)......................... $ 346,771 0.17% 5.66% 0.81% 5.02%
1995....................................... $ 406,597 0.17% 5.35% 0.81% 4.71%
1994....................................... $ 382,814 0.16% 3.24% 0.84% 2.56%
1993....................................... $ 424,363 0.17% 3.25% 0.81% 2.61%
1992....................................... $ 416,945 0.18% 4.96% 0.83% 4.31%
1991....................................... $ 453,947 0.15% 7.05% 0.80% 6.40%
1990*...................................... $ 232,091 0.13% 8.42% 0.83% 7.72%
</TABLE>
- ------------------
+ Returns are for the periods indicated and have not been annualized.
* Fiduciary Reserve commenced operations August 7, 1989. Ratios for this period
have been annualized.
** Ratios for the six-month period ended December 31, 1995 have been annualized.
<PAGE>
5
PERFORMANCE INFORMATION
From time to time, in advertisements or reports to shareholders, the performance
of the Fund may be quoted and compared to that of other mutual funds with
similar investment objectives and to relevant indices.
The Fund may advertise its 'yield' and 'effective yield.' Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The 'yield' of the Fund refers to the income generated by an
investment in the 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 the 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. See 'Yield' in Statement of Additional
Information.
The performance of any investment will generally reflect market conditions,
portfolio quality and maturity, type of investment, and operating expenses. The
Fund's performance will fluctuate and is not necessarily representative of
future results. Any fees charged by Institutional Investors to their Customers
in connection with investments in Fund Shares are not reflected in the Fund's
performance, and such fees, if charged, will reduce the actual return received
by Customers on their investments. Conversely, the Fund's performance would be
favorably affected by any investment advisory or administrative fee waivers on
the part of CoreStates Advisers or SEI Financial Management Corporation.
Shareholders will receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements audited by independent
auditors.
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to provide as high a level of current
interest income as is consistent with liquidity and relative stability of
principal. The Fund intends to achieve its stated objective by investing in a
diversified portfolio of money market instruments of the highest quality,
including a broad range of government, bank, and commercial paper obligations.
The securities held by the Fund will have remaining maturities of 397 days or
less, although securities subject to repurchase agreements and certain other
securities may bear longer maturities. In addition, the portfolio's average
weighted maturity will not exceed 90 days.
Certain investment vehicles utilized by the Fund are subject to the limitations
discussed herein under 'Investment Restrictions.' The following descriptions
illustrate the types of instruments in which the Fund may invest:
U.S. TREASURY OBLIGATIONS--bills, notes and bonds issued by the U.S. Treasury
and STRIPS. STRIPS may be sold as zero coupon securities which means that they
are sold at a substantial discount and redeemed at face value at their maturity
date without interim cash payments of interest or principal. This discount is
amortized over the life of the security, and such amortization will constitute
the income earned on the security for both accounting and tax purposes. Because
of these features, STRIPS may be subject to greater interest rate volatility
than interest paying U.S. Treasury Obligations. See also 'Taxes.'
RECEIPTS--interests in separately traded interest and principal component parts
of U.S. Treasury obligations that are issued by banks or brokerage firms and are
created by depositing U.S. Treasury obligations into a special account at a
custodian bank. The custodian holds the interest and principal payments for the
benefit of the registered owners of the certificates or receipts. The custodian
arranges for the issuance of the certificates or receipts evidencing ownership
and maintains the register. Receipts include 'Treasury Receipts' ('TR'S'),
'Treasury Investment Growth Receipts' ('TIGR'S'), and 'Certificates of Accrual
on Treasury Securities' ('CATS').
STRIPS, TR'S, TIGR'S AND CATS are sold as zero coupon securities which means
that they are sold at a substantial discount and redeemed at face value at
<PAGE>
6
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. See also 'Dividends and Taxes.'
GOVERNMENT OBLIGATIONS--obligations issued or guaranteed by the U.S. Government
or its agencies and instrumentalities. U.S. Treasury obligations 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 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.
BANK OBLIGATIONS--The Fund may purchase the types of bank obligations listed
below, including U.S. dollar-denominated instruments issued or supported by the
credit of U.S. or foreign banks or savings institutions having total assets at
the time of purchase in excess of $1 billion. The assets of a bank or savings
institution will be deemed to include the assets of its domestic and foreign
branches.
1. CERTIFICATES OF DEPOSIT
Certificates of deposit are negotiable certificates representing a commercial
bank's obligation to repay funds deposited with it, earning specified rates of
interest over given periods. The Fund may also make interest-bearing savings
deposits in commercial and savings banks in amounts not in excess of 5% of its
total assets.
2. BANKERS' ACCEPTANCES
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.
3. FOREIGN INVESTMENTS
While the Fund will invest in an obligation of a foreign bank or a foreign
branch of a U.S. bank only if CoreStates Advisers deems the instrument to
present minimal credit risks, such an investment may nevertheless subject the
Fund to risks that are different from those of investments in domestic
obligations of U.S. banks due to differences in political, regulatory, and
economic systems and conditions. Such risks include future adverse political and
economic seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks.
4. TIME DEPOSITS
Time deposits are non-negotiable deposits in a banking institution earning a
specified interest rate over a given period of time. Such deposits cannot be
withdrawn before the date specified at the time of deposit.
COMMERCIAL PAPER--The Fund may invest in commercial paper (short-term promissory
notes issued by corporations), including variable amount master demand notes,
rated at the time of purchase 'Prime-1' by Moody's Investors Service, Inc.
(Moody's) and/or 'A-1' or better by Standard & Poor's Corporation ('S&P').
Pursuant to Securities and Exchange Commission ('SEC') regulations applicable to
money market funds, the Fund will only purchase securities that have no
short-term ratings at the time of purchase if they are determined to be of
comparable quality by CoreStates Advisers, pursuant to guidelines approved by
the Company's Board of Directors, or if the issuer of such securities has
comparable short-term securities outstanding which are rated 'Prime-1' by
Moody's or 'A-1' or better by S&P. Any purchases by the Fund of unrated
securities must be approved or ratified by the Board of Directors. To the extent
that the ratings accorded by
<PAGE>
7
Moody's or S&P may change as a result of changes in their ratings systems, the
Fund will attempt to use comparable ratings as standards for its investments, in
accordance with the investment policies contained herein. Where necessary to
ensure that an instrument is of the highest quality, the Fund will require that
the issuer's obligation to pay the principal of, and the interest on, the
instrument be backed by insurance or by an unconditional bank letter or line of
credit, guarantee, or commitment to lend. All obligations, including any
underlying guarantees, must be deemed by CoreStates Advisers to present minimal
credit risks, pursuant to guidelines approved by the Board of Directors. See the
'Appendix' to the Statement of Additional Information for a description of
applicable ratings.
Variable amount master demand notes in which the Fund may invest are unsecured
demand notes that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate according to the terms of the
instrument. 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 the Fund and the issuer, they are not normally
traded. Although there is no secondary market in the notes, the Fund may demand
payment of principal and accrued interest at any time. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes (which are normally manufacturing, retail, financial, and other
business concerns) must satisfy the same criteria as set forth above for issuers
of commercial paper. The Fund's Investment Adviser will consider the earning
power, cash flow, and other liquidity ratios of the issuers of such notes and
will continuously monitor their financial status to meet payment on demand. In
determining the Fund's average weighted portfolio maturity, a variable amount
master demand note will be deemed to have a maturity equal to the longer of the
periods remaining to the next interest rate adjustment or the demand notice
period.
REPURCHASE AGREEMENTS--The Fund may enter into repurchase agreements with
respect to portfolio securities. Under the terms of a repurchase agreement, the
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 Fund's 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 the 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 Fund's Custodian in the Federal
Reserve's book-entry system. Default by the seller would, however, expose the
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 Fund under the Investment Company Act of 1940, as
amended (the 'Investment Company Act').
REVERSE REPURCHASE AGREEMENTS--The Fund may borrow funds for temporary purposes
by entering into reverse repurchase agreements. Pursuant to such agreements, the
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. The Fund enters into reverse repurchase agreements only to avoid
otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time the Fund enters into a reverse repurchase agreement, it
places in a segregated custodial account liquid assets such as U.S. Government
securities or debt securities rated in the highest rating category and 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 the 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 Fund under the Investment Company Act.
<PAGE>
8
ASSET-BACKED SECURITIES--The Fund may invest in asset-backed securities with
final maturity dates of 13 months or less. Asset-backed securities offer
investors an ownership interest in a pool of financial assets. The issuer is a
special purpose trust collateralized by receivables generated from installment
sales contracts (i.e., auto loans) or revolving lines of credit (i.e., credit
cards). Credit enhancement mechanisms permit the trust to absorb high levels of
losses on the underlying receivables and still make timely payments of principal
and interest on the securities. These factors have led to the development of a
liquid secondary market for the securities.
LENDING OF SECURITIES--The Fund may lend their portfolio securities to
qualified brokers, dealers, banks, and other financial institutions for the
purpose of realizing additional net investment income through the receipt of
interest on the loan. The Fund may lend portfolio securities with a value of up
to 33 1/3% of its total assets. Such loans may be terminated at any time. The
Fund will receive 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 Fund will be invested in short-term debt securities.
The Fund will retain most rights of beneficial ownership including dividends,
interest or other distributions on the loaned securities. Voting rights pass
with the lending. The Fund will call loans to vote proxies if a material issue
affecting the investment is to be voted upon. Loans will be made only to
borrowers deemed by CoreStates Advisers to be of good standing.
Such loans would involve risk of delay in receiving additional collateral in the
event the value of the collateral decreased below the value of the securities
loaned, or risk of delay in recovering the securities loaned or even loss of
rights in the collateral should the borrower of the securities fail financially.
INVESTMENT RESTRICTIONS
Certain investment policies of the Fund may be changed at any time and from time
to time by the Board of Directors without shareholder approval, provided such
change is deemed to be consistent with the Fund's objective and in the best
interests of its shareholders. However, the Fund's investment objective, along
with the restrictions and limitations described herein and in the Statement of
Additional Information, are fundamental and may be changed only by the
affirmative vote of a majority of the outstanding Shares of the Fund. See
'Description of Shares.'
THE FUND MAY NOT:
1. Purchase securities of any one issuer (other than obligations of the U.S.
Government, its agencies or instrumentalities) if, as a result thereof, more
than 5% of the value of the Fund's total assets would be invested in such
issuer; provided, however, that the Fund may invest up to 25% of its total
assets without regard to this restriction as permitted by applicable law. There
is no limit to the percentage of assets that may be invested in U.S. Treasury
bills and notes, or other obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities.
As a result of the rules described herein under 'Portfolio Valuation' and in the
Statement of Additional Information under 'Net Asset Value', the Fund will only
exceed the foregoing 5% limitation under limited circumstances for periods up to
three business days.
2. Purchase any securities which would cause 25% or more of the value of the
Fund's 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, provided that there is no limitation with respect to: (a) obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, domestic bank certificates of deposit, bankers' acceptances,
and repurchase agreements secured by such obligations; (b) 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 their parents;
and (c) utilities will be divided according to their services-for example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
<PAGE>
9
3. Make loans, except that the Fund may purchase or hold certain debt
instruments and enter into repurchase agreements, in accordance with its
policies and limitations.
4. Borrow money or issue senior securities, except that the Fund may borrow from
banks and enter into reverse repurchase agreements for temporary purposes in
amounts not to exceed 10% of the value of the 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 the Fund's total assets at
the time of such borrowing. The Fund will not purchase any securities while its
borrowings (including reverse repurchase agreements) are outstanding.
5. Knowingly invest more than 10% of its total assets in illiquid securities,
including foreign time deposits with maturities longer than seven days and
repurchase agreements providing for settlement more than seven days after
notice.
VALUATION OF SHARES
NET ASSET VALUE
The Fund's net asset value per Share for purposes of pricing purchase and
redemption orders is normally determined as of 4:00 P.M. (Eastern time) (the
'valuation time') on each business day of the Fund. A 'business day' of the Fund
is a day on which the New York Stock Exchange is open for trading, and any other
day (other than a day on which no Shares of the Fund are tendered for redemption
and no order to purchase any Shares is received) during which there is a
sufficient degree of trading in securities or instruments held by the Fund such
that the Fund's net asset value per Share might be materially affected. Net
asset value per Share is calculated by dividing the value of all of the Fund's
portfolio securities and other assets, less liabilities, by the number of
outstanding Shares of the Fund at the time of the valuation. The result
(adjusted to the nearest cent) is the net asset value per Share.
PORTFOLIO VALUATION
The assets in the Fund are valued based upon the amortized cost method, pursuant
to rules promulgated under the Investment Company Act. Under this method of
valuation, the portfolio value of the assets normally will not change in
response to fluctuating interest rates. In connection with its use of this
valuation method, however, the Fund monitors the deviation between the amortized
cost value of its assets and their market value (which can be expected to vary
inversely with changes in prevailing interest rates). Although the Fund seeks,
through its use of amortized cost valuation, to maintain its net asset value per
Share at $1.00, there can be no assurance that the net asset value will not
vary.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are sold on a continuous basis by the Fund's Distributor. The
principal offices of the Distributor are located at 680 East Swedesford Road,
Wayne, Pennsylvania, 19087.
The Distributor and the Fund are parties to a 'Distribution Agreement,' although
no compensation is paid to the Distributor for the distribution services it
provides to the Fund.
PURCHASE OF SHARES
Institutional Investors may acquire Shares of the Fund for their own account or
as a record owner on behalf of fiduciary, agency, or custody accounts by placing
orders with the Distributor. Purchases may be made on any Business Day of the
Fund at the net asset value per Share (see 'Valuation of Shares') next
determined after receipt by the Fund of an order to purchase shares.
An order received before the valuation time on any Business Day will be executed
on the date of receipt at the net asset value determined as of the valuation
time on such date so long as Federal funds are transmitted or delivered to the
Custodian by close of business on the next Business Day. An order received after
the valuation time on any Business Day will be executed on the next Business Day
of a Fund at the net asset value determined on such date.
<PAGE>
10
Funds should be wired to CORESTATES PHIL, Philadelphia, PA ABA #031000011, for
credit to COREFUNDS-A/C #0169-0541. The wire instructions must also include the
investor's account number. Before wiring any funds, however, an investor must
call CoreFunds Investor Services at 1-800-355-CORE in order to confirm the wire
instructions for the transfer agent, State Street Bank and Trust Company (the
'Transfer Agent'). An order to purchase shares by Federal funds wire will be
deemed to have been received by a Fund on the Business Day that investors notify
SEI Financial Management Corporation by 10:30 a.m. (Eastern time) of their
intentions to wire money, provided that the Custodian receives Federal funds on
the following Business Day.
The minimum investment amount is $1 million for the initial purchase of Shares
by an investor which amount may be waived at the discretion of the Distributor.
There is no minimum for subsequent investments.
The Fund reserves the right to reject any order for the purchase of its Shares
in whole or in part.
Every shareholder of record will receive a confirmation of each new Share
transaction with the Fund, which will also show the total number of Shares being
held in safekeeping by the Transfer Agent for the account of the shareholder.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing Shares of a Fund will not be issued.
Beneficial ownership of Shares held of record by Institutional Investors on
behalf of their Customers will be recorded by the institutions and reflected in
the regular account statements provided by them to their Customers.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed in accordance with the procedures described
below.
With respect to Shares held by Institutional Investors on behalf of their
Customer Accounts, all or part of the Shares beneficially owned by a Customer
may be redeemed in accordance with instructions and limitations pertaining to
their Account at the institution.
Shareholders who desire to redeem Shares of the Fund must place their redemption
orders with CoreFunds Investor Services for the Transfer Agent prior to 3:00
p.m. (Eastern time) on any Business Day. Payment will be made the next Business
Day after proper receipt by the Transfer Agent by transfer of Federal funds. The
execution of redemption orders at net asset value by the Transfer Agent will be
delayed for the period of time that the redemption order is in transit from SEI
Financial Management Corporation. Otherwise, the redemption order will be
effective the next Business Day.
The Fund intends to pay cash for all Shares redeemed, but under abnormal
conditions which make payment in cash unwise, the Fund may make payment wholly
or partly in portfolio securities at their then market value equal to the
redemption price. In such cases, a shareholder may incur brokerage costs in
converting such securities to cash.
DIVIDENDS AND TAXES
DIVIDENDS
The net investment income of the Fund is declared daily as a dividend to its
shareholders. Capital gains distributions, if any, will be made at least
annually. Shares begin earning dividends on the day on which the purchase order
for the Shares is executed and continue to earn dividends through, and
including, the day before the redemption order for the Shares is executed.
Dividends are distributable monthly on the first business day of each month in
the form of additional Shares of the Fund, or, if specifically requested (in
writing) by the shareholder to CoreFunds Investor Services prior to the
distribution date, in cash. Dividends are automatically paid in cash (along with
any redemption proceeds) not later than seven business days after a shareholder
closes an account with the Fund.
TAXES
The Fund intends to qualify as a 'regulated investment company' under the
Internal Revenue Code of 1986, as amended (the 'Code'). This requires, among
other things, that the Fund distribute to its shareholders at least 90% of its
net investment income. The Fund contemplates declaring as dividends 100% of its
investment
<PAGE>
11
company taxable income. The Fund does not expect to realize any net long-term
capital gains and, therefore, does not foresee paying any 'capital gain
dividends,' as described in the Code.
Generally, the Fund's investment company taxable income will be its taxable
income (for example, its interest income and net short-term capital gains),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund will be taxed on any undistributed investment company
taxable income of the Fund. To the extent that such income is distributed by the
Fund it will generally be taxable as ordinary income to Fund shareholders who
are not currently exempt from federal income taxes.
With respect to investments in STRIPS and Receipts which are sold at original
issue discount and thus do not make periodic cash interest payments, the Fund
will be required to include as part of its current income the imputed interest
on such obligations even though the Fund has not received any interest payments
on such obligations during that period. Because the Fund distributes all of its
net investment income to its shareholders, the Fund may have to sell portfolio
securities to distribute such imputed income, which may occur at a time when the
Adviser would not have chosen to sell such securities and which may result in a
taxable gain or loss.
Whether paid in cash or in the form of additional Shares, dividends attributable
to a Fund's net investment income (including ordinary income and net short-term
capital gains, if any) will generally be taxable to a shareholder to the extent
of the shareholder's ratable share of the Fund's earnings and profits as
determined for tax purposes. Such dividends and distributions may also be
subject to state and local taxes. However, in the opinion of counsel, the Fund's
Shares are exempt from current Pennsylvania Personal Property Taxes.
Corporate investors should note that dividends from the Fund's net investment
income will generally not qualify for the dividends-received deduction for
corporations.
In addition, the sale or redemption of a mutual fund is a taxable event to the
selling or redeeming shareholder. Gains or losses (if any) may be realized from
an ordinary redemption of Shares, as described herein, or on a telephone
exchange among CoreFunds Portfolios.
BACK-UP WITHHOLDING
Generally, the Fund is 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.
IN GENERAL
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareholders. No attempt
has been made to present a detailed explanation of the Federal, state or local
income tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. The foregoing summary is
based on current tax laws and regulations which may be changed by legislative,
judicial or administrative action.
Shareholders will be advised at least annually as to the federal income tax
status of distributions made during the year. See the Statement of Additional
Information for further information regarding taxes.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The directors and executive officers of the
Company, their addresses, principal occupations during the past five years, and
other affiliations are as follows:
ERIN ANDERSON--Director--INSEAD, Boulevard de Constance, 77305 Fountainebleau
Cedex, France. Professor of Marketing, INSEAD, Fountainebleau, France, since
1994. Associate Professor of Marketing, The Wharton School of the University of
Pennsylvania, prior to 1994.
EMIL J. MIKITY--Director--302 Country Club Drive, Wilmington, DE 19803. Retired;
Senior Vice
<PAGE>
12
President Investments, Atochem North America, 1979-89.
GEORGE H. STRONG--Director--946 Navesink Road, Locust, NJ 07760. Financial
Consultant since 1985; Director & Senior Vice President, Universal Health
Services, Inc., 1979-1984.
DAVID G. LEE--President--Senior Vice President of the Administrator and
Distributor since 1993. Vice President of the Administrator and Distributor,
1991 to 1993. President, GW Sierra Trust Funds prior to 1991.
CARMEN V. ROMEO--Treasurer, Assistant Secretary--Director, Executive Vice
President, Chief Financial Officer and Treasurer of SEI. Director and Treasurer
of the Administrator and Distributor since 1981.
JAMES W. JENNINGS (1)--Secretary--2000 One Logan Square, Philadelphia, PA 19103.
Partner of the Law firm of Morgan, Lewis & Bockius LLP, since 1970.
KEVIN P. ROBINS--Vice President, Assistant Secretary--Senior Vice President and
General Counsel of SEI and the Distributor since 1994. Vice
President and Assistant Secretary of the Administrator and the Distributor,
1992-1994. Associate, Morgan Lewis & Bockius LLP prior to 1992.
SANDRA K. ORLOW--Vice President, Assistant Secretary--Vice President and
Assistant Secretary of the Administrator and Distributor since 1983.
KATHRYN L. STANTON--Vice President, Assistant Secretary--Vice President and
Assistant Secretary of the Administrator and Distributor since 1994. Associate,
Morgan, Lewis & Bockius LLP, 1989-1994.
RICHARD J. SHOCH--Vice President and Assistant Secretary--Mr. Shoch has been
Vice President and Assistant Secretary of SEI Corporation since November 1995.
From 1990 to June 1995, Mr. Shoch was Regulatory Manager of SEI Corporation.
TODD CIPPERMAN--Vice President and Assistant Secretary--Mr. Cipperman has been
Vice President and Assistant Secretary of SEI Corporation 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.
JOSEPH M. LYDON--Vice President--Mr. Lydon has been Vice President, Director of
Business Administration--Fund Resources, a division of SEI Corporation since
November 1995. From 1989 to April 1995, Mr. Lydon was Vice President of Fund
Group. Vice President of the Advisor--Dreman Value Management, L.P. and
President of Dreman Financial Services, Inc.
STEPHEN G. MEYER--Controller--CPA--1995 to Present. Director--Internal Audit and
Risk Management--SEI--1992 to 1995. Coopers & Lybrand, Senior Associate--1990 to
1992. Vanguard
- ------------------
(1) Mr. Jennings is an 'interested person' of the Company as defined in the
Investment Company Act.
Group of Investments, Internal Audit Supervisor-- Prior to 1990.
INVESTMENT ADVISER
1. ADVISORY AGREEMENT
Investment advisory services are currently provided to the Fund by CoreStates
Advisers pursuant to an Investment Advisory Agreement dated June 23, 1987, (the
'Investment Advisory Agreement') between the Fund and CoreStates Advisers.
CoreStates Advisers is a wholly-owned subsidiary of CoreStates Bank, itself a
wholly-owned subsidiary of CoreStates Financial Corp ('CoreStates Corp').
CoreStates Corp, based in Philadelphia, Pennsylvania, is one of the 30 largest
bank holding companies in the United States, and leads the region in investing
corporate cash. CoreStates Corp currently has over $29 billion in assets and
discretionary management over $22 billion in customer accounts through a variety
of banking activities at over 355 domestic and foreign locations. CoreStates
Corp's leading subsidiary, CoreStates Bank, currently ranks thirty-second in the
management of discretionary trust assets.
CoreStates Advisers is an adviser registered under the Investment Advisers Act
of 1940. It performs most investment management and advisory functions for the
trust departments of CoreStates Corp's banking subsidiaries, related investment
advisory, research, trading, and fund management functions, and also provides
similar services to customers
<PAGE>
13
unrelated to CoreStates Corp. CoreStates Advisers currently manages
discretionary and non-discretionary client security portfolios with a total
aggregate market value of over $16 billion, for individuals, corporations,
institutions, and municipalities. CoreStates Advisers has extensive mutual fund
experience in the management of money market, tax-free, fixed-income, equity,
and international investments. CoreStates Advisers principal offices are located
at 1500 Market Street, P.O. Box 7558, Philadelphia, PA 19102.
As Investment Adviser, CoreStates Advisers manages the Fund's investment
portfolio, makes decisions with respect to and places orders for all purchases
and sales of the Fund's portfolio securities, and maintains certain records
relating to such purchases and sales. CoreStates Advisers pays all expenses
incurred by it in connection with its investment advisory activities, other than
the cost of securities (including any brokerage commissions) purchased for the
Fund and the cost of obtaining market quotations for portfolio securities held
by the Fund.
2. ADVISORY FEE
For the services provided and expenses assumed as the Fund's Investment Adviser,
CoreStates Advisers is entitled to receive a fee from the Fund, computed daily
and paid monthly, at the annual rate of .50% on the Fund's average net assets.
CoreStates Advisers may, from time to time and at its discretion, voluntarily
waive all or a portion of its investment advisory fees in order to assist the
Fund in maintaining a competitive expense ratio.
For the fiscal year ended June 30, 1995, CoreStates Advisers waived the entire
amount of its investment advisory fee.
3. PORTFOLIO MANAGER
Joyce Ann Lotkowski, Investment Officer, is portfolio manager of the Fund. She
is a fixed income portfolio manager responsible for individually managed
corporate trust accounts. Mrs. Lotkowski joined CoreStates Advisers in 1982 as a
portfolio manager. She joined the Philadelphia National Bank in 1978 in the CPA
and Government Request Department and in 1980 transferred to the Corporate Trust
Department.
ADMINISTRATOR
1. ADMINISTRATION AGREEMENT
The Administrator acts as the Fund's Administrator pursuant to an Administration
Agreement dated October 30, 1992 (the 'Administration Agreement'). State Street
Bank and Trust Company located at 225 Franklin Street, Boston, MA 02110, serves
as the Fund's Transfer Agent (the 'Transfer Agent') and dividend paying agent.
The Administrator generally assists in the Fund's administration and operations.
See 'Administrator' in the Statement of Additional Information for a list of the
Administrator's specific services.
2. ADMINISTRATIVE FEES
For its administrative services, the Administrator is entitled to receive a fee
from the Fund, computed daily and paid monthly, at the annual rate of .25% on
the Funds' average net assets. For the fiscal year ended June 30, 1995, the
Administrator was entitled to a fee from the Fund, computed daily and paid
monthly, at the annual rate of .25% of the Fund's average net assets.
For the fiscal year ended June 30, 1995, the Fund paid the Administrator
administrative fees totalling .11% of its average daily net assets after fee
waivers.
EXPENSES
The Fund's expenses are accrued daily and are deducted from total income before
dividends are paid. Except as noted herein and in the Statement of Additional
Information, the Fund's service contractors bear all expenses incurred in
connection with the performance of their services on behalf of the Fund.
Similarly, the Fund bears the expenses incurred in its operations.
GLASS-STEAGALL ACT
CoreStates Corp and its banking subsidiaries are permitted to perform the
services contemplated by the Investment Advisory Agreement and to engage in
certain activities in connection with the investment of their Customer Accounts
in Fund Shares without violating the federal banking law commonly referred to as
the Glass-Steagall Act, or other applicable
<PAGE>
14
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 was thereby
prohibited from serving as Investment Adviser to the Fund, the Fund's Board of
Directors would promptly seek to retain another qualified investment adviser for
the Fund.
In addition, certain state securities laws may require banks and other
Institutional Investors purchasing Shares on behalf of their Customers in such
states to register as dealers pursuant to state law.
DESCRIPTION OF SHARES
CoreFunds has set up the following twenty-three portfolios: Growth Equity,
Equity, Special Equity, Equity Index, International Growth, Balanced, Short
Intermediate Bond, Bond, Short-Term Income, Government Income, Intermediate
Municipal Bond, Pennsylvania Municipal Bond, New Jersey Municipal Bond, Global
Bond, Cash Reserve, Treasury Reserve, Tax-Free Reserve, Fiduciary Reserve,
Fiduciary Treasury Reserve, Fiduciary Tax-Free Reserve, CoreFund Elite Cash
Reserve, CoreFund Elite Government Reserve and CoreFund Elite Treasury Reserve.
CoreFunds offers two classes of each portfolio except for Equity Index Fund,
CoreFund Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite
Treasury Reserve, Fiduciary Reserve, Fiduciary Tax-Free Reserve, and Fiduciary
Treasury Reserve. CoreFunds may in the future create one or more additional
portfolios, or one or more classes of shares within a portfolio. Class Y Shares
- -- Institutional, Classes A and C Shares -- Individual and shares of CoreFund
Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite Treasury
Reserve, Fiduciary Reserve, Fiduciary Treasury Reserve, and Fiduciary Tax-Free
Reserve, are offered in separate prospectuses. This prospectus solely relates to
Class Y Shares of Fiduciary Reserve.
Class A Shares differ from Class Y Shares in that Class A Shares are subject to
a sales load and distribution and transfer agent expenses for certain additional
shareholder services they receive. Class C Shares also differ from Class Y
Shares in that Class C Shares are subject to distribution and transfer agent
expense for certain additional shareholder services, but unlike Class A Shares,
are not subject to a sales load. Classes A and C Shares also have voting rights
which Class Y Shares do not, in connection with the Distribution Plan affecting
Class A and C Shares. In addition, the distribution and transfer agent expenses
charged Class A and C Shares result in Class A and C Shares having different
dividends and performance results from Class Y Shares. In addition, the minimum
initial investment for Class Y Shares is substantially higher than that required
for Class A or Class C Shares with the exception of the Equity Index Fund.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN
RELATE PRIMARILY TO SERIES A SHARES OF THE EQUITY INDEX FUND AND DESCRIBE ONLY
THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS
RELATING TO SUCH SHARES. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION
REGARDING OTHER COREFUNDS PORTFOLIOS MAY OBTAIN PROSPECTUSES DESCRIBING SUCH
PORTFOLIOS BY CONTACTING THE DISTRIBUTOR AT 1-800-355-CORE. Prior to the date of
this Prospectus, all Class A Shares were known as Series B -- Individual for all
portfolios other than the Money Market Funds; Class C Shares were known as
Series B -- Individual for the Money Market Funds; and Class Y Shares were known
as Series A -- Institutional. CoreFunds has changed their designation to conform
to the standard designations suggested by the Investment Company Institute.
Except for differences between classes of some of CoreFunds' portfolios
pertaining to distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class,
each share in each Fund represents an equal proportionate interest in that Fund
with each other share of the same Fund and is entitled to such dividends and
distributions out of the income earned on the assets belonging to such Fund as
are declared in the discretion of the Board of Directors.
<PAGE>
15
CoreFunds' shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in the aggregate and
not by portfolio or class except as otherwise expressly required by law or when
the Board of Directors determines that the matter to be voted upon affects only
the interests of the shareholders of a particular portfolio or class. See the
Statement of Additional Information under 'Description of Shares' for examples
where the Investment Company Act requires voting by portfolio or class. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate number of shares of all of the Funds may elect all of the directors if
they choose to do so and, in such event, the holders of the remaining shares
would not be able to elect any person or persons to the Board of Directors.
As used in this Prospectus, a 'vote of a majority of the outstanding shares' of
a Fund means the affirmative vote of the lesser of (a) more than 50% of the
outstanding shares of a Fund, or (b) at least 67% of the shares of a Fund
present at a meeting at which the holders of more than 50% of the outstanding
shares of such Fund are represented in person or by proxy.
GENERAL INFORMATION
In accordance with the Maryland General Corporation Law, the Company is not
required to hold annual meetings of shareholders unless the Investment Company
Act requires the shareholders to elect members of the Board of Directors.
However, a meeting of shareholders may be called for any purpose upon the
written request of the holders of at least 10% of the outstanding Shares of the
Company, or of a Fund with respect to matters affecting only such Fund.
As used in this Prospectus, 'assets belonging to the Fund' means the
consideration received by the Company upon the issuance or sale of Shares in the
Fund, together with all income, earnings, profits and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of the
Company not belonging to the Fund or the Company's other portfolios. Assets
belonging to the Fund are charged with the direct liabilities in respect of the
Fund and with a share of the general liabilities of the Company allocated in
proportion to the relative asset values of each of the Company's portfolios at
the time the expense or liability is incurred. The management of the Company
makes determinations with respect to the Fund as to liabilities when they are
incurred and as to assets when they are acquired. Such determinations are
reviewed and approved annually by the Company's Board of Directors and are
conclusive.
<PAGE>
/X/
COREFUND
FIDUCIARY
RESERVE
(COREFUNDS, INC.)
680 East Swedesford Road
Wayne, PA 19087
NEW INVESTOR INFORMATION
1-800-355-CORE
SHAREHOLDER SERVICES
1-800-323-3851
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
DISTRIBUTOR
SEI Financial Services Company
Wayne, PA 19087
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
CONTENTS
Introduction . . . 2
Fund Expenses . . . 2
Financial Highlights . . . 4
Performance Information . . . 5
Investment Objective and Policies . . . 5
Investment Restrictions . . . 8
Valuation of Shares . . . 8
How to Purchase and Redeem Shares . . . 9
Dividends and Taxes . . . 10
Management of the Fund . . . 11
Description of Shares . . . 14
General Information . . . 15
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION APRIL 22, 1996 INCORPORATED HEREIN BY REFERENCE, IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING
BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
COR-F-055-02
/X/
COREFUND
FIDUCIARY
RESERVE
(COREFUNDS, INC.)
PROSPECTUS
April 22, 1996
Investment Adviser:
CORESTATES
CORESTATES
INVESTMENT ADVISERS
<PAGE>
PROSPECTUS
COREFUND FIDUCIARY TREASURY RESERVE
<TABLE>
<S> <C>
680 East Swedesford Road For current performance, purchase,
Wayne, PA 19087 redemption, and other information,
Call: 1-800-355-CORE
</TABLE>
CoreFund Fiduciary Treasury Reserve (the 'Fund') is a portfolio offered by
CoreFunds, Inc. (the 'Company'), a no-load, diversified, open-end management
investment company.
The Fund's investment objective is to provide its shareholders with current
interest income, liquidity, and safety of principal. The Fund intends to achieve
this objective by investing substantially all of its assets in direct
obligations of the U.S. Treasury, with remaining maturities of 397 days or less.
THE FUND WILL ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.00,
HOWEVER, AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES IN THE FUND ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR GUARANTEED
OR ENDORSED BY, CORESTATES BANK, N.A., THE PARENT CORPORATION OF THE FUND'S
INVESTMENT ADVISER, OR ANY OF ITS AFFILIATES. SUCH SHARES ARE ALSO NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
This Prospectus sets forth certain information about the Fund that a prospective
investor ought to know before investing. Investors should read this Prospectus
and retain it for future reference.
Additional information about the Fund, contained in a Statement of Additional
Information, has been filed with the Securities and Exchange Commission and is
available upon request without charge by writing to the Fund at its address. The
Statement of Additional Information bears the same date as this Prospectus and
is incorporated by reference in its entirety into this Prospectus.
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April 22, 1996.
<PAGE>
2
The Fund's Investment Adviser is 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'). SEI Financial Management Corporation (the
'Administrator') serves as the Fund's Administrator and SEI Financial Services
Company (the 'Distributor') serves as the Fund's Director.
Shares of the Fund ('Shares') are sold only to various types of Institutional
Investors ('Institutional Investors'), including but not limited to affiliate
and subsidiary banks of CoreStates Corp. Shares may be purchased by
Institutional Investors for investment of their own funds, or for funds of their
customer accounts ('Customer Accounts') for which they serve in a fiduciary,
agency, or custodial capacity. Shares are sold and redeemed without the
imposition of a purchase or redemption charge by the Fund, although
Institutional Investors that are record owners of Shares for their Customer
Accounts may charge their Customers separate account fees. See 'How to Purchase
and Redeem Shares.'
FUND EXPENSES
The tables below set forth information concerning shareholder transaction
expenses and annual operating expenses of the Fund.
<TABLE>
<CAPTION>
FIDUCIARY TREASURY
SHAREHOLDER TRANSACTION EXPENSES RESERVE FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... 0%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........ 0%
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds, as
applicable)................................................................................. 0%
Redemption Fee................................................................................ None
Exchange Fee.................................................................................. None
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
FIDUCIARY TREASURY
ANNUAL FUND OPERATING EXPENSES (A) RESERVE FUND
- -------------------------------------------------------------------------------------------------------------------
12b-1 Fees.................................................................................... None
Investment Advisory Fee after Fee Waivers (B)................................................. .00%
Administrative Fee after Fee Waivers (C)...................................................... .11%
Other Expenses (D)............................................................................ .10%
Net Annual Fund Operating Expenses (E)........................................................ .21%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The Fund operating expenses as set forth in this table reflect expenses
expected to be incurred by the Fund for the fiscal period ending June 30,
1996, shown as a percentage of average net assets for such year.
(B) Absent voluntary waivers, CoreStates Advisers' investment advisory fee is
calculated at the annual rate of .20% of the Fund's average net assets.
(C) Absent voluntary waivers, the Administrator's administrative fee is
calculated at the annual rate of .25% of the Fund's average net assets.
(D) Includes (among others) legal and auditing fees.
(E) CoreStates Advisers and the Administrator may, from time to time and at
their discretion, voluntarily waive all or a portion of their fees. The
expense ratio of .21% is net of investment advisory and administrative fee
waivers in effect during the fiscal period. Absent any fee waivers, the
expense ratio would have been .85%.
<PAGE>
3
<TABLE>
<CAPTION>
EXAMPLE FIDUCIARY TREASURY RESERVE FUND
- ----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:..... $2 $7 $12 $27
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of the tables is to assist the investor in understanding the various
costs and expenses that a Shareholder in the Fund will bear directly or
indirectly. For additional information regarding fees and other expenses, see
'Investment Adviser,' 'Administrator,' and 'Expenses.'
Absent the voluntary waiver of fees by CoreStates Advisers and the
Administrator, the amount in the Example above would be $9, $27, $47 and $105
for one year, three years, five years and ten years, respectively.
THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
<PAGE>
4
FINANCIAL HIGHLIGHTS
The Company was organized as a Maryland corporation on September 11, 1984 under
the name of 'Red Oak Cash Reserve Fund, Inc.' The Company changed its name to
'CoreFunds, Inc.' on June 23, 1987, at a Special Meeting of Shareholders. The
Fiduciary Treasury Reserve Fund commenced operations on December 10, 1991.
The table that follows presents information about the investment results of
Shares of the Fund since its inception. The financial highlights for each of the
periods presented have been audited by Ernst & Young LLP, independent certified
public accountants, whose report thereon appears in CoreFunds' annual report
with respect to the Fund which accompanies the Statement of Additional
Information.
FOR THE PERIOD ENDED JUNE 30,
FIDUCIARY TREASURY RESERVE
<TABLE>
<CAPTION>
NET DIVIDENDS NET
ASSET VALUE NET FROM NET ASSET VALUE
BEGINNING OF INVESTMENT INVESTMENT END OF TOTAL
YEAR PERIOD INCOME INCOME PERIOD RETURN
- --------------------------------------------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
1995** (unaudited)................................. $ 1.00 0.03 (0.03) $ 1.00 2.85%+
1995............................................... $ 1.00 0.05 (0.05) $ 1.00 5.24%
1994............................................... $ 1.00 0.03 (0.03) $ 1.00 3.10%
1993............................................... $ 1.00 0.03 (0.03) $ 1.00 3.17%
1992*.............................................. $ 1.00 0.02 (0.02) $ 1.00 2.00%+
</TABLE>
<TABLE>
<CAPTION>
NET RATIO RATIO OF NET
ASSETS RATIO OF EXPENSES INCOME TO
END RATIO OF NET TO AVERAGE AVERAGE NET
OF PERIOD OF EXPENSES INCOME NET ASSETS ASSETS
(THOUSANDS TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
YEAR OMITTED) NET ASSETS NET ASSETS WAIVERS) WAIVERS
- ------------------------------------------- ----------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
1995** (unaudited)......................... $ 19,551 0.19% 5.60% 0.83% 4.96%
1995....................................... $ 18,396 0.23% 5.09% 0.87% 4.45%
1994....................................... $ 20,363 0.28% 3.03% 0.91% 2.40%
1993....................................... $ 27,614 0.18% 3.19% 0.85% 2.52%
1992*...................................... $ 49,328 0.05% 3.95% 0.80% 3.20%
</TABLE>
- ------------------
+ Returns are for the period indicated and have not been annualized.
* The Fiduciary Treasury Reserve commenced operations December 10, 1991. Ratios
for this period have been annualized.
** Ratios for the six-month period ended December 31, 1996 have been annualized.
<PAGE>
5
PERFORMANCE INFORMATION
From time to time, in advertisements or reports to shareholders, the performance
of the Fund may be quoted and compared to that of other mutual funds with
similar investment objectives and to relevant indices.
The Fund may advertise its 'yield' and 'effective yield.' Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The 'yield' of the Fund refers to the income generated by an
investment in the 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 the 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. See 'Yield' in the Statement of Additional
Information.
The performance of any investment will generally reflect market conditions,
portfolio quality and maturity, type of investment, and operating expenses. The
Fund's performance will fluctuate and is not necessarily representative of
future results. Any fees charged by Institutional Investors to their Customers
in connection with investments in Fund Shares are not reflected in the Fund's
performance, and such fees, if charged, will reduce the actual return received
by Customers on their investments. Conversely, the Fund's performance would be
favorably affected by any investment advisory or administrative fee waivers on
the part of CoreStates Advisers or SEI Financial Management Corporation.
Shareholders will receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements audited by independent
auditors.
INVESTMENT OBJECTIVE
IN GENERAL
The Fund's investment objective is to provide current interest income,
liquidity, and safety of principal. The Fund intends to achieve its stated
objective by investing in direct obligations of the U.S. Treasury, such as
bills, notes and bonds, and separately traded interest and principal component
parts of such obligations that are transferable through the Federal book-entry
system known as Separately Traded Registered Interest and Principal Securities
('STRIPS'), as well as repurchase agreements relating to direct U.S. Treasury
obligations. The securities held by the Fund will have remaining maturities of
397 days or less, although securities subject to repurchase agreements may bear
longer maturities. In addition, the portfolio's average weighted maturity will
not exceed 90 days.
The Fund may also utilize the investment vehicles described below, subject to
the limitations discussed herein under 'Investment Restrictions.'
INVESTMENT POLICIES
U.S. TREASURY OBLIGATIONS--bills, notes and bonds issued by the U.S. Treasury
and STRIPS. STRIPS may be sold as zero coupon securities which means that they
are sold at a substantial discount and redeemed at face value at their maturity
date without interim cash payments of interest or principal. This discount is
amortized over the life of the security, and such amortization will constitute
the income earned on the security for both accounting and tax purposes. Because
of these features, STRIPS may be subject to greater interest rate volatility
than interest paying U.S. Treasury Obligations. See also 'Taxes.'
REPURCHASE AGREEMENTS--The Fund may enter into repurchase agreements with
respect to portfolio securities. Under the terms of a repurchase agreement, the
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 Fund's management, subject to the seller's agreement
to repurchase them at a mutually agreed-upon date and price. The repurchase
price generally
<PAGE>
6
equals the price paid by the 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 Fund's Custodian in the Federal Reserve's
book-entry system. Default by the seller would, however, expose the 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 Fund under the Investment Company Act of 1940, as amended
(the 'Investment Company Act').
LENDING OF SECURITIES--The Fund may lend their portfolio securities to
qualified brokers, dealers, banks, and other financial institutions for the
purpose of realizing additional net investment income through the receipt of
interest on the loan. The Fund may lend portfolio securities with a value of up
to 33 1/3% of its total assets. Such loans may be terminated at any time. The
Fund will receive 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 Fund will be invested in short-term debt securities.
The Fund will retain most rights of beneficial ownership including dividends,
interest or other distributions on the loaned securities. Voting rights pass
with the lending. The Fund will call loans to vote proxies if a material issue
affecting the investment is to be voted upon. Loans will be made only to
borrowers deemed by CoreStates Advisers to be of good standing.
Such loans would involve risk of delay in receiving additional collateral in the
event the value of the collateral decreased below the value of the securities
loaned, or risk of delay in recovering the securities loaned or even loss of
rights in the collateral should the borrower of the securities fail financially.
INVESTMENT RESTRICTIONS
Certain investment policies of the Fund may be changed at any time and from time
to time by the Board of Directors without shareholder approval, provided such
change is deemed to be consistent with the Fund's objective and in the best
interests of its shareholders. However, the Fund's investment objective, along
with the restrictions and limitations described herein and in the Statement of
Additional Information, are fundamental and may be changed only by the
affirmative vote of a majority of the outstanding Shares of the Fund. See
'Description of Shares.'
THE FUND MAY NOT:
1. Purchase securities other than direct obligations of the U.S. Treasury, such
as Treasury bills and notes, some of which may be subject to repurchase
agreements.
2. Make loans, except that the Fund may purchase or hold certain debt
instruments and enter into repurchase agreements, in accordance with its
policies and limitations.
3. Borrow money or issue senior securities, except that the Fund may borrow from
banks. The Fund will not purchase any securities while its borrowings are
outstanding.
4. Knowingly invest more than 10% of its total assets in illiquid securities,
including repurchase agreements providing for settlement more than seven days
after notice.
VALUATION OF SHARES
NET ASSET VALUE
The Fund's net asset value per Share for purposes of pricing purchase and
redemption orders is normally determined as of 4:00 P.M. (Eastern time) (the
'valuation time') on each business day of the Fund. A 'business day' of the Fund
is a day on which the New York Stock Exchange is open for trading, and any other
day (other than a day on which no Shares of the Fund are tendered for redemption
and no order to purchase any Shares is received) during which there is a
sufficient degree of trading in securities or instruments held by the Fund
<PAGE>
7
such that the Fund's net asset value per Share might be materially affected. Net
asset value per Share is calculated by dividing the value of all of the Fund's
portfolio securities and other assets, less liabilities, by the number of
outstanding Shares of the Fund at the time of the valuation. The result
(adjusted to the nearest cent) is the net asset value per Share.
PORTFOLIO VALUATION
The assets in the Fund are valued based upon the amortized cost method, pursuant
to rules promulgated under the Investment Company Act. Under this method of
valuation, the portfolio value of the assets normally will not change in
response to fluctuating interest rates. In connection with its use of this
valuation method, however, the Fund monitors the deviation between the amortized
cost value of its assets and their market value (which can be expected to vary
inversely with changes in prevailing interest rates). Although the Fund seeks,
through its use of amortized cost valuation, to maintain its net asset value per
Share at $1.00, there can be no assurance that the net asset value will not
vary.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are sold on a continuous basis by the Fund's Distributor. The
principal offices of the Distributor are located at 680 East Swedesford Road,
Wayne, Pennsylvania 19087.
The Distributor and the Fund are parties to a 'Distribution Agreement,' although
no compensation is paid to the Distributor for the distribution services it
provides to the Fund.
PURCHASE OF SHARES
Institutional Investors may acquire Shares of the Fund for their own account or
as a record owner on behalf of fiduciary, agency, or custody accounts by placing
orders with the Distributor. Purchases may be made on any Business Day of the
Fund at the net asset value per Share (see 'Valuation of Shares') next
determined after receipt by the Fund of an order to purchase shares.
An order received before the valuation time on any Business Day will be executed
on the date of receipt at the net asset value determined as of the valuation
time on such date so long as Federal funds are transmitted or delivered to the
Custodian by close of business on the next Business Day. An order received after
the valuation time on any Business Day will be executed on the next Business Day
of the Fund at the net asset value determined on such date.
Funds should be wired to CORESTATES PHIL, Philadelphia, PA ABA #031000011, for
credit to COREFUNDS--A/C #0169-0541. The wire instructions must also include the
investor's account number. Before wiring any funds, however, an investor must
call CoreFunds Investor Services at 1-800-355-CORE in order to confirm the wire
instructions for the transfer agent, State Street Bank and Trust Company (the
'Transfer Agent'). An order to purchase shares by Federal funds wire will be
deemed to have been received by a Fund on the Business Day that investors notify
SEI Financial Management Corporation by 10:30 a.m. (Eastern time) of their
intentions to wire money, provided that the Custodian receives Federal funds on
the following Business Day.
The minimum investment amount is $1 million for the initial purchase of Shares
by an investor which amount may be waived at the discretion of the Distributor.
There is no minimum for subsequent investments.
The Fund reserves the right to reject any order for the purchase of its Shares
in whole or in part.
Every shareholder of record will receive a confirmation of each new Share
transaction with the Fund, which will also show the total number of Shares being
held in safekeeping by the Transfer Agent for the account of the shareholder.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing Shares of a Fund will not be issued.
Beneficial ownership of Shares held of record by Institutional Investors on
behalf of their Customers will be recorded by the institutions and reflected in
the regular account statements provided by them to their Customers.
<PAGE>
8
REDEMPTION OF SHARES
Shares may ordinarily be redeemed in accordance with the procedures described
below.
With respect to Shares held by Institutional Investors on behalf of their
Customer Accounts, all or part of the Shares beneficially owned by a Customer
may be redeemed in accordance with instructions and limitations pertaining to
their Account at the institution.
Shareholders who desire to redeem Shares of the Fund must place their redemption
orders with CoreFunds Investor Services for the Transfer Agent prior to 3:00
p.m. (Eastern time) on any Business Day. Payment will be made the next Business
Day after proper receipt by the Transfer Agent by transfer of Federal funds. The
execution of redemption orders at net asset value by the Transfer Agent will be
delayed for the period of time that the redemption order is in transit from SEI
Financial Management Corporation. Otherwise, the redemption order will be
effective the next Business Day.
The Fund intends to pay cash for all Shares redeemed, but under abnormal
conditions which make payment in cash unwise, the Fund may make payment wholly
or partly in portfolio securities at their then market value equal to the
redemption price. In such cases, a shareholder may incur brokerage costs in
converting such securities to cash.
DIVIDENDS AND TAXES
DIVIDENDS
The net investment income of the Fund is declared daily as a dividend to its
shareholders. Capital gains distributions, if any, will be made at least
annually. Shares begin earning dividends on the day on which the purchase order
for the Shares is executed and continue to earn dividends through, and
including, the day before the redemption order for the Shares is executed.
Dividends are distributable monthly on the first business day of each month in
the form of additional Shares of the Fund, or, if specifically requested (in
writing) by the shareholder to CoreFunds Investor Services prior to the
distribution date, in cash. Dividends are automatically paid in cash (along with
any redemption proceeds) not later than seven business days after a shareholder
closes an account with the Fund.
TAXES
The Fund intends to qualify as a 'regulated investment company' under the
Internal Revenue Code of 1986, as amended (the 'Code'). This requires, among
other things, that the Fund distribute to its shareholders at least 90% of its
net investment income. The Fund contemplates declaring as dividends 100% of its
investment company taxable income. The Fund does not expect to realize any net
long-term capital gains and, therefore, does not foresee paying any 'capital
gain dividends,' as described in the Code.
Generally, the Fund's investment company taxable income will be its taxable
income (for example, its interest income and net short-term capital gains),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund will be taxed on any undistributed investment company
taxable income of the Fund. To the extent that such income is distributed by the
Fund it will generally be taxable as ordinary income to Fund Shareholders who
are not currently exempt from federal income taxes.
Whether paid in cash or in the form of additional Shares, dividends attributable
to a Fund's net investment income (including ordinary income and net short-term
capital gains, if any) will generally be taxable to a shareholder to the extent
of the shareholder's ratable share of the Fund's earnings and profits as
determined for tax purposes. Such dividends and distributions may also be
subject to state and local taxes. However, in the opinion of counsel, the Fund's
Shares are exempt from current Pennsylvania Personal Property Taxes.
With respect to investments in STRIPS which are sold at original issue discount
and thus do not make periodic cash interest payments, the Fund will be required
to include as part of its current income the imputed interest on such
obligations even though the Fund has not received any interest payments on such
obligations during that period. Because the Fund distributes all of its net
investment income to shareholders, the Fund may have to sell portfolio
securities to distribute such imputed income, which
<PAGE>
9
may occur at a time when the Adviser would not have chosen to sell such
securities and which may result in a taxable gain or loss.
Corporate investors should note that dividends from the Fund's net investment
income will generally not qualify for the dividends-received deduction for
corporations.
In addition, the sale or redemption of shares of a mutual fund is a taxable
event to the selling or redeeming shareholder. Gains or losses (if any) may be
realized from an ordinary redemption of Shares, as described herein, or on a
telephone exchange among the CoreFunds portfolios.
BACK-UP WITHHOLDING
Generally, the Fund is 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.
IN GENERAL
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareholders. No attempt
has been made to present a detailed explanation of the federal, state or local
income tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. The foregoing summary is
based on current tax laws and regulations which may be changed by legislative,
judicial or administrative action.
Shareholders will be advised at least annually as to the federal income tax
status of distributions made during the year. See the Statement of Additional
Information for further information regarding taxes.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The directors and executive officers of the
Company, their addresses, principal occupations during the past five years, and
other affiliations are as follows:
ERIN ANDERSON--Director--INSEAD, Boulevard de Constance, 77035 Fountainebleau
Cedex, France. Professor of Marketing, INSEAD, Fountainebleau, France, since
1994. Associate Professor of Marketing, The Wharton School of the University of
Pennsylvania, prior to 1994.
EMIL J. MIKITY--Director--302 Country Club Drive, Wilmington, DE 19803. Retired;
Senior Vice President Investments, Atochem North America, 1979-89.
GEORGE H. STRONG--Director--946 Navesink Road, Locust, NJ 07760. Financial
Consultant since 1985; Director & Senior Vice President, Universal Health
Services, Inc., 1979-1984.
DAVID G. LEE--President--Senior Vice President of the Administrator and
Distributor since 1993. Vice President of the Administrator and Distributor,
1991 to 1993. President, GW Sierra Trust Funds prior to 1991.
CARMEN V. ROMEO--Treasurer, Assistant Secretary--Director, Executive Vice
President, Chief Financial Officer and Treasurer of SEI. Director and Treasurer
of the Administrator and Distributor since 1981.
JAMES W. JENNINGS (1)--Secretary--2000 One Logan Square, Philadelphia, PA 19103.
Partner of the Law firm of Morgan, Lewis & Bockius LLP, since 1970.
KEVIN P. ROBINS--Vice President, Assistant Secretary--Senior Vice President and
General Counsel of SEI and the Distributor since 1994. Vice President and
Assistant Secretary of the Administrator and the Distributor, 1992-1994.
Associate, Morgan, Lewis & Bockius LLP prior to 1992.
SANDRA K. ORLOW--Vice President, Assistant Secretary--Vice President and
Assistant Secretary of the Administrator and Distributor since 1983.
- ------------------
(1) Mr. Jennings is an 'interested person' of the Company as defined in the
Investment Company Act.
<PAGE>
10
KATHRYN L. STANTON--Vice President, Assistant Secretary--Vice President and
Assistant Secretary of the Administrator and Distributor since 1994. Associate,
Morgan, Lewis & Bockius LLP, 1989-1994.
RICHARD J. SHOCH--Vice President and Assistant Secretary--Mr. Shoch has been
Vice President and Assistant Secretary of SEI Corporation since November 1995.
From 1990 to June 1995, Mr. Shoch was Regulatory Manager of SEI Corporation.
TODD CIPPERMAN--Vice President and Assistant Secretary--Mr. Cipperman has been
Vice President and Assistant Secretary of SEI Corporation 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.
JOSEPH M. LYDON--Vice President--Mr. Lydon has been Vice President, Director of
Business Administration--Fund Resources, a division of SEI Corporation since
November 1995. From 1989 to April 1995, Mr. Lydon was Vice President of Fund
Group. Vice President of the Advisor--Dreman Value Management, L.P. and
President of Dreman Financial Services, Inc.
STEPHEN G. MEYER--Controller--CPA--1995 to Present. Director--Internal Audit and
Risk Management--SEI--1992 to 1995. Coopers & Lybrand, Senior Associate--1990 to
1992. Vanguard Group of Investments, Internal Audit Supervisor-- Prior to 1990.
INVESTMENT ADVISER
1. ADVISORY AGREEMENT
Investment advisory services are currently provided to the Fund by CoreStates
Advisers pursuant to an Investment Advisory Agreement dated March 25, 1991 (the
'Investment Advisory Agreement'), between the Fund and CoreStates Advisers.
CoreStates Advisers is a wholly-owned subsidiary of CoreStates Bank, itself a
wholly-owned subsidiary of CoreStates Financial Corp ('CoreStates Corp').
CoreStates Corp, based in Philadelphia, Pennsylvania, is one of the 30 largest
bank holding companies in the United States, and leads the region in investing
corporate cash. CoreStates Corp currently has over $29 billion in assets and
discretionary management over $22 billion through a variety of banking
activities at over 355 domestic and foreign locations. CoreStates Corp's leading
subsidiary, CoreStates Bank, currently ranks thirty-second in the management of
discretionary trust assets.
CoreStates Advisers is an adviser registered under the Investment Advisers Act
of 1940. It performs most investment management and advisory functions for the
trust departments of CoreStates Corp's banking subsidiaries, related investment
advisory, research, trading, and fund management functions, and also provides
similar services to customers unrelated to CoreStates Corp. CoreStates Advisers
currently manages discretionary and non-discretionary client security portfolios
with a total aggregate market value of over $16 billion, for individuals,
corporations, institutions, and municipalities. CoreStates Advisers has
extensive mutual fund experience in the management of money market, tax-free,
fixed income, equity, and international investments. CoreStates Advisers
principal offices are located at 1500 Market Street, P.O. Box 7558,
Philadelphia, PA 19102.
As Investment Adviser, CoreStates Advisers manages the Fund's investment
portfolio, makes decisions with respect to and places orders for all purchases
and sales of the Fund's portfolio securities, and maintains certain records
relating to such purchases and sales. CoreStates Advisers pays all expenses
incurred by it in connection with its investment advisory activities, other than
the cost of securities (including any brokerage commissions) purchased for the
Fund and the cost of obtaining market quotations for portfolio securities held
by the Fund.
2. ADVISORY FEE
For the services provided and expenses assumed as the Fund's Investment Adviser,
CoreStates Advisers is entitled to receive a fee from the Fund, computed daily
and paid monthly, at the annual rate of .50% on the Fund's average net assets.
CoreStates Advisers may, from time to time and at its discretion, voluntarily
waive all or a portion of its investment advisory fees in order to assist the
Fund in maintaining a competitive expense ratio.
For the fiscal year ended June 30, 1995, CoreStates Advisers waived its entire
investment advisory fee.
3. PORTFOLIO MANAGER
Ronald R. Brasten, Senior Investment Officer, is portfolio manager of the Fund.
He also manages the CoreFund Treasury Reserve and has investment responsibility
for individually managed corporate and personal accounts. After receiving his
B.S. in Accounting from Drexel University, Mr. Brasten
<PAGE>
11
joined the Financial Division of CoreStates in 1984. In 1986, he transferred to
the Asset and Liability group as an ALCO analyst. Mr. Brasten joined CoreStates
Advisers in August 1989.
ADMINISTRATOR
1. ADMINISTRATION AGREEMENT
The Administrator acts as the Fund's Administrator pursuant to an Administration
Agreement dated October 30, 1992 (the 'Administration Agreement').
State Street Bank and Trust Company located at 225 Franklin Street, Boston, MA
02110, serves as the Fund's Transfer Agent and dividend paying agent.
The Administrator generally assists in the Fund's administration and operations.
See 'Administrator' in the Statement of Additional Information for a list of the
Administrator's specific services.
For its administrative services, the Administrator is entitled to receive a fee
from the Fund, computed daily and paid monthly, at the annual rate of .25% on
the Fund's average net assets. For the fiscal year ended June 30, 1995, the
Administrator was entitled to a fee from the Fund, computed daily and paid
monthly, at the annual rate of .25% on the Fund's average net assets.
For the fiscal year ended June 30, 1995, the Fund paid the Administrator
administrative fees totalling .11% of its average daily net assets, after fee
waivers.
EXPENSES
The Fund's expenses are accrued daily and are deducted from total income before
dividends are paid. Except as noted herein and in the Statement of Additional
Information, the Fund's service contractors bear all expenses incurred in
connection with the performance of their services on behalf of the Fund.
Similarly, the Fund bears the expenses incurred in its operations.
GLASS-STEAGALL ACT
CoreStates Corp and its banking subsidiaries are permitted to perform the
services contemplated by the Investment Advisory Agreement and to engage in
certain activities in connection with the investment of their Customer Accounts
in Fund Shares 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 was thereby prohibited from serving as Investment Adviser to
the Fund, the Fund's Board of Directors would promptly seek to retain another
qualified investment adviser for the Fund.
In addition, certain state securities laws may require banks and other
Institutional Investors purchasing Shares on behalf of their Customers in such
states to register as dealers pursuant to state law.
DESCRIPTION OF SHARES
CoreFunds has set up the following twenty-three portfolios: Growth Equity,
Equity, Special Equity, Equity Index, International Growth, Balanced, Short
Intermediate Bond, Bond, Short-Term Income, Government Income, Intermediate
Municipal Bond, Pennsylvania Municipal Bond, New Jersey Municipal Bond, Global
Bond, Cash Reserve, Treasury Reserve, Tax-Free Reserve, Fiduciary Reserve,
Fiduciary Treasury Reserve, Fiduciary Tax-Free Reserve, CoreFund Elite Cash
Reserve, CoreFund Elite Government Reserve and CoreFund Elite Treasury Reserve.
CoreFunds offers two classes of each portfolio except for Equity Index Fund,
CoreFund Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite
Treasury Reserve, Fiduciary Reserve, Fiduciary Tax-Free Reserve, and Fiduciary
Treasury Reserve. CoreFunds may in the future create one or more additional
portfolios, or one or more classes of shares within a portfolio. Class Y Shares
- -- Institutional, Classes A and C Shares -- Individual and shares of CoreFund
Elite Cash Reserve, CoreFund Elite Government Reserve, CoreFund Elite Treasury
Reserve, Fiduciary Reserve, Fiduciary Treasury Reserve, and Fiduciary Tax-Free
Reserve, are offered in separate prospectuses. This prospectus solely relates to
Class Y Shares of Fiduciary Treasury Reserve.
Class A Shares differ from Class Y Shares in that Class A Shares are subject to
a sales load and distribution and transfer agent expenses for certain additional
shareholder services they receive. Class C Shares also differ from Class Y
Shares in that Class C Shares are subject to distribution and transfer agent
expense for certain additional shareholder services, but unlike Class A Shares,
are not subject to a sales load. Classes A and C Shares also have voting rights
which Class Y Shares do not, in connection with the Distribution Plan affecting
Class A and C Shares. In addition, the distribution and transfer agent expenses
charged Class A and C
<PAGE>
12
Shares result in Class A and C Shares having different dividends and performance
results from Class Y Shares. In addition, the minimum initial investment for
Class Y Shares is substantially higher than that required for Class A or Class C
Shares with the exception of the Equity Index Fund.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN
RELATE PRIMARILY TO SERIES A SHARES OF THE EQUITY INDEX FUND AND DESCRIBE ONLY
THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS
RELATING TO SUCH SHARES. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION
REGARDING OTHER COREFUNDS PORTFOLIOS MAY OBTAIN PROSPECTUSES DESCRIBING SUCH
PORTFOLIOS BY CONTACTING THE DISTRIBUTOR AT 1-800-355-CORE. Prior to the date of
this Prospectus, all Class A Shares were known as Series B -- Individual for all
portfolios other than the Money Market Funds; Class C Shares were known as
Series B -- Individual for the Money Market Funds; and Class Y Shares were known
as Series A -- Institutional. CoreFunds has changed their designation to conform
to the standard designations suggested by the Investment Company Institute.
Except for differences between classes of some of CoreFunds' portfolios
pertaining to distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class,
each share in each Fund represents an equal proportionate interest in that Fund
with each other share of the same Fund and is entitled to such dividends and
distributions out of the income earned on the assets belonging to such Fund as
are declared in the discretion of the Board of Directors.
CoreFunds' shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in the aggregate and
not by portfolio or class except as otherwise expressly required by law or when
the Board of Directors determines that the matter to be voted upon affects only
the interests of the shareholders of a particular portfolio or class. See the
Statement of Additional Information under 'Description of Shares' for examples
where the Investment Company Act requires voting by portfolio or class. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate number of shares of all of the Funds may elect all of the directors if
they choose to do so and, in such event, the holders of the remaining shares
would not be able to elect any person or persons to the Board of Directors.
As used in this Prospectus, a 'vote of a majority of the outstanding shares' of
a Fund means the affirmative vote of the lesser of (a) more than 50% of the
outstanding shares of a Fund, or (b) at least 67% of the shares of a Fund
present at a meeting at which the holders of more than 50% of the outstanding
shares of such Fund are represented in person or by proxy.
GENERAL INFORMATION
In accordance with the Maryland General Corporation Law, the Company is not
required to hold annual meetings of shareholders unless the Investment Company
Act requires the shareholders to elect members of the Board of Directors.
However, a meeting of shareholders may be called for any purpose upon the
written request of the holders of at least 10% of the outstanding Shares of the
Company, or of a Fund with respect to matters affecting only such Fund.
As used in this Prospectus, 'assets belonging to the Fund' means the
consideration received by the Company upon the issuance or sale of Shares in the
Fund, together with all income, earnings, profits and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of the
Company not belonging to the Fund or the Company's other portfolios. Assets
belonging to the Fund are charged with the direct liabilities in respect of the
Fund and with a share of the general liabilities of the Company allocated in
proportion to the relative asset values of each of the Company's portfolios at
the time the expense or liability is incurred. The management of the Company
makes determinations with respect to the Fund as to liabilities when they are
incurred and as to assets when they are acquired. Such determinations are
reviewed and approved annually by the Company's Board of Directors and are
conclusive.
<PAGE>
/X/
COREFUND
FIDUCIARY
TREASURY
RESERVE
(COREFUNDS, INC.)
680 East Swedesford Road
Wayne, PA 19087
NEW INVESTOR INFORMATION
1-800-355-CORE
SHAREHOLDER SERVICES
1-800-323-3851
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
DISTRIBUTOR
SEI Financial Services Company
Wayne, PA 19087
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
CONTENTS
Introduction . . . 2
Fund Expenses . . . 2
Financial Highlights . . . 4
Performance Information . . . 5
Investment Objective . . . 5
Investment Policies . . . 5
Investment Restrictions . . . 6
Valuation of Shares . . . 6
How to Purchase and Redeem Shares . . . 7
Dividends and Taxes . . . 8
Management of the Fund . . . 9
Description of Shares . . . 11
General Information . . . 12
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION APRIL 22, 1996 INCORPORATED HEREIN BY REFERENCE, IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING
BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
COR-F-053-02
/X/
COREFUND
FIDUCIARY
TREASURY
RESERVE
(COREFUNDS, INC.)
PROSPECTUS
April 22, 1996
Investment Adviser:
CORESTATES
CORESTATES
INVESTMENT ADVISERS
<PAGE>
COREFUNDS, INC.
Statement of Additional Information
Dated April 22, 1996
TABLE OF CONTENTS
THE COMPANY................................................................. 3
ADDITIONAL INVESTMENT POLICIES.............................................. 4
ADDITIONAL INVESTMENT RESTRICTIONS.......................................... 23
TEMPORARY INVESTMENTS....................................................... 28
SPECIAL CONSIDERATIONS...................................................... 30
NET ASSET VALUE............................................................. 32
DIVIDENDS................................................................... 33
TOTAL RETURN................................................................ 34
YIELDS...................................................................... 35
ADDITIONAL INFORMATION CONCERNING TAXES..................................... 37
DESCRIPTION OF SHARES....................................................... 40
DIRECTORS AND OFFICERS...................................................... 42
PRINCIPAL HOLDERS OF SECURITIES............................................. 44
INVESTMENT ADVISER.......................................................... 55
SUB-ADVISERS................................................................ 58
PORTFOLIO TRANSACTIONS...................................................... 59
ADMINISTRATOR............................................................... 61
DISTRIBUTOR................................................................. 64
CUSTODIAN AND TRANSFER AGENT................................................ 65
EXPENSES.................................................................... 65
LEGAL COUNSEL............................................................... 66
MISCELLANEOUS............................................................... 66
APPENDIX.................................................................. B-67
FINANCIAL STATEMENTS...................................................... B-69
This Statement of Additional Information is meant to be read in
conjunction with the applicable Prospectuses for the portfolios offered by
CoreFunds, Inc. dated April 22, 1996 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. at
680 East Swedesford Road, Wayne, Pennsylvania 19087, or by telephoning
1-800-355-CORE.
COR-F-032-03
<PAGE>
THE COMPANY
CoreFunds, Inc. (the "Company") is an open-end management investment
company presently offering shares in twenty-three diversified and
non-diversified portfolios (the "Fund" or "Funds"). Although Shares in the Elite
Cash Reserve, Elite Government Reserve and Elite Treasury Reserve portfolios
("Elite Funds") are not currently being offered, the Company expects to
introduce these Elite Funds in the future. The Company is authorized to offer
separate series of shares of beneficial interest (the "Shares") of each Fund.
Shareholders may purchase Shares through three separate classes, Class Y, Class
A and Class C, which provide for variations in distribution costs, transfer
agent fees, voting rights, and dividends. Except for these differences between
Class Y, Class A 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.
<TABLE>
<CAPTION>
Equity Funds: Taxable Money Market Funds:
<S> <C>
- Growth Equity Fund - Cash Reserve
- Equity Fund - Treasury Reserve
- Equity Index Fund - Fiduciary Reserve
- International Growth Fund - Fiduciary Treasury Reserve
- Balanced Fund - Elite Cash Reserve
- Special Equity Fund - Elite Government Reserve
- Elite Treasury Reserve
Fixed Income Funds: Tax-Exempt Money Market Funds:
- Short-Intermediate Bond Fund - Tax-Free Reserve
- Bond Fund - Fiduciary Tax-Free Reserve
- Short Term Income Fund
- Government Income Fund
- Intermediate Municipal Bond Fund
- Pennsylvania Municipal Bond Fund
- New Jersey Municipal Bond Fund
- Global Bond Fund
</TABLE>
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 corresponding banks, for the investment of their own funds or
funds for which they serve in a fiduciary, agency, or custodial capacity.
Class A and Class C Shares in 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 corresponding 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.
B-2
<PAGE>
ADDITIONAL 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 -
- Intermediate Municipal Bond Fund -
- Pennsylvania Municipal Bond Fund -
- New Jersey Municipal Bond Fund -
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 Prospectuses and 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 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,
B-3
<PAGE>
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 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.
Special Risk Factors - Pennsylvania Municipal Securities
The following information as to certain Pennsylvania risk factors has
been provided in view of the policy of concentrating in Pennsylvania Municipal
Securities by the Pennsylvania Municipal Bond Fund. This information constitutes
only a brief summary, does not purport to be a complete description of
Pennsylvania risk factors and is principally drawn from official statements
relating to securities offerings of the Commonwealth of Pennsylvania that have
come to the attention of the Pennsylvania Municipal Bond Fund and were available
as of the date of this Statement of Additional Information. The Fund has not
independently verified any of this information but is not aware of any fact
which would render such information inaccurate.
General. Pennsylvania has historically been dependent on heavy industry
although recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic growth
in Pennsylvania are in the service sector, including trade, medical and health
services, education and financial institutions. Agriculture continues to be an
important component of the Commonwealth's economic structure, with nearly
one-fourth of the Commonwealth's total land area devoted to cropland, pasture
and farm woodlands.
In 1994, the population of Pennsylvania was 12.09 million people.
According to the U.S. Bureau of the Census, Pennsylvania experienced a slight
increase from the 1985 estimate of 11.77 million. Pennsylvania has a high
proportion of persons 65 or older. The Commonwealth is highly urbanized, with
almost 85% of the 1990 census population residing in metropolitan statistical
areas. The cities of Philadelphia and Pittsburgh, the Commonwealth's largest
metropolitan statistical areas, together comprise approximately 50% of the
Commonwealth's total population.
Pennsylvania's average annual unemployment rate remained below the
national average between 1986 and 1990. Slower economic growth caused the rate
to rise to 6.9% in 1991 and 7.5% in 1992. The resumption of faster economic
growth resulted in a decrease in the Commonwealth's unemployment rate to 7.1
percent in 1993. Seasonally adjusted data for March 1995, the most recent month
for which data is available, shows an unemployment rate of 6.0% compared to an
unemployment rate of 5.5% for the United States as a whole.
Financial Accounting. Pennsylvania utilizes the fund method of
accounting and over 150 funds have been established for the purpose of recording
receipts and disbursements, of which the General Fund is the largest. Most of
the operating and administrative expenses are payable from the General Fund. The
Motor License Fund is a special revenue fund that receives tax and fee revenues
relating to motor fuels and vehicles (except one-half cent per gallon of the
liquid fuels tax which is deposited in the Liquid Fuels Tax Fund for
distribution to local municipalities) and all such revenues are required to be
used for highway purposes. Other special revenue funds have been established to
receive specified revenues appropriated to specific departments, boards and/or
commissions. Such funds include the Game, Fish, Boat, Banking Department, Milk
Marketing, State Farm Products Show, State Racing and State Lottery Funds. The
General Fund, all special revenue funds, the Debt Service Funds and the Capital
Project Funds combine to form the Governmental Fund Types.
Enterprise funds are maintained for departments or programs operated
like private enterprises. The largest of the Enterprise funds is the State
Stores Fund, which is used for the receipts and disbursements of the
Commonwealth's liquor store system. Sale and distribution of all liquor within
Pennsylvania is a government enterprise.
B-4
<PAGE>
Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary"). Since 1984, the Commonwealth has also prepared
financial statements in accordance with generally accepted accounting principles
("GAAP"). The GAAP statements have been audited jointly by the Auditor General
of the Commonwealth and an independent public accounting firm. The Budgetary
information is adjusted at fiscal year end to reflect appropriate accruals for
financial reporting in conformity with GAAP. The Commonwealth maintains a June
30th fiscal year end.
The Constitution of Pennsylvania provides that operating budget
appropriations may not exceed the actual and estimated revenues and available
surplus in the fiscal year for which funds are appropriated. Annual budgets are
enacted for the General Fund and for certain special revenue funds which
represent the majority of expenditures of the Commonwealth.
Revenues and Expenditures. Pennsylvania's Governmental Fund Types
receive over 57% of their revenues from taxes levied by the Commonwealth.
Interest earnings, licenses and fees, lottery ticket sales, liquor store
profits, miscellaneous revenues, augmentations and federal government grants
supply the balance of the receipts of these funds. Revenues not required to be
deposited in another fund are deposited in the General Fund. The major tax
sources for the General Fund are the 6% sales and use tax (33.7% of General Fund
revenues in fiscal 1994), the 2.8% personal income tax (32.0% of General Fund
revenues in fiscal 1994) and the 10.99% corporate net income tax (10.2% of
General Fund revenues in fiscal 1994). Tax and fee proceeds relating to motor
fuels and vehicles are constitutionally dedicated to highway purposes and are
deposited into the Motor License Fund. The major sources of revenue for the
Motor License Fund include the liquid fuels tax, the oil company franchise tax,
aviation taxes and revenues from fees levied on heavy trucks. These revenues are
restricted to the repair and construction of highway bridges and aviation
programs. Lottery ticket sales revenues are deposited in the State Lottery Fund
and are reserved by statute for programs to benefit senior citizens.
Pennsylvania's major expenditures include funding for education ($6.4
billion of fiscal 1994 expenditures, the projected $6.7 billion of the fiscal
1995 budget and the proposed $6.9 billion of the fiscal 1996 budget) and public
health and human services ($11.7 billion of fiscal 1994 expenditures, the
projected $12.8 billion of the fiscal 1995 budget and the proposed decreases of
the fiscal 1996 $12.3 billion budget).
Governmental Fund Types: Financial Condition/Results of Operations
(GAAP Basis). Reduced revenue growth and increased expenses contributed to
negative unreserved-undesignated fund balances of the Governmental Fund Types at
the end of the 1990 and 1991 fiscal years, largely due to operating deficits in
the General Fund and State Lottery Fund during those years. Actions taken during
fiscal 1992 to bring the General Fund back into balance, including tax increases
and expenditure restraints, resulted in a $1.1 billion reduction to the
unreserved-undesignated fund deficit for combined Governmental Fund Types and a
return to a positive fund balance. Financial performance continued to improve
during fiscal 1994 resulting in a positive unreserved-undesignated balance for
combined governmental types at June 30, 1994, as a result of a $289.2 million in
the balance. These gains were produced by continued efforts to control
expenditure growth. At the end of fiscal 1994, the total fund balance and other
credits for the total Governmental Fund Types was $1,981.9 million, a $22
million increase from the balance at June 30, 1994. During fiscal 1994, total
assets increased by $1,424.9 million to $8,521.3 million, while liabilities
increased $655.6 million to $5,792.1 million.
General Fund: Financial Condition/Results of Operations.
Five Year Overview (GAAP Basis). The five year period from fiscal 1990
through fiscal 1994 was marked by public health and welfare costs growing at a
rate double the growth rate for all the state expenditures. Rising caseloads,
increased utilization of services and rising prices joined to produce the rapid
rise of public health and welfare costs at a time when a national recession
caused tax revenues to stagnate and even decline. During the period from fiscal
1990 through fiscal 1994, public health and welfare costs rose by an average
annual rate of 9.4% while tax revenues were growing at an average annual rate of
5.8%. Consequently, spending
B-5
<PAGE>
on other budget programs was restrained to a growth rate below 4.7% and sources
of revenues other than taxes became larger components of fund revenues. Among
those sources are transfers from other funds and hospital and nursing home
pooling of contributions to use as federal matching funds.
Tax revenues declined in fiscal 1991 as a result of the recession in
the economy. A $2.7 billion tax increase enacted for fiscal 1992 brought
financial stability to the General Fund. That tax increase included several
taxes with retroactive effective dates which generated some one-time revenues
during fiscal 1992. The absence of those revenues in fiscal 1993 contributed to
the decline in tax revenues shown for fiscal 1993. Fiscal 1994 tax revenues
increased by 4.1%, but a decline in other revenues caused by the end of medical
assistance pooled financing in fiscal 1993 held total revenues to a 1.8% gain.
Expenditure for fiscal 1994 rose by 4.3%.
During fiscal 1992 enactment of over $2.7 billion in General Fund tax
increases and implementation of expenditure control initiatives have helped the
General Fund balance return to a surplus at June 30, 1992, of $87.5 million. The
actions taken to increase revenues and restrain expenditure growth were
necessary to offset the effects on General Fund finances of a period of slow
economic growth including a national economic recession. The recession caused
tax revenues during fiscal 1991 to be below the amount received during fiscal
1990 while spending, particularly for public health and welfare programs to
support needy individuals, increased by over 21%. Public health and welfare
expenditures continued their rapid increase with a 23.9% increase during fiscal
1992 as caseloads and costs continued upward. Some of these increased costs were
met through the use of pooled financing techniques that use private
contributions and intergovernmental transfers to substitute for state funds
match for federal governmental grants-in-aid. Debt service expenditures
escalated as the amount of tax anticipation note borrowing increased in response
to the fiscal pressures brought about by slow economic growth and the recession.
Fiscal 1992 Financial Results (GAAP Basis). During fiscal 1992, the
General Fund recorded a $1.1 billion operating surplus. This operating surplus
was achieved through legislated tax rate increases and tax base broadening
measures enacted in August 1991, and by controlling expenditures through
numerous cost reduction measures implemented during the fiscal year. As a result
of the operating surplus, the General Fund balance increased to $87.5 million at
June 30, 1992.
Fiscal 1993 Financial Results (GAAP Basis). The fund balance of the
General Fund increased by $611.4 million during the fiscal year, led by an
increase in the unreserved balance of $576.8 million over the prior fiscal year
balance. At June 30, 1993, the fund balance totaled $698.9 million and the
unreserved- undesignated balance totaled $64.4 million.
Fiscal 1994 Budget (GAAP Basis). The fund balance of the General Fund
increased by $194.0 million due largely to an increased reserve for encumbrances
and an increase in other designated funds. At June 30, 1994, the fund balance
totalled $892.9 million and the unreserved-undesignated balance totaled $79.1
million. A continuing recovery of the Commonwealth's financial condition from
the effects of the national economic recession of 1990 and 1991 is demonstrated
by this increase in the balance and a return to a positive unreserved-
undesignated balance. For the third consecutive fiscal year the increase in the
unreserved-undesignated balance exceeded the increase recorded in the budgetary
basis unappropriated surplus during the fiscal year.
Fiscal 1995 Budget (Budgetary Basis). The approved fiscal 1995 budget
provides for $15,665.7 million appropriations from commonwealth funds, an
increase of 4.0 percent over appropriations, including supplemental
appropriations, for fiscal 1994. Medical assistance expenditures represent the
largest single increase in the budget ($221 million) representing a nine percent
increase over the prior fiscal year. The budget includes a reform of the
state-funded public assistance program that added certain categories of
eligibility to the program but also limited the availability of such assistance
to other eligible persons. Education subsidies to local school districts were
increased by $132.2 million to continue the increased funding for the poorest
school districts in the state.
B-6
<PAGE>
Several tax reductions were enacted with the fiscal 1995 budget.
Estimated fiscal year revenues, net of the enacted tax cuts, were increased
$296.5 million in the revised projection for fiscal 1994. The increase
represents a 1.9 percentage point increase in the rate of growth anticipated for
fiscal 1995 to 6.3 percent, excluding the effect of the fiscal 1995 tax
reductions, and is largely due to actual and anticipated higher collections of
the corporate net income tax, the sales and use tax and miscellaneous
collections. For the March 1995 fiscal year-to-date official estimate used for
enactment of the budget, collections of corporation taxes are $195.8 million
(7.3 percent) above the official estimate through March. The sales tax is also
above estimate while the personal income tax is $30.2 million (0.9 percent)
under the official estimate through March.
After a review of the fiscal 1994 budget in January 1995, $64.9 million
of additional appropriation needs were identified for the fiscal year. Of this
amount, the largest are for medical assistance ($21.8 million) and general
assistance cash grants ($10.3) million). The balance of the additional
appropriation needs are for their public welfare programs, educational
subsidiaries and office relocation costs due to a fire. The supplemental
appropriations requested are proposed to be funded from appropriation lapses
estimated to total $172 million for the fiscal year.
Proposed Fiscal 1996 Budget: The proposed General Fund budget submitted
by the Governor to the General Assembly on March 7, 1995, is balanced on a
modified cash basis assuming the drawdowns of approximately $333.0 million of
the projected $336.2 million year-end balance for fiscal 1994. Appropriations of
commonwealth funds are proposed to be $16,094.9 million, a 2.3 percent increase
over the estimated $15,730.6 million total current fiscal year appropriations
and supplemental appropriations. The rate of increase is among the lowest rates
of increase proposed over the last decade.
A major contribution to the overall low rate of increase in
appropriated commonwealth funds is the proposed 1.8 percent increase to medical
assistance costs paid from this funds. In recent fiscal years such costs
increased an average 14.4 percent per year. The Governor's budget proposes a
number of cost reduction strategies for the medical assistance program that
total $332 million and are responsible for the small costs increase in fiscal
1996.
The revenue projections in the proposed budget are based on an
expectation for economic growth in the nation to average 2.5 percent for the
first half of 1995 gradually slowing to a 1.7 percent rate for 1996. The
Commonwealth believes these rates of economic growth are conservative estimates
based on forecasts it has reviewed. Fiscal 1996 commonwealth revenues are
projected to increase 3.6 percent before deducting the estimated costs of the
various tax reductions approved in July 1994. Revenues on a cash basis, that is
net of those 1994 tax reductions and the proposed tax reductions for fiscal
1995, are estimated to increase by 1 percent over current estimates for the 1994
fiscal year.
Tax changes proposed by the Governor for the fiscal 1995 budget are
aimed at improving the competitiveness of the Commonwealth's corporate tax rates
and are estimated to reduce commonwealth revenues for fiscal year 1995 by $214.8
million representing 1.3% of anticipated revenues. The largest part of this cost
is from a proposed acceleration of the currently scheduled reduction of the
corporate net income tax rate to 9.99 percent. The Governor's proposed budget is
currently being reviewed in committee hearings in the General Assembly.
Commonwealth Debt. Current constitutional provisions permit
Pennsylvania to issue the following types of debt: (i) debt to suppress
insurrection or rehabilitate areas affected by disaster, (ii) electorate
approved debt, (iii) debt for capital projects subject to an aggregate debt
limit of 1.75 times the annual average tax revenues of the preceding five fiscal
years, (iv) tax anticipation notes payable in the fiscal year of issuance. All
debt except tax anticipation notes must be amortized in substantial and regular
amounts.
B-7
<PAGE>
General obligation debt totaled $5.076 million at June 30, 1994. Over
the 10-year period ended June 30, 1994, total outstanding general obligation
debt increased at an annual rate of 1.3% and for the five years ended June 30,
1994, at an annual rate of 1.5%. All outstanding general obligation bonds of the
Commonwealth are rated AA- by Standard and Poor's Corporation, A1 by Moody's
Investors Service, and AA- by Fitch Investors Service. The ratings reflect only
the views of the rating agencies.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
already outstanding, may not exceed in aggregate 20% of the revenues estimated
to accrue to the appropriate fund in the fiscal year. The Commonwealth is not
permitted to fund deficits between fiscal years with any form of debt. All
year-end deficit balances must be funded within the succeeding fiscal year's
budget. Pennsylvania issued a total of $600.0 million of tax anticipation notes
for the account of the General Fund in fiscal 1995, all of which matured on June
30, 1995, and were paid from fiscal 1995 General Fund receipts.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years. Currently, there are no bond anticipation notes outstanding.
State-related Obligations. Certain state-created agencies have
statutory authorization to incur debt for which no legislation providing for
state appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of, or revenues derived from, the various
projects financed and the debt of such agencies is not an obligation of
Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations. The following agencies had debt currently
outstanding as of December 31, 1994: Delaware River Joint Toll Bridge Commission
($56.3 million), Delaware River Port Authority ($233.9 million), Pennsylvania
Economic Development Financing Authority ($659.9 million), Pennsylvania Energy
Development Authority ($162.1 million), Pennsylvania Higher Education Assistance
Agency ($1,283.8 million), Pennsylvania Higher Educational Facilities Authority
($1,965.8 million), Pennsylvania Industrial Development Authority ($357.3
million), Pennsylvania Infrastructure Investment Authority ($227.5 million),
Pennsylvania Turnpike Commission ($1,252.6 million), Philadelphia Regional Port
Authority ($63.9 million) and the State Public School Building Authority ($286.8
million). In addition, the Governor is statutorily required to place in the
budget of the Commonwealth an amount sufficient to make up any deficiency in the
capital reserve fund created for, or to avoid default on, bonds issued by the
Pennsylvania Housing Finance Agency ($2,060 million of revenue bonds and $240
million of notes outstanding as of December 31, 1994), and an amount of funds
sufficient to alleviate any deficiency that may arise in the debt service
reserve fund for bonds issued by The Hospitals and Higher Education Facilities
Authority of Philadelphia ($1.64 million of the loan principal was outstanding
as of December 31, 1994.) The budget as finally adopted by the legislation may
or may not include the amounts requested by the Governor.
Litigation. Certain litigation is pending against the Commonwealth that
could adversely affect the ability of the Commonwealth to pay debt service on
its obligations, including suits relating to the following matters: (a)
approximately 3,500 suits are pending against the Commonwealth pursuant to the
General Assembly's 1978 approval of a limited waiver of sovereign immunity which
permits recovery of damages for any loss up to $250,000 per person and
$1,000,000 per accident ($32.0 million appropriated from the Motor License Fund
in fiscal 1994 has been decreased to $27.0 million for fiscal 1995; (b) the ACLU
filed suit in April 1990 in federal court demanding additional funding for child
welfare services (no available estimates of potential liability), which the
Commonwealth then sought dismissal based on, among other things, the settlement
in a similar Commonwealth court action that provided for more funding in fiscal
1991 as well as a commitment to pay to counties $30.0 million over 5 years (on
April 12, 1993, the court dismissed all claims except for the constitutional
claims of some of the plaintiffs and two Americans with Disabilities Act
claims). The district court has since denied the ACLU's motion for class
certification. The parties have stipulated to a judgment against the plaintiffs
in order for plaintiffs to appeal the denial of class certification to the Third
Circuit. In
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December of 1994, the third Circuit reversed Judge Kelly's ruling, finding that
he erred in refusing to certify the class. Consistent with the Third Circuit's
ruling, the District Court recently certified the class, and the parties have
resumed discovery; (c) in 1987, the Supreme Court of Pennsylvania held that the
statutory scheme for county funding of the judicial system was in conflict with
the Pennsylvania Constitution but stayed judgment pending enactment by the
legislature of funding consistent with the opinion (the legislature has yet to
consider legislation implementing the judgment); (d) several banks have filed
suit against the Commonwealth contesting the constitutionality of a 1989 law
imposing a bank shares tax on banking institutions. Pursuant to a Settlement
Agreement dated as of April 2, 1995, the Commonwealth agreed to enter a credit
in favor of Fidelity in the amount of $4,100,000 in settlement of the
constitutional and non-constitutional issues including interest. Pursuant to a
separate Settlement Agreement dated as of April 21, 1995, the Commonwealth
settled with the intervening banks, referred to as "New Banks." As part of the
settlement, the Commonwealth agreed neither to assess nor attempt to recoup
any new bank tax credits which had been granted or taken by any of the
intervening banks; (e) in November 1990, the ACLU brought a class action suit on
behalf of the inmates in thirteen Commonwealth correctional institutions
challenging confinement conditions and including a variety of other allegations.
On August 1, 1994, the parties submitted a proposed settlement agreement to the
Court for its review. The Court held hearings on the proposed Settlement
Agreement in December 1994. The Court approved the Settlement Agreement with a
January 17, 1995 Memorandum. On February 3, 1995, the Commonwealth paid $1.3
million in attorney's fees to the plaintiffs' attorneys in accordance with the
Agreement. The remaining $100,00 in attorneys' fees will be paid upon dismissal
of the preliminary injunction relating to certain health issues. The parties are
currently complying with monitoring provisions outlined in the Agreement. The
monitoring phase will expire on January 6, 1998; (f) in 1991, a consortium of
public interest law firms filed a class action suit alleging that the
Commonwealth had failed to comply with the 1989 federal mandate with respect to
certain services for Medicaid-eligible children under the age of 21. In July
1994, the Court denied the plaintiffs' request to proceed as a class action and
dismissed five of the eighteen plaintiff organizations from the case. The
parties have reached a tentative settlement agreement which they have submitted
to the court for approval; (g) litigation has been filed in both state and
federal court by an association of rural and small schools and several
individual school districts and parents challenging the constitutionality of the
Commonwealth's system for funding local school districts -- the federal case has
been stayed pending resolution of the state case and the state case is in the
pre-trial discovery stage. The trial has not yet been scheduled. Following a
status conference among counsel, Judge Pellegrini issued an Order, dated April
6, 1995, in which certain deadlines were established for exchange of information
and depositions for expert witnesses. An additional status conference is
scheduled for July 10, 1995 (no available estimate of potential liability); (h)
The Pennsylvania Medical Society sued the Commonwealth for payment of the full
Medicare co-pay and deductible for outpatient services to medical assistance
clients who are also eligible for Medicare. The Commonwealth received a
favorable decision in the United Stated District Court but the Pennsylvania
Medical Society appealed the decision and won a reversal in the United States
Third Circuit Court. After similarly unfavorable decisions by every other
appellate court that addressed the issue, the Commonwealth implemented a new
payment system effective January 23, 1995. Preliminary estimated costs to the
Commonwealth are approximately $50 million per year; and (i) On November 11,
1993, the Commonwealth of Pennsylvania, Department of Transportation and
Envirotest/Synterra Partners ("Envirotest"), a partnership, entered into a
"Contract for Centralized Emissions Inspection Facilities." Thereafter,
Envirotest acquired certain land and constructed approximately 85 automobile
emissions inspection facilities throughout various regions of the Commonwealth.
By Act of the General Assembly in October 1994 (Act No. 1994-95), the program
was suspended and the Department of Transportation was prohibited from expending
funds to implement the program. On April 12, 1995, Envirotest Systems
Corporation, Envirotest Partners (successor to Envirotest/Synterra Partners) and
the Commonwealth of Pennsylvania entered into a Standstill Agreement pursuant to
which the parties will proceed to discuss the resolution of claims which
Envirotest might have against the Commonwealth arising from the suspension of
the emissions testing program. The Office of General Counsel believes it is
premature at this time to estimate the nature and size of Envirotest's potential
claim in this matter.
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Philadelphia. (For the fiscal year ending June 30, 1991, Philadelphia
experienced a cumulative General Fund balance deficit of $153.5 million. The
audit findings for the fiscal year ending June 30, 1992 place the cumulative
General Fund balance deficit at $224.9 million.)
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist Philadelphia in
remedying fiscal emergencies was enacted by the General Assembly and approved by
the Governor in June 1991. PICA is designed to provide assistance through the
issuance of funding debt and to make factual findings and recommendations to the
assisted city concerning its budgetary and fiscal affairs. An intergovernmental
cooperation agreement between Philadelphia and PICA was approved by City Council
on January 3, 1992, and approved by the PICA Board and signed by the Mayor on
January 8, 1992. At this time, Philadelphia is operating under a five year
fiscal plan approved by PICA on May 2, 1994. The latest five year plan was
presented to PICA by the Mayor on March 15, 1995 and PICA is scheduled to act on
it at the authority's April 17, 1995 meeting.
To date, PICA has issued $1,418,680,000 of its Special Tax Revenue
Bonds. This financial assistance has included the refunding of certain city
general obligation bonds, funding of capital projects and the liquidation of the
Cumulative General Fund balance deficit as of June 30, 1992, of $224.9 million.
The audited General Fund balance of the city as of June 30, 1994, showed a
surplus of approximately $15.4 million, up from approximately $3 million as of
June 30, 1993.
No further bonds are to be issued by PICA for the purpose of financing
a capital project or deficit as the authority for such bond sales expired
December 31, 1994. PICA's authority to issue debt for the purpose of financing a
cash flow deficit expires on December 31, 1996.
Special Risk Factors - New Jersey Municipal Securities
The following summary is based upon the most recent information
available as of the date of this Statement of Additional Information.
New Jersey Municipal Securities and Special Considerations Relating
Thereto. The concentration of investments in New Jersey Municipal Securities by
the New Jersey Municipal Bond Fund raises special investment considerations. In
particular, changes in the economic condition and governmental policies of the
State of New Jersey or its municipalities could adversely affect the value of
this Fund and the securities held by it.
The following information is based on official statements relating to
securities offerings of the State of New Jersey (the "State") and various local
agencies that have come to the Fund's attention and available as of the date of
this Statement of Additional Information. The New Jersey Municipal Bond Fund has
not independently verified any of the information contained in the official
statement but is not aware of any fact which would render such information
inaccurate.
General. New Jersey is located at the center of the Middle Atlantic
region which extends from Boston to Washington, and which includes almost
one-fourth of the country's population. The extensive facilities of the Port
Authority of New York and New Jersey, the Delaware River Port Authority and the
South Jersey Port Corporation across the Delaware River from Philadelphia
augment the air, land and water transportation complex which has influenced much
of the State's economy. This central location in the northeastern corridor, the
transportation and port facilities and proximity to New York City make the State
an attractive location for corporate headquarters and international business
offices. A number of Fortune Magazine's top 500 companies maintain headquarters
or major facilities in New Jersey, and many foreign-owned firms have located
facilities in the State.
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The State's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. New Jersey's principal manufacturing
industries produce chemicals and pharmaceuticals, electrical equipment and
instruments, printing, machinery and food products. In addition, the State
introduced legalized casino gambling into Atlantic City in the 1970's which has
fostered employment and tourism in Atlantic City.
New Jersey is the ninth largest state in population and the fifth
smallest in land area. It is the most densely populated state in the United
States with an average of 1,062 persons per square mile. New Jersey's population
grew rapidly in the years following World War II, before slowing to an annual
rate of .27% in the 1970's. Between 1980 and 1990, the annual growth rate was
.49% and between 1990 and 1994 accelerated to .52%. While this rate of growth is
less than that for the United States, it compares favorably with other Middle
Atlantic States.
After enjoying an extraordinary boom during the mid-1980's, New Jersey,
as well as the rest of the Northeast, slipped into a slowdown well before the
onset of the national recession, which began in July 1990. By the beginning of
the national recession, construction activity had already been declining in New
Jersey for nearly two years. The onset of recession caused an acceleration of
New Jersey's job losses in construction and manufacturing, as well as an
employment downturn in such previously growing sectors as wholesale trade,
retail trade, finance, utilities and trucking and warehousing.
Reflecting the downturn, the rate of unemployment in the State rose
from a peacetime low of 3.6% during the first quarter of 1989 to a recessionary
peak of 8.4% during 1992. The unemployment rate fell to 6.9% during the first
quarter of 1995.
Financial Accounting. The State utilizes the fund method of accounting.
Accordingly, the State prepares separate statements for the General Fund,
Special Revenue Funds, Debt Service Funds, Capital Project Funds, Trust and
Agency Funds, Enterprise Funds, University Funds, General Fixed Asset Account
Group and General Long-Term Debt Account Group.
The General Fund is the fund into which all State revenues not
otherwise restricted by statute are deposited and from which appropriations are
made. The largest part of the total financial operations of the State is
accounted for in the General Fund. Revenues received from taxes and unrestricted
by statute, most federal revenue and certain miscellaneous revenue items are
recorded in the General Fund.
Special Revenue Funds are used to account for resources legally
restricted to expenditure for specified purposes. Special Revenue Funds include
the Casino Control Fund, the Casino Revenue Fund, the Gubernatorial Elections
Fund and the Property Tax Relief Fund. Other Special Revenue Funds have been
created which are either reported ultimately in the General Fund or are created
to hold revenues derived from private sources.
Debt Service Funds are used to account for the accumulation of
resources for, and the payment of, principal and redemption premium, if any, of,
and interest on, general obligation bonds. Capital Project Funds are used to
account for financial resources to be used for the acquisition or construction
of major State capital facilities. Trust and Agency Funds are used to account
for assets held in a trust capacity or as an agent for individuals, private
organizations, other governments and/or other funds. The General Fixed Asset
Account Group accounts for the State's fixed assets acquired or constructed for
general governmental purposes. The General Long-Term Debt Account Group accounts
for the unmatured general long-term liabilities of the State.
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Enterprise Funds account for operations where the intent of the State
is that the cost of providing goods or services to the general public on a
continuing basis be financed or recovered primarily through user charges, or
where periodic measurement of the results of operations is appropriate for
capital maintenance, public policy, management control or accountability. The
College and University Funds account for the operations of Rutgers, the State
University, the University of Medicine and Dentistry of New Jersey, the New
Jersey Institute of Technology, and the nine State colleges including their
foundations and associations, in accordance with existing authoritative
accounting and reporting principles applicable to universities and hospitals.
The State operates on a fiscal year beginning July 1 and ending June
30. The State Constitution provides that all monies for the support of State
government and all other State purposes, as far as can be ascertained or
reasonably foreseen, must be provided for in one general appropriation law
covering one and the same fiscal year. No general appropriations law or other
law appropriating money for any State purpose shall be enacted if the amount of
money appropriated therein, together with all other prior appropriations made
for the same fiscal year, exceeds the total amount of revenue on hand and
anticipated to be available for such fiscal year, as certified by the Governor.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur a
deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such appropriation. In the
past when actual revenues have been less than the amount anticipated in the
budget, the Governor has exercised plenary powers leading to, among other
actions, implementation of a hiring freeze for all State departments and the
discontinuation of programs for which appropriations were budgeted but not yet
spent.
Financial Results and Projections.
Revenues. Estimated receipts from State taxes and revenues are
forecasts based on the best information available at the time of such forecasts.
The principal taxes in New Jersey are the Sales and Use Tax, the Gross Income
Tax, and the Corporation Business Tax. The fiscal year 1996 Appropriation Act
forecasts Sales and Use Tax collections of $4,356 million, a 5.5% increase over
receipts estimated for fiscal year 1995; Gross Income Tax collections of $4,580
million, a 9.0% increase over receipts estimated in the revised estimates for
fiscal year 1995; and Corporation Business Tax collections of $1,145 million, a
8.6% increase over receipts estimated in the revised estimates for fiscal year
1995. Changes in economic activity in the State and the nation, consumption of
durable goods, corporate financial performance and other factors that are
difficult to predict may result in actual collections being more or less than
forecasted.
Appropriations. The State appropriated approximately $14,737
million for fiscal year 1993 and $15,492 million for fiscal year 1994. Estimated
appropriations for fiscal years 1995 and 1996 total $15,528 million and $15,995
million, respectively. Of the estimated $15,995 million appropriated in fiscal
year 1995 from the General Fund, the Property Tax Relief Fund, the Casino
Control Fund, the Casino Revenue Fund, and the Gubernatorial Elections Fund,
$6,423.5 million (40.2%) is appropriated for State aid to local governments,
$3,708 million (23.2%) is appropriated for grants-in-aid (payments to
individuals or public or private agencies for benefits to which a recipient is
entitled to by law, or for the provision of services on behalf of the State),
$5,179.6 million (32.4%) for direct State services, $466.3 million (2.9%) for
debt service on State general obligation bonds and $443.9 million (2.9%) for
capital construction.
Fund Balances. The undesignated Fund balances are available
for appropriations in succeeding fiscal years. There have been positive Fund
balances in the General Fund at the end of each year since the State
Constitution was adopted in 1947. Total ending Fund balances for fiscal years
1992, 1993 and 1994 were $836.2 million, $1,149.6 million and $1,264.6 million,
respectively. General Fund balances accounted for $1.4 million,
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and $760.8 million and $937.4 million of the total ending Fund balances in
fiscal years 1992, 1993 and 1994, respectively. Total ending Fund balances are
estimated to be $965.7 million for the fiscal year 1995, of which the General
Fund balance is expected to account for $926.0 million. The estimates for fiscal
year 1995 are preliminary and are subject to change upon completion of the
State's year end audit. The estimates for Total and General Fund balances for
the fiscal year ended 1995 are $549.3 million and $563 million, respectively.
The estimates for fiscal 1996 reflect amounts contained in the Fiscal Year 1996
Appropriations Act and Supplemental Appropriations enacted through September 1,
1993. It should be noted that an adverse determination in certain litigation in
which the State is a party would have a significant impact on fiscal 1995 and
subsequent fiscal year fund balances (see "Litigation" section).
Indebtedness of the State.
General Obligation Bonds. The primary method for State
financing of capital projects is through the sale of the general obligation
bonds of the State. These bonds are backed by the full faith and credit of the
State. State tax revenues and certain other fees are pledged to meet the
principal payments, interest payments and if provided, redemption premium
payments, if any, required to fully pay the bonds. As of June 30, 1994, the
outstanding general obligation bonded indebtedness of the State was
approximately $3.65 billion. For fiscal 1996, $466.3 million has been
appropriated for the debt service obligation on outstanding indebtedness.
Tax and Revenue Anticipation Notes. In fiscal year 1992 the
State initiated a program under which it issued tax and revenue anticipation
notes to aid in providing effective cash flow management to fund imbalances
which occur in the collection and disbursement of the General Fund and Property
Tax Relief Fund revenues. There are presently no tax and revenue anticipation
notes outstanding. Such tax and revenue anticipation notes do not constitute a
general obligation of the State or a debt or liability within the meaning of the
State Constitution. These notes constitute special obligations of the State
payable solely from moneys on deposit in the General Fund and Property Tax
Relief Fund and legally available for such payment.
State Related Obligations.
Lease Financing. The State has entered into a number of leases
relating to the financing of certain real property and equipment. Lease
financing obligations outstanding as of December 31, 1992 totalled $804.8
million.
State Supported School and County College Bonds. Legislation
provides for future appropriations for State aid to local school districts equal
to debt service on a maximum principal amount of $280.0 million of bonds issued
by such local school districts for construction and renovation of school
facilities and for State aid to counties equal to debt service on up to $80.0
million of bonds issued by counties for construction of county college
facilities. The State Legislature is not legally bound to make such future
appropriations, but has done so to date on all outstanding obligations issued
under these laws. As of December 31, 1993, the maximum amount of $280.0 million
of school district bonds has been approved for State support. Bonds or notes in
the amount of $274.1 million have been issued by local school districts, of
which $211.2 million have been retired and $62.8 million are still outstanding.
As of June 30, 1993, $81.9 million of county college bonds or notes have been
authorized or issued, of which $42.0 million have been retired.
Moral Obligation Financing. The authorizing legislation for
certain State entities provides for specific budgetary procedures with respect
to certain obligations issued by such entities. Pursuant to such legislation, a
designated official is required to certify any deficiency in a debt service
reserve fund maintained to meet payments of principal of and interest on the
obligations, and a State appropriation in the amount of the deficiency is to be
made. However, the State Legislature is not legally bound to make such an
appropriation. Bonds issued pursuant to authorizing legislation of this type are
sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible
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State entities. The State provides the South Jersey Port Corporation with funds
to cover all debt service and property tax requirements to the extent earned
revenues are anticipated to be insufficient to cover these obligations. All
other entities with moral obligation bonds are expected to generate revenues
sufficient to cover debt service requirements thereon. As of June 30, 1994,
outstanding moral obligation indebtedness totalled $737.9 million, with an
approximate maximum annual debt service requirement of $68.2 million.
New Jersey Transportation Trust Fund Authority. In July 1984,
the State created the New Jersey Transportation Trust Authority (the
"Authority"), an instrumentality of the State organized and existing under the
New Jersey Transportation Trust Fund Authority Act of 1984, as amended (the
"Act") for the purpose of funding a portion of the State's share of the cost of
improvements to the State's transportation system. Pursuant to the Act, the
Authority, the State Treasurer and the Commissioner of Transportation executed a
contract (the "Contract") which provides for the payment of these revenues to
the Authority. The payment of all such amounts is subject to and dependent upon
appropriations being made by the State Legislature and there is no requirement
that the Legislature make such appropriations.
Pursuant to the Act, the aggregate principal amount of the
Authority's bonds, notes or other obligations outstanding at any one time may
not exceed $1.7 billion. This amount is reduced by certain payments to the
Authority by the State in excess of the contract amount. Since January 1985, the
Authority has issued $1.223 billion in bonds. Of these, $1,222.3 million were
outstanding on June 30, 1994. These bonds are special obligations of the
Authority payable from the payments made by the State pursuant to the Contract.
Economic Recovery Fund Bonds. Legislation enacted during 1992
by the State authorizes the New Jersey Economic Development Authority ("NJEDA")
to issue bonds for various economic development purposes. Pursuant to that
legislation, NJEDA and the State Treasurer have entered into an agreement (the
"ERF Contract") through which NJEDA has agreed to undertake the financing of
certain projects and the State Treasurer has agreed to credit to the Economic
Recovery Fund from the General Fund amounts equivalent to payments due to the
State under an agreement with the Port Authority of New York and New Jersey. The
payment of all amounts under the ERF Contract is subject to and dependent upon
appropriations being made by the State Legislature. On June 1, 1994, NJEDA
issued $705.3 million in Economic Recovery Fund Bonds.
Miscellaneous. Other State related obligations include bonds
of the New Jersey Sports and Exposition Authority and lease purchase agreements
of the New Jersey Commission on Science and Technology. Amounts outstanding as
of June 30, 1994 totalled $615.1 million and $1.3 million, respectively, for
these two organizations.
State Employees. The State, as a public employer, is covered by the New
Jersey Public Employer-Employee Relations Act, as amended, which guarantees
public employees the right to negotiate collectively through employee
organizations certified or recognized as the exclusive collective negotiations
representatives for units of public employees found to be appropriate for
collective negotiations purposes. Approximately 64,500 employees are paid
through the State payroll system. Of the 64,500 employees, 56,800 are
represented by certified or recognized exclusive majority representatives and
are organized into various negotiation units. The State is conducting
negotiations for successor agreement with various negotiation units affecting
approximately 54,400 employees. The current agreement expired on June 30, 1994.
Three units of State Police employees, representing approximately 2,400
Troopers, Sergeants and Lieutenants are in the second year of a three-year
contract which expires on June 30, 1996. Their agreements call for a 4% wage
increase effective June 24, 1995. The fiscal year 1996 budget is expected to
reduce the workforce through attrition, voluntary furlough and layoff of state
employees during the fiscal year.
Counties and Municipalities. The Local Budget Law imposes specific
budgetary procedures upon counties and municipalities ("local units"). Every
local unit must adopt an operating budget which is balanced on a cash basis, and
items of revenue and appropriation must be examined by the Director of the
Division (the
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"Director"). This process insures that every municipality and county annually
adopts a budget balanced on a cash basis, within limitations on appropriations
or tax levies, respectively, and making adequate provision for principal of and
interest on indebtedness falling due in the fiscal year, deferred charges and
other statutory expenditure requirements. In addition to the exercise of
regulatory and oversight functions, the Director offers expert technical
assistance to local units in all aspects of financial administration, including
revenue collection and cash management procedures, contracting procedures, debt
management and administrative analysis.
State law also regulates the issuance of debt by local units. The Local
Budget Law limits the amount of tax anticipation notes that may be issued by
local units and requires the repayment of such notes within 120 days of the end
of the fiscal year (six months in the case of the counties) in which they were
issued. The Local Bond Law governs the issuance of bonds and notes by the local
units. No local unit is permitted to issue bonds for the payment of current
expenses (other than Fiscal Year Adjustment bonds). Local units may not issue
bonds to pay outstanding bonds, except for refunding purposes, and then only
with the approval of the Local Finance Board. Local units may issue bond
anticipation notes for temporary periods not exceeding in the aggregate
approximately ten years from the date of first issue. The debt that any local
unit may authorize is limited to a percentage of its equalized valuation basis,
which is the average of the equalized value of all taxable real property and
improvements within the geographic boundaries of the local unit, as annually
determined by the Director of the Division of Taxation, for each of the three
most recent years.
State law authorizes State officials to supervise fiscal administration
in any municipality which is in default on its obligations or upon the
occurrence of certain other events. State officials are authorized to continue
such supervision for as long as any of the conditions exist and until the
municipality operates for a fiscal year without incurring a cash deficit.
School Districts. New Jersey's school districts operate under the same
comprehensive review and regulation as do its counties and municipalities.
Certain exceptions and differences are provided, but the State supervision of
school finance closely parallels that of local governments.
Litigation. Certain litigation is pending or threatened in which the
State has the potential for either a significant loss of revenue or a
significant unanticipated expenditure, including suits relating to the following
matters:
(a) Several cases are pending in the State courts challenging the
methods by which the State Department of Human Services shares with
county governments the maintenance recoveries and costs for residents
in State psychiatric hospitals and residential facilities for the
developmentally disabled.
(b) Suits have been initiated by various counties in the State seeking
the return of moneys paid by the counties since 1980 for the
maintenance of Medicaid or Medicare eligible residents of institutions
for the developmentally disabled. In March 1994, the State Superior
Court ruled that the counties were entitled to credits for payments
made since 1989. In February 1995 all but one county had resolved its
cost-sharing disputes with the State. One county has filed for
administrative review to contest the State's calculation of the
credits.
(c) A class action on behalf of all New Jersey long-term care
facilities avers that the State has implemented unreasonably low
Medicaid payment rates. A final decision in favor of the plaintiffs
could require the State to make substantial expenditures. A plaintiffs'
motion for a preliminary injunction was denied on May 25, 1995, and
that denial is being appealed to the Third Circuit.
(d) Litigation is pending challenging various portions of the State's
Fair Automobile Insurance Reform Act of 1990, which substantially
altered the State's statutory scheme governing private passenger
automobile insurance.
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(e) At any given time, there are various numbers of claims and cases
pending against the State, its agencies and employees seeking recovery
of damages paid out of a fund created pursuant to the State's Tort
Claims Act. The State is unable to estimate its exposure for these
claims and cases. An independent study estimated an aggregate potential
exposure of $50 million for tort claims pending as of January 1, 1982.
It is estimated that were a similar study made of claims currently
pending, the amount of such estimated exposure would be somewhat
higher.
(f) At any given time, there are various claims of contract and other
claims against the State, and State agencies including environmental
claims arising from the alleged disposal of hazardous waste. The State
is unable to estimate its exposure for these claims.
(g) At any given time, there are various numbers of claims and cases
pending against the University of Medicine and Dentistry ("University")
and its employees seeking recovery of damages that are paid out of the
Self Insurance Reserve Fund created pursuant to the State's Tort Claims
Act. An independent study estimated an aggregate potential exposure of
$66.5 million for claims pending as of December 31, 1994. In addition,
various other claims are pending against the University seeking damages
or other relief which, if granted, would require the expenditure of
funds (amount not estimated).
(h) Various hospitals have challenged the Commissioner's calculation of
the hospital assessment required by the Health Care Cost Reduction Act
of 1991. The court denied a request by 11 hospitals for injunctive
relief to prevent the assessment after fiscal year 1994. The assessment
is intended to produce approximately $3 million per month from all
State hospitals. On January 17, 1995, the Appellate Division rejected
the hospitals' argument. The Supreme Court denied the hospitals'
petition for certification on April 26, 1995. In a separate case, the
Appellate Division rejected a group of 67 hospital's request for a
refund based on a prior opinion because the appeal had been filed in an
untimely manner.
(i) An individual plaintiff has filed a suit against two members of the
New Jersey Bureau of Securities alleging various causes of action for
defamation, injury to reputation, abuse of process and improper
disclosure of private facts. The State was granted a Motion for Summary
Judgment on January 11, 1995. Plaintiff has filed a notice of appeal.
The State is unable to estimate its exposure for this claim and intends
to defend the suit vigorously.
(j) Fourteen counties have filed suits against various State agencies
and employees, seeking a portion of $412 million in federal funding the
State received for disproportionate share hospital payments made to
county psychiatric facilities. The State contends that it does not have
to share the federal funding because it already paid the counties their
portion of disproportionate share hospital payments. The State has
requested oral argument.
(k) In October 1993, a suit was filed against the Governor and various
State Commissioners alleging violations of numerous laws allegedly
resulting from the existence of chromium contamination in the
State-owned Liberty Park in Jersey City. No immediate relief was
sought, but injunctive and monetary relief was asked for. The
complaints were amended and the plaintiffs filed another suit seeking
cessation of all construction and penalties against the transporter of
soil to the park. The cases have been consolidated and referred to
mediation.
(l) Various labor unions filed suit on October 17, 1994, challenging
State legislation dealing with the funding of several public employee
pension funds. The suit alleges, among other things, that certain
provisions of the legislation violate the contract, due process and
taking clauses of the United States and New Jersey Constitutions, and
that the changes constitute a breach of the States fiduciary duty to
two of the pension systems. Plaintiffs seek to permanently enjoin the
State from administering the changes.
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An adverse determination in this matter would have a significant impact
on the State's fiscal 1996 budget. The State has filed motions to
dismiss and for summary judgment. The State intends to vigorously
defend this action.
(m) A case has been filed in federal district court seeking injunctive
relief and damages in excess of $19 million from the State's Department
of Environmental Protection and several of its officers based on
alleged violations of the Commerce Clause and Contracts Clause of the
U.S. Constitution. The State intends to vigorously defend this action.
(n) A complaint was filed in Tax Court on May 23, 1994 against the
State and certain of its officials challenging the constitutionality of
waste licensure renewal fees collected by the Department of
Environmental Protection. The State is unable to estimate its exposure
for this claim and intends to defend this suit vigorously.
Additional Information on Investment Practices
1. Variable Rate Demand Obligations. Variable rate demand obligations
held by the Tax-Exempt Money Market, Intermediate Municipal Bond, Pennsylvania
Municipal Bond and New Jersey Municipal Bond 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.
2. When-Issued Securities. The 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's Custodian
will set aside cash or high quality liquid portfolio securities equal to the
amount of the commitment in a separate account. The Fund may be required
subsequently to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. Therefore, it may be expected that the Fund's net assets will
fluctuate to a greater degree when they set aside portfolio securities to cover
such purchase commitments than when they set aside cash. In addition, because a
Fund will set aside cash or liquid assets to satisfy its purchase commitments in
the manner described, the Fund's liquidity and ability to manage its investment
portfolios might be affected in the event its commitments to purchase
when-issued securities ever exceeded 25% of the value of its total assets.
CoreStates Advisers intends, however, to take reasonable precautions in
connection with the Tax-Free Money Market Funds' investment practices with
respect to when-issued securities to avoid any adverse effect on a Fund's policy
of maintaining a net asset value per Share at $1.00.
When acquiring when-issued securities for a Fund, CoreStates Advisers
will assess such factors as the stability or instability of prevailing interest
rates, the amount and period of a Fund's commitment with respect to the
when-issued securities being acquired, the interest rate to be paid on those
securities, and the length of a Fund's average weighted portfolio maturity at
the time.
When a Fund engages in when-issued transactions, it relies upon the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous.
B-17
<PAGE>
- Short-Intermediate Bond Fund -
- Elite Government Reserve -
- Short Term Income Fund -
- Government Income Fund -
- Bond Fund -
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.
- Intermediate Municipal Bond Fund -
- Short Intermediate Bond Fund -
- Global Bond Fund -
- Short-Term Income Fund-
- Pennsylvania Municipal Bond Fund -
- New Jersey Municipal Bond Fund -
- Tax-Free Reserve -
Puts
Intermediate Municipal Bond Fund, Short Intermediate Bond Fund, Global Bond
Fund, Short Term Income Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund and Tax-Free Reserve reserve the right to engage in put
transactions. CoreStates Advisers has the authority to 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
B-18
<PAGE>
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 Fund
would be general creditor (i.e. on a parity 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. The 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 the 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.
- Equity Fund -
- Special Equity Fund -
- International Growth Fund -
- Growth Equity Fund -
Convertible Securities
Some securities purchased by Growth Equity Fund (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. "Conversion parity" is the price at
which common stock has the same value as bonds that are convertible into that
stock. The holder of a convertible bond will usually not exercise the exchange
privilege until the market price of the common stock reaches conversion parity.
- Equity Fund -
- Special Equity Fund -
- International Growth Fund -
- Global Bond Fund -
B-19
<PAGE>
Futures and Options
As stated in the Prospectuses relating to these Funds, 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 security remaining fully
invested, and reducing transaction costs and currency fluctuations. In addition,
as stated in the Prospectus, Equity Fund and Special Equity Fund may purchase or
sell options on securities for the purpose of hedging against market risks
related to their portfolio securities.
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.
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from fluctuations in
the market value of the underlying securities.
Regulations of the Commodity Futures Trading Commission ("CFTC")
applicable to these Funds 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. These 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 it intends to purchase.
The use of such futures contracts is an effective way in which these
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.
B-20
<PAGE>
Options. These Funds may also buy and sell put and call options with
respect to the underlying portfolio securities of a Fund. 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 and 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.
These Fund's may write (i.e. sell) covered put and call options with
respect to the Fund's portfolio securities. 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.
The Funds write only "covered" options. This 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 with its custodian cash, U.S. Government securities or
other liquid high-grade debt obligations having a value equal to or greater than
the exercise price of the option.
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.
B-21
<PAGE>
The securities exchanges have established limitations governing the
maximum number of options which may be written 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. 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 write may be affected by options written by other
investment advisory clients of the Adviser or of any Sub-Advisers.
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 International Growth Fund and Global
Bond Fund 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, International Growth Fund and Global Bond
Fund 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. International Growth Fund and
Global Bond Fund will also incur costs in connection with forward currency
contracts and conversions of foreign currencies into U.S. dollars.
ADDITIONAL 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.
Additional 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 and #10.
B-22
<PAGE>
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).
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.
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.
- Fixed Income Funds -
The following policies are applicable to the 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
B-23
<PAGE>
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, except that Government Income
Fund, Intermediate Municipal Bond Fund, 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.
- Taxable Money Market Funds -
The following policies are applicable to the Company's 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.
B-24
<PAGE>
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.
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.
- Tax-Exempt Money Market Funds -
The following policies are applicable to the Company's 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
B-25
<PAGE>
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.
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.
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.
B-26
<PAGE>
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.
- Equity Funds -
An Equity Fund's investments in warrants, valued at the lower of cost
or market value, may not exceed 5% of the value of its net assets. Warrants
included within this amount may be warrants that are not listed on the New York
Stock Exchange or the American Stock Exchange; provided that the amount of such
warrants shall not exceed 2% of the value of an Equity Fund's net assets.
- Equity Fund -
- Special Equity Fund -
- Bond Fund -
- Balanced Fund -
- Short Term Income Fund -
- Government Income Fund -
- Intermediate Municipal Bond Fund -
- Global 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 relating to the Equity Funds and
Tax-Exempt Money Market Funds, these 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.
B-27
<PAGE>
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
Treasury; others, such as those of the Federal National Mortgage Association,
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 funds 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 such as U.S. Government securities or liquid debt securities rated
in the highest rating category and 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
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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.
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 -
- Intermediate Municipal Bond Fund -
- Pennsylvania Municipal Bond Fund -
- New Jersey Municipal Bond Fund -
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.
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ADDITIONAL 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 Corp or its affiliated and subsidiary
banks.
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.
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."
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 difference between the sales charge on the shares purchased at the
reduced rate and the sales
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<PAGE>
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.
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. However, with respect to the Taxable Money Market Funds, the Board of
Directors must approve or ratify the purchase of any unrated obligations or
obligations rated by only one NRSRO.
CoreFunds' Board of Directors has also undertaken to establish
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 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 promptly consider what action, if
any, should be initiated. If the Board 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.
B-31
<PAGE>
DIVIDENDS
- Equity Funds -
The policy of the Growth Equity, Equity, Special Equity, Equity Index
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 and net realized capital
gains on a semi-annual basis.
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
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 -
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 Directors' fees) of the Company prorated to each
portfolio on the basis of its relative net assets. 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.
- Taxable Money Market Funds -
- Tax-Exempt Money Market Funds -
The policy of the Money Market 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.
Net income for dividend purposes includes (i) interest and dividends
accrued (whether taxable or tax-exempt) and discount earned on a Money Market
Fund's assets (including both original issue and market
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<PAGE>
discount), less (ii) amortization of any premium on such assets and accrued
expenses directly attributable to a Fund, and the general expenses (e.g., legal,
auditing, and Directors' fees) of the Company prorated to each Fund on the basis
of its relative net assets. Capital gains dividends (if any) would be calculated
separately and distributed to shareholders on an annual basis.
TOTAL RETURN
- Equity Funds -
- Fixed-Income Funds -
In General
An Equity or Fixed Income Fund's total return is computed by dividing
the net change in value of a hypothetical pre-existing account in a Fund having
a value of $1,000 (less any applicable sales charge) at the beginning of the
base period by the value of such account at the end of the base period. For
purposes of such computation, "net change" includes (i) increases in the value
of the account arising from the reinvestment in the account of income and
capital gains dividends declared on the original share, and income and capital
gains dividends declared on shares, including fractions thereof, purchased
through reinvestment and (ii) decreases in the value of the account arising from
all fees charged to such account, based upon the duration of the base period and
a Fund's average account size.
Total return will vary from time to time and is not indicative of
future results. Total return is a function of the market value of the securities
held in a Fund and dividends paid on them, as well as expenses of the Fund.
Performance
The performance results listed below refer to results on Class Y Shares
and Class A Shares (where applicable) of the Funds.
- Equity Index Fund -
The average annualized total return for shares of Equity Index Fund was
24.45% for the period from 7/1/94 to 6/30/95.
- Equity Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of Equity Fund were 17.29% and 16.96%, respectively, for the period from
7/01/94 to 6/30/95.
- Growth Equity Fund -
The average annualized total returns for Series A Shares and Series B
Shares of Growth Equity Fund were 23.71% and 23.44%, respectively, for the
period from 7/01/94 to 6/30/95.
- International Growth Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of International Growth Fund were (0.21)% and (0.48)%, respectively, for
the period from 7/01/94 to 6/30/95.
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<PAGE>
- Balanced Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of Balanced Fund were 16.21% and 15.84%, respectively, for the period
from 7/01/94 to 6/30/95.
- Short Intermediate Bond Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of Short Intermediate Bond Fund were 8.22% and 7.95% respectively, for
the period from 7/01/94 to 6/30/95.
- Government Income Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of Government Income Fund were 10.26% and 10.23%, respectively, for the
period from 7/01/94 to 6/30/95.
- Intermediate Municipal Bond Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of Intermediate Municipal Bond Fund were 5.58% and 5.42%, respectively,
for the period from 7/01/94 to 6/30/95.
- Pennsylvania Municipal Bond Fund -
The cumulative total returns since inception for Class Y Shares and
Class A Shares of Pennsylvania Municipal Bond Fund were 7.50% and 7.25%,
respectively, for the period from 7/01/94 to 6/30/95.
- New Jersey Municipal Bond Fund -
The cumulative total returns since inception for Class Y Shares and
Class A Shares of New Jersey Municipal Bond Fund were 7.25% and 6.84%,
respectively, for the period from 7/01/94 to 6/30/95.
- Global Bond Fund -
The cumulative total returns since inception for Class Y Shares and
Class A Shares of Global Bond Fund were 9.70% and 9.57%, respectively, for the
period from 7/01/94 to 6/30/95.
YIELDS
The various types of yields which are quoted to illustrate the
performance of non-equity portfolios are calculated as follows.
- Taxable Money Market Funds -
- Tax-Exempt Money Market Funds -
Seven-day Yield
Each Taxable or Tax-Exempt Money Market Fund's standardized 7-day yield
is computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account in a Money Market Fund having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by 365/7.
The net change in the value of an account in a Money Market Fund includes the
value of additional shares purchased with dividends from the original share and
any such
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<PAGE>
additional shares, and all fees, other than non-recurring account or sales
charges, that are charged to all shareholder accounts in proportion to the
length of the base period and a Fund's average account size. The capital changes
to be excluded from the calculation of the net change in account value are
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation. A Money Market Fund's effective annualized yield
is computed by compounding the unannualized base period return (calculated as
above) by adding 1 to the base period return, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result.
Taxable Equivalent Yield
For a Tax-Exempt Money Market Fund, the taxable equivalent yield is
determined by dividing the Fund's current tax-free yield by the sum of one minus
the investor's current tax bracket (e.g., 15%, 28%, or 31%).
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.
- Fixed Income Funds -
Thirty-day Yield
The yield of the Fixed Income Funds is calculated by dividing the net
investment income per share (as described below) earned by a Fund during a
30-day (or one month) period by the net asset value per share on the last day of
the period and analyzing the result on a semi-annual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result,
and then doubling the difference. The Fund's net investment income per share
earned during the period is based on the average daily number of shares
outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements. This calculation can be expressed as follows:
Yield = 2[(A-B + 1)6 - 1]
CxD
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
Except as noted below, for the purpose of determining net investment
income earned during the period (variable "A" in the formula), interest earned
on debt obligations held by the Fund is calculated by computing the
yield-to-maturity of each obligation based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
business day of each month, or, with respect to obligations purchased during the
month, based on the purchase price (plus actual accrued interest), dividing the
result by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is held
by the Fund. For purposes of this calculation, it is assumed that each month
contains 30 days. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date.
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<PAGE>
Undeclared earned income will be subtracted from the net asset value
per share (variable "D" in the formula). Undeclared earned income is net
investment income which, at the end of the base period, has not been declared as
a dividend, but is reasonably expected to be, and is declared as a dividend
shortly thereafter.
Taxable Equivalent Yield
For the Intermediate Municipal Bond Fund, the taxable equivalent yield
is determined by dividing such Fund's current tax-free yield by the sum of one
minus the investor's current tax bracket.
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.
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 in its current taxable year 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 meet two income requirements. First it 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. Second, a Fund must derive less than 30% of its gross
income each taxable year from the sale or other disposition of stocks or
securities held for less than three months. 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
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<PAGE>
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. Finally, 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 long-term capital gains, 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.
If a shareholder recognizes a loss on the disposition of shares held
six months or less with respect to which the shareholder has received a capital
gains distribution, the loss will be treated as a long-term capital loss to the
extent of the amount of the capital gains distributions received.
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) 100% of any undistributed ordinary income or
capital gain net income from the prior year. 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 would be eligible for the
dividends-received deduction for corporate shareholders.
- Tax-Exempt Money Market Funds -
- Intermediate Municipal Bond Fund -
- Pennsylvania Municipal Bond Fund -
- New Jersey Municipal Bond Fund -
As described herein and in the Prospectuses relating to the Tax-Exempt
Money Market Funds, Intermediate Municipal Bond Fund, Pennsylvania Municipal
Bond Fund, and New Jersey Municipal Bond Fund, 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.
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<PAGE>
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 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
B-38
<PAGE>
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
long-term capital gains, regardless of how long a shareholder has held Fund
shares.
DESCRIPTION OF SHARES
- All Funds -
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 offers shares in twenty-three portfolios (the three Elite
portfolios have not offered their shares), consisting of an institutional class
of shares (Class Y) and individual classes of shares (Class A or Class C), as
listed below:
<TABLE>
<CAPTION>
Class of Shares # of Shares Fund
- --------------- ----------- ----
<S> <C> <C>
Class Y 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 750 million Fiduciary Reserve
Class Y 50 million Equity Fund
Class A 50 million Equity Fund
Class Y 25 million International
Growth Fund
Class Y 25 million International
Growth Fund
Class Y 500 million Equity Index Fund
Class Y 100 million Growth Equity Fund
Class A 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 Fiduciary
Tax-Free Reserve
Class Y 250 million Tax-Free Reserve
Class C 250 million Tax-Free Reserve
Class Y 250 million Fiduciary Treasury Reserve
Class Y 100 million Balanced Fund
B-39
<PAGE>
Class of Shares # of Shares Fund
- --------------- ----------- ----
Class Y 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
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 1 billion Elite Cash Reserve
Class Y 1 billion Elite Treasury Reserve
Class Y 1 billion Elite Government Reserve
Class Y 1 billion Special Equity Fund
Class A 1 billion 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
</TABLE>
Prior to the date of this Prospectus, all 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. In addition, prior
to the date of this Prospectus, the Equity Fund was known as the Value Equity
Fund and the Short-Intermediate Bond Fund was known as the Intermediate Bond
Fund.
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
B-40
<PAGE>
Funds which are available for distribution.
Rule 18f-2 under the Investment Company Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of the Fund affected by the matter. A Fund is affected by a
matter unless it is clear that the interests of each Fund in the matter are
identical or that the matter does not affect any interest of the Fund. Under
Rule 18f-2, the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to a
Fund only if approved by a majority of the outstanding shares of such Fund. In
the case of a Rule 12b-1 distribution plan, approval by a series would be
effectively acted upon only if approved by a majority of the outstanding shares
of the series of a Fund having such a distribution plan. However, Rule 18f-2
also provides that the ratification of independent auditors, the approval of
principal underwriting contracts, and the election of Directors may be
effectively acted upon by shareholders of the Company voting together without
regard to class or series.
Notwithstanding any provision of Maryland law requiring a greater vote
of the Company's shares (or of any class voting as a class) in connection with
any corporate action, unless otherwise provided by law (for example, by Rule
18f-2) or by the Company's Articles of Incorporation, the Company may take or
authorize such action upon the favorable vote of the holders of more than 50% of
the outstanding Common Stock of all of the Funds (voting together without regard
to class or series).
DIRECTORS AND OFFICERS
- All Funds -
The names and general background information of the Company's Directors
and Executive Officers are set forth below:
ERIN ANDERSON - Director - Professor of Marketing, INSEAD,
Fountainebleu, France since 1994; Associate Professor of Marketing, The
Wharton School of the University of Pennsylvania, prior to 1994.
EMIL J. MIKITY - Director - Retired; Senior Vice President Investments,
Atochem North America, 1979-1989.
GEORGE H. STRONG - Director - Financial Consultant since 1985; Director
and Senior Vice President, Universal Health Services, Inc., 1979-1984.
DAVID LEE - 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.
CARMEN V. ROMEO - Treasurer, Assistant Secretary - Director, Executive
Vice President, Chief Financial Officer and Treasurer of SEI
Corporation; Director and Treasurer of the Administrator and
Distributor since 1981; President, GW Sierra Trust Funds prior to 1991.
JAMES W. JENNINGS - Secretary - Partner of the law firm of Morgan,
Lewis & Bockius LLP since 1970.
KEVIN P. ROBINS - Vice President, Assistant Secretary - Senior Vice
President and General Counsel of SEI Corporation and the Distributor
since 1994; Vice President and Assistant Secretary of the
B-41
<PAGE>
Administrator and the Distributor, 1992-1994; Associate, Morgan, Lewis
& Bockius LLP (law firm) prior to 1992.
SANDRA K. ORLOW - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of the Administrator and Distributor since
1983.
KATE STANTON - 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.
RICHARD J. SHOCH - Vice President, Assistant Secretary - Mr. Shoch has
been Vice President and Assistant Secretary of SEI Corporation since
November 1995. From 1990 to June 1995, Mr. Shoch was Regulatory Manager
of SEI Corporation.
TODD CIPPERMAN - Vice President, Assistant Secretary - Mr. Cipperman
has been Vice President and Assistant Secretary of SEI Corporation
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.
JOSEPH M. LYDON - Vice President - Mr. Lydon has been Director of
Business Administration - Fund Resources, a division of SEI Corporation
since November 1995. From 1989 to April 1995, Mr. Lydon was Vice
President of Fund Group. Vice President of the Advisor - Dreman Value
Management, L.P. and President of Dreman Financial Services, Inc.
STEPHEN G. MEYER - Controller - CPA - 1995 to Present. Director,
Internal Audit and Risk Management, SEI, 1992 to 1995. Coopers &
Lybrand, Senior Associate, 1990 to 1992. Vanguard Group of Investments,
Internal Audit Supervisor prior to 1990.
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, 1995, the Company paid a total of $77,831 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 Compensation 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, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
(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, 1995 ended June 30, 1995
<S> <C> <C> <C> <C>
Erin Anderson, 17,750 0 0 17,750
B-42
<PAGE>
Director
Emil J. Mikity, 19,250 0 0 19,250
Director
George H. Strong, 17,750 0 0 17,750
Director
</TABLE>
* A Director who is an "interested person" as defined in the Investment
Company Act.
PRINCIPAL HOLDERS OF SECURITIES
- Growth Equity Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Growth Equity Fund:
<TABLE>
<CAPTION>
Name Amount of Record Percent of Total
Ownership Shares Outstanding
<S> <C> <C>
Patterson & Co. 8,235,206.706 95.47%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class A Shares of Growth Equity Fund:
<TABLE>
<CAPTION>
Name Amount of Record Percent of Total
Ownership Shares Outstanding
<S> <C> <C>
Patterson & Co. 25,970.755 12.10%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
- Equity Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Equity Fund:
B-43
<PAGE>
Name Amount of Record Percent of Total
Ownership Shares Outstanding
MAM & Co. 21,396,775.29 87.85%
c/o Kim Kutzer
P.O. Box 16004 Mail Code BB0405
Reading, PA 19612-6004
Patterson & Co. 1,385,761.975 5.69%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class A Shares of Equity Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
National Financial Services Corp. 165,069.5330 25.65%
For The Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
- Equity Index Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding shares of Equity Index Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 4,624,159.421 82.21%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
B-44
<PAGE>
- International Growth Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of International Growth Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 9.098,476.916 87.06%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
MAM & Co. 921,598.3984 8.82%
c/o Kim Kutzer
P.O. Box 16004 Mail Code BB0405
Reading, PA 19612-6004
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class A Shares of International Growth Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Mark E. Stalnecker & 13,766.4630 8.85%
Susan M. Stalnecker JTTEN
9 Briarcrest Drive
Wallingford, PA 19086
- Balanced Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Balanced Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 5,696,648.3 63.87%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
MAM & Co. 3,162,342.89 35.46%
c/o Kim Kutzer
P.O. Box 16004 Mail Code BB0405
Reading, PA 19612-6004
B-45
<PAGE>
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class A Shares of Balanced Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
CoreStates Bank, NA C/F IRA 11,884.075 5.04%
of James E. Brown
1025 Cross Road
Schwenksville, PA 19473
- Short-Intermediate Bond Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Short-Intermediate Bond Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
MAM & Co. 10,414,860.11 60.36%
c/o Kim Kutzer
P.O. Box 16004 Mail Code BB0405
Reading, PA 19612-6004
Patterson & Co. 4,696,271.106 27.22%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class A Shares of Short-Intermediate Bond Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
National Financial Services Corp. 36,987.9425 11.91%
One World Financial Center
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
- Intermediate Municipal Bond Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Intermediate Municipal Bond
Fund:
B-46
<PAGE>
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 19,542.1430 88.37%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Paine Webber FBO 1,551.3180 7.02%
M Tegler A/C# PY01395B3
C/O NSCC New York
55 Water Street
New York, NY 10041
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class A Shares of Intermediate Municipal Bond
Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Salvatore J. Alesi Sr. & 8,270.8560 8.20%
Rose P Alesi JTTEN
284 Ellis Road
Havertown, PA 19083
Joseph T. Oprocha & 6,836.7260 6.78%
Theresa E. Oprocha JTTEN
107 Snyder Avenue
Philadelphia, PA 19148
Frank B. Holst & 5,793.8380 5.74%
E. Joan Holst JTTEN
2218 Oak Terrace
Lansdale, PA 19446
Thomas Glenn 5,394.4890 5.35%
827 North 63rd Street
Philadelphia, PA 19151
Joanne V. Palestini & 5,346.5230 5.30%
Joseph F. Palestini ITTEN
753 Manatawa Avenue
Philadelphia, PA 19128
National Finanical Services Corp. 5,063.9680 5.02%
For Exclusive Use of Our Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281
Irene Sungaila 5,049.49 5.00%
5214 Burton Street
Philadelphia, PA 19124
B-47
<PAGE>
- Government Income Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Government Income Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 1,446,888.29 99.92%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class A Shares of Government Income Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Jean Taxin 8,193.4340 6.33%
5005 Woodbine Avenue
Philadelphia, PA 19131
CoreStates Bank NA C/F IRA 7,341.5110 5.67%
of Salvatore M. Reyes
500 Newport Avenue
Ocean Gate, NJ 08740
CoreStates Bank NA C/F IRS 7,315.1990 5.65%
of Donald A. Fleck
32 Summit Circle
Churchville, PA 18966
- Pennsylvania Municipal Bond Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Pennsylvania Municipal Bond
Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
MAM & Co. 557,973.9223 64.93%
c/o Kim Kutzer
P.O. Box 16004 Mail Code BB0405
Reading, PA 19612-6004
Dr. Vernon F. Alibert & 176,834.8760 20.50%
Dolores V. Alibert
1420 Conchester Highway
Boothwyn, PA 19061
B-48
<PAGE>
Patterson & Co . 124,602.714 14.49%
PNB Personal Trust Acctg
P.O. Box 7829
Philadelphia, PA 19101
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class A Shares of Pennsylvania Municipal Bond
Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
National Financial Services Corp. 16,759.5940 18.39%
For The Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Salvatore J. Alesi, Sr. & 15,358.2170 16.85%
Rose P. Alesi JTTEN
284 Ellis Road
Havertown, PA 19083
- New Jersey Municipal Bond Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of New Jersey Municipal Bond Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 111,182.5630 99.98%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class A Shares of New Jersey Municipal Bond
Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Nathan J. Bershanoff 7,871.56 44.85%
5251 Garden Avenue
Pennsauken, NJ 08109
Mary Manchur & 2,359.8870 13.45%
Jean Kent JTTEN
19 Thatchers Road
Frenchtown, NJ 08225
B-49
<PAGE>
Almira E. Brinser & 2,287.660 13.03%
Everett L. Brinser JTTEN
802 Chestnut Avenue
Laurel Springs, NJ 08021
Deborah L. Brett 2,207.3460 11.55%
Randall P. Brett JTTEN
7 Sherman Court
Plainsboro, NJ 08536-2332
Andria Hildebrand 1,870.4420 10.66%
Wilfred C. Hildebrand JTTEN
211 S. Main Street
Pennington, NJ 08534
Nelson Martin 1,114.9980 6.35%
59 Hasting Lane
Willingboro, NJ 08046
- Cash Reserve -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Cash Reserve:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 537,767,828.30 65.80%
P.O. Box 7618 FC9-1-17
Attn: Jim Quinlan
Philadelphia, PA 19101-7618
MAM & Co. 216,046,965 26.44%
c/o Mark Medura MHO 330
P.O. Box 16006 Mail Code BB0425
Reading, PA 19612-6006
- Treasury Reserve -
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class Y Shares of Treasury Reserve:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 328,644,898.45 37.06%
P.O. Box 7618 FC9-1-17
Attn: Jim Quinlan
Philadelphia, PA 19101-7618
The Bank of New York 288,303,105.81 32.51%
One Wall Street, 5th Floor/STIF
B-50
<PAGE>
New York, NY 10286-0001
MAM & Co. 109,378,568.05 12.33%
c/o Mark Medura MHO 330
P.O. Box 16006 Mail Code BB0425
Reading, PA 19612-6006
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class C Shares of Treasury Reserve:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 9,914,348.94 48.44%
P.O. Box 7618 FC9-1-17
Attn: Jim Quinlan
Philadelphia, PA 19101-7618
Collagenex Inc. 4,302,923.27 21.03%
301 S. State Street
Newtown, PA 18940
- Tax-Free Reserve -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Tax-Free Reserve:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
MAM & Co. 53,924,555.39 51.21%
c/o Mark Medura MHO 330
P.O. Box 16006 Mail Code BB0425
Reading, PA 19612-6006
Patterson & Co. 44,154,500.67 41.93%
P.O. Box 7618 FC9-1-17
Attn: Jim Quinlan
Philadelphia, PA 19101
As of April 16, 1996, the following accounts were holders of record
of 5% or more of the outstanding Class C Shares of Tax-Free Reserve:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Marierra E. Williams 233,547.40 8.88%
RD2 Box 141
Elverson, PA 19520-9435
Elizabeth R. Cabine POA 200,078.00 7.61%
Eleanor P. Jester
2135 Concord Pike
B-51
<PAGE>
Wilmington, DE 19803-2906
Gregory J. Blazic 197,298.07 7.50%
Lellus L. Blazic JTTEN
P.O. Box 603 Country Club Road
Valley Forge, PA 19482-0603
William H. Simon, MD 188,511.77 7.17%
255 S. 17th Street
11th Floor
Philadelphia, PA 19103
Harold D. McKemy 138,854.86 5.28%
3 Bobolink Drive
Wyomissing, PA 19610
- Fiduciary Reserve -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding shares of Fiduciary Reserve:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 396,374,111.48 100%
P.O. Box 7618 FC9-1-17
Attn: Jim Quinlan
Philadelphia, PA 19101
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding shares of Fiduciary Treasury Reserve:
- Fiduciary Treasury Reserve -
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 20,390,716.72 100%
P.O. Box 7618 FC9-1-17
Attn: Jim Quinlan
Philadelphia, PA 19101
B-52
<PAGE>
- Fiduciary Tax-Free Reserve -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding shares of Fiduciary Tax-Free Reserve:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 113,469,854.09 100%
P.O. Box 7618 FC9-1-17
Attn: Jim Quinlan
Philadelphia, PA 19101
- Global Bond Fund -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Global Bond Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
Patterson & Co. 3,285,919.225 95.66%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding Class A Shares of Global Bond Fund:
Name Amount of Record Percent of Total
Ownership Shares Outstanding
CoreStates Bank N.A. C/F IRA of 5,734.791 36.73%
A. Gilbert Heebner
2 Etienne Arbordeau
Berwyn Baptist Road
Devon, PA 19333
James W. Jennings 4,525.452 28.99%
2000 One Logan Square
Philadelphia, PA 19103
CoreStates Bank NA C/F IRA of 2,673.235 17.12%
Allen Luke
17 Bennett Court
East Brunswick, NJ 08816
CoreStates Bank NA C/F IRA of
Patrick M. Carlomango
3124 Taft Road
Norristown, PA 19403
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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.
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
subsidiaries, CoreStates Bank and New Jersey National Bank (national banking
associations), and Hamilton Bank (a Pennsylvania banking institution), 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.
In April 1996, CoreStates Corpacquired Meridian Bancorp. Pursuant to
this acquisition, CoreFunds merged the Conestoga Fund portfolios into CoreFunds
family of mutual funds. In particular, the Conestoga Cash Management, Tax- Free,
U.S. Treasury Securities, Equity, Intermediate Income, Pennsylvania Tax-Free
Bond, Balanced and International Equity Funds were merged into existing
comparable CoreFunds portfolios with the successor entity remaining the
CoreFunds portfolio. In addition, the Conestoga Special Equity, Bond and Short
Term Income Funds were merged into newly-created CoreFunds shell portfolios in
order to continue that operation. The shareholders of each of the CoreFunds'
portfolios approved new investment advisory agreements with CoreStates Advisors
as well as new investment sub-advisory agreements with all existing sub-advisors
to the Funds. In connection with the International Growth Fund, shareholders
approved the addition of Aberdeen Fund Managers, Inc. ("Aberdeen Managers") as
an investment sub-advisor within the contract of a multiple manager system. 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 year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Growth Equity Fund totalling $386,678 after
voluntary fee waivers of $193,333. For the fiscal year ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling
$320,583, after voluntary fee waivers of $248,000. For the fiscal year ended
June 30, 1993, CoreStates Advisers was paid investment advisory fees by this
Fund totalling $96,277 after voluntary fee waivers of $288,940.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Equity Fund totalling
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$199,645, after voluntary fee waivers of $51,162. For the fiscal year ended June
30, 1994, CoreStates Advisers was paid investment advisory fees by this Fund
totalling $121,274, after voluntary fee waivers of $44,569. For the fiscal year
ended June 30, 1993, CoreStates Advisers was paid investment advisory fees by
this Fund totalling $46,772 after voluntary fee waivers of $51,353.
For the fiscal period ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Equity Index Fund totalling $85,692, after voluntary
fee waivers of $259,535. For the fiscal period ended June 30, 1994, CoreStates
Advisers was paid investment advisory fees by this Fund totalling $73,135, after
voluntary fee waivers of $219,716. For the fiscal period ended June 30, 1993,
CoreStates Advisers was paid investment advisory fees by this Fund totalling
$33,052, after voluntary fee waivers of $93,023.
For the fiscal period ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by International Growth Fund totalling $861,592, after
voluntary fee waivers of $57,439. For the fiscal period ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling
$664,153, after voluntary fee waivers of $85,107. For the fiscal year ended June
30, 1993, CoreStates Advisers was paid investment advisory fees by this Fund
totalling $270,891, after voluntary fee waivers of $104,113.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Balanced Fund totalling $240,853, after voluntary
fee waivers of $133,801. For the fiscal year ended June 30, 1994, CoreStates
Advisers was paid investment advisory fees by this Fund totalling $134,678,
after voluntary fee waivers of $145,819. For the fiscal year ended June 30,
1993, CoreStates Advisers was paid investment advisory fees by this Fund
totalling $0, after voluntary fee waivers of $88,537.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Short Intermediate Bond Fund totalling $203,083,
after voluntary fee waivers of $87,019. For the fiscal year ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling
$183,014, after voluntary fee waivers of $106,631. For the fiscal year ended
June 30, 1993, CoreStates Advisers was paid investment advisory fees by this
Fund totalling $58,743 after voluntary fee waivers of $114,593.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Intermediate Municipal Bond Fund totalling $2,752,
after voluntary fee waivers of $6,425. For the fiscal year ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling
$1,899, after voluntary fee waivers of $11,626. For the fiscal year ended June
30, 1993, CoreStates Advisers was paid investment advisory fees by this Fund
totalling $0, after voluntary fee waivers of $1,329.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Government Income Fund totalling $22,528, after
voluntary fee waivers of $33,796. For the fiscal year ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling
$10,608 after voluntary fee waivers of $38,912. For the fiscal year ended June
30, 1993, CoreStates Advisers were paid advisory fees by this Fund totalling $0,
after voluntary fee waivers of $7,616.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Pennsylvania Municipal Bond Fund totalling $0, after
voluntary fee waivers of $10,956. For fiscal year ended June 30, 1994,
CoreStates Advisers were paid investment advisory fees by this Fund totalling
$0, after voluntary fee waivers of $361.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by New Jersey Municipal Fund totalling $0, after
voluntary fee waivers of $8,045. For the fiscal year ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling $0,
after voluntary waivers of $788.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Global Bond Fund totalling $77,740, after voluntary
fee waivers of $77,729. For the fiscal year ended June 30, 1994, CoreStates
Advisers was paid investment advisory fees by this Fund totalling $41,845, after
voluntary waivers of $41,845.
For the fiscal year ended June 30, 1995, Treasury Reserve paid
CoreStates Advisers investment advisory fees totalling $1,039,138, after
voluntary fee waivers of $1,322,599. For the fiscal year ended June 30, 1994,
this Fund paid CoreStates Advisers
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investment advisory fees totalling $1,067,724, after voluntary fee waivers of
$1,358,926. For the fiscal year ended June 30, 1993, CoreStates Advisers was
paid investment advisory fees by this Fund totalling $1,136,845 after voluntary
fee waivers of $1,455,070.
For the fiscal year ended June 30, 1995, Cash Reserve paid CoreStates
Advisers investment advisory fees totalling $1,196,254, after voluntary fee
waivers of $1,522,489. For the fiscal year ended June 30, 1994, this Fund paid
CoreStates Advisers investment advisory fees totalling $1,182,826, after
voluntary fee waivers of $1,505,298. For the fiscal year ended June 30, 1993,
CoreStates Advisers was paid investment advisory fees by this Fund totalling
$1,265,297, after voluntary fee waivers of $1,611,344.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Tax-Free Reserve totalling $172,635, after voluntary
fee waivers of $219,739. For the fiscal year ended June 30, 1994, CoreStates
Advisers was paid investment advisory fees by this Fund totalling $197,246,
after voluntary fee waivers of $252,250. For the fiscal year ended June 30,
1993, CoreStates Advisers was paid $178,951 in investment advisory fees for
investment advisory services provided to this Fund, after voluntary fee waivers
of $229,185.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Fiduciary Treasury Reserve totalling $0, after
voluntary fee waivers of $109,215. For the fiscal year ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling $0,
after voluntary fee waivers of $104,101. For the fiscal year ended June 30,
1993, CoreStates Advisers was paid investment advisory fees for this Fund
totalling $0, after voluntary fee waivers of $288,065.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees for Fiduciary Reserve totalling $0, after voluntary fee
waivers of $2,011,375. For the fiscal year ended June 30, 1994, CoreStates
Advisers was paid investment advisory fees for Fiduciary Reserve totalling $0,
after voluntary fee waivers of $2,179,755. For the fiscal year ended June 30,
1993, CoreStates Advisers was paid investment advisory fees by Fiduciary Reserve
totalling $0, after voluntary fee waivers of $2,106,368.
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Fiduciary Tax-Free Reserve totalling $0, after
voluntary fee waivers of $424,166. For the fiscal year ended June 30, 1994,
CoreStates Advisers was paid investment advisory fees by this Fund totalling $0,
after voluntary fee waivers of $409,628. For the fiscal year ended June 30,
1993, CoreStates Advisers was paid investment advisory fees for Fiduciary
Tax-Free Reserve totalling $0, after voluntary waivers of $266,276.
Elite Cash Reserve, Elite Government Reserve and Elite Treasury Reserve
were not in operation as of June 30, 1995.
SUB-ADVISERS
- International Growth Fund -
Martin Currie, Inc. ("Martin Currie"), a subsidiary of Martin Currie,
Ltd., and Aberdeen Managers , a subsidiary of Aberdeen Trust, PLC, are the
International Growth Fund's sub-advisers.
Martin Currie, Ltd. performs various investment advisory services for a
number of open- and closed-end mutual funds, offshore funds, pension funds,
foundations, and charities. Current assets under management total over $4
billion. The Martin Currie offices are located in Saltire Court, 20 Castle
Terrace, Edinburgh, Scotland.
Aberdeen Trust 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 $4 billion. The Aberdeen
Trust PLC offices are located at 10 Queens Terrace, Aberdeen AB9 1QJ Scotland
and Aberdeen Managers officers are located at Nations Bank Tower, 22nd Floor,
Ft. Laurderdale, Florida 33396.
The services provided and the expenses assumed by Martin Currie and
Aberdeen Managers as sub-advisers, as well as the fees payable to them, are
described in the Prospectuses relating to International Growth Fund.
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The International Growth Sub-Advisory Agreement
The International Growth Sub-Advisory Agreement between CoreStates
Advisers and Martin Currie provides that Martin Currie shall not be liable for
any error of judgment or mistake of law or for any loss suffered by
International Growth Fund in connection with its performance under this
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
in the performance of its duties, or from reckless disregard by it of its duties
and obligations thereunder.
Unless sooner terminated, the International Growth 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 International Growth 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. The International Growth 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. The International Growth
Sub-Advisory Agreement also terminates automatically in the event of its
assignment, as defined in the Investment Company Act.
The International Growth Sub-Advisory Agreement between CoreStates
Advisers and Aberdeen Managers provides that Aberdeen Managers shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
International Growth Fund in connection with its performance under this
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 Aberdeen
Managers in the performance of its duties, or from reckless disregard by it of
its duties and obligations thereunder.
Unless sooner terminated, the International Growth 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 International Growth 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. The International Growth 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 Aberdeen Managers. The International Growth
Sub-Advisory Agreement also terminates automatically in the event of its
assignment, as defined in the Investment Company Act.
- Global Bond Fund -
Alpha Global Fixed Income Managers, Inc. ("Alpha Global") is
sub-adviser to Global Bond Fund.
Alpha Global 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 $130 billion. Alpha Global 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.
The Global Bond Sub-Advisory Agreement
The Global Bond Sub-Advisory Agreement between CoreStates Advisers and
Alpha Global provides that Alpha Global shall not be liable for any error of
judgment or mistake of law or for any loss suffered by Global Bond Fund in
connection with its performance under this 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 Alpha Global in the performance of its
duties, or from reckless disregard by it of its duties and obligations
thereunder.
Unless sooner terminated, the Global Bond 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 Global Bond Fund (as defined in the Prospectuses), and by
a majority of the Directors who are not parties to this Sub-Advisory
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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. The Global Bond 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 Alpha Global. The Global Bond Sub-Advisory Agreement also terminates
automatically in the event of its assignment, as defined in the Investment
Company Act.
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. However, absent exemptive relief, a Fund will
not engage in such activities if prohibited from doing so by Section 17(a) of
the Investment Company Act.
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.
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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
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 renumeration 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
(e.g., 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.
Brokerage Commissions
- Growth Equity Fund -
During the fiscal year ended June 30, 1995, Growth Equity Fund paid
aggregate brokerage commissions of approximately $223,429.
- Equity Fund -
During the fiscal year ended June 30, 1995, Equity Fund paid aggregate
brokerage commissions of approximately $117,625.
- Equity Index Fund -
During the fiscal period ended June 30, 1995, Equity Index Fund paid
aggregate brokerage commissions of approximately $61,052.
- International Growth Fund -
During the fiscal year ended June 30, 1995, International Growth Fund
paid aggregate brokerage commissions of approximately $350,685.
- Balanced Fund -
During the fiscal year ended June 30, 1995, Balanced Fund paid
aggregate brokerage commissions of approximately $66,243.
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
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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. As a general rule, net gains are distributed to
shareholders and will be taxable at ordinary income tax rates, for federal
income tax purposes, regardless of long-or short-term capital gains status. See
"Distributions" and "Taxes" for more information on taxation. The tables set
forth in "Financial Highlights" present the Fund's historical portfolio turnover
rates.
ADMINISTRATOR
- All Funds -
SEI Financial Management Corporation (the "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.
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 wholly owned subsidiary of SEI Corporation
("SEI"), was organized as a Delaware corporation in 1969 and has its principal
business offices at 680 East Swedesford Road, Wayne, PA 19087. Alfred P. West,
Jr., Carmen V. Romeo, and Robert A. Nesher constitute the Board of Directors of
the Administrator. Mr. West is the Chairman of the Board and President of the
Administrator. Mr. West serves as the Chairman of the Board of Directors, and
Chief Executive Officer of SEI. SEI and its subsidiaries 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 also serves as administrator to the following
other institutional mutual funds: SEI Liquid Asset Trust; SEI Tax Exempt Trust;
SEI Index Funds; SEI Institutional Managed Trust; SEI Cash+Plus Trust; SEI
International Trust; Key Investment Funds, Inc.; The Capitol Mutual Funds; Union
Investors Funds, Inc.; The Compass Capital Group; Advisor's Inner Circle Fund;
FFB Lexicon Funds; The Pillar Funds; CUFund; STI Classic Funds; The One Group
Fund; First American Investment Funds, Inc.; First American Funds, Inc.; The
Arbor Funds; and 1784 Funds.
Administration Fees
For the fiscal period ended June 30, 1995, Growth Equity Fund paid SEI
administrative fees totalling $123,731, after voluntary fee waivers of $69,600.
For the fiscal period ended June 30, 1994, Growth Equity Fund paid SEI
administrative fees totalling $116,502, after voluntary fee waivers of $73,176.
For the fiscal period ended June 30, 1993, Growth Equity Fund paid SEI and the
Fairfield Group, Inc. ("Fairfield") administrative fees totalling $67,825, after
voluntary fee waivers of $60,564.
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For the fiscal period ended June 30, 1995, Equity Fund paid SEI
administrative fees totalling $53,535, after voluntary fee waivers of $30,067.
For the fiscal period ended June 30, 1994, Equity Fund paid SEI administrative
fees totalling $34,108, after voluntary fee waivers of $21,186. For the fiscal
period ended June 30, 1993, this Fund paid SEI and Fairfield administrative fees
totalling $22,301, after voluntary fee waivers of $10,407.
For the fiscal period ended June 30, 1995, Equity Index Fund paid SEI
administrative fees totalling $137,868, after voluntary fee waivers of $77,861.
For the fiscal period ended June 30, 1994, Equity Index Fund paid SEI
administrative fees totalling $112,341, after voluntary fee waivers of $70,393.
For the fiscal period ended June 30, 1993, this Fund paid SEI and Fairfield
administrative fees totalling $48,717, after voluntary fee waivers of $30,080.
For the fiscal period ended June 30, 1995, International Growth Fund
paid SEI administrative fees totalling $183,805, after voluntary fee waivers of
$103,392. For the fiscal period ended June 30, 1994, International Growth Fund
paid SEI administrative fees totalling $144,204, after voluntary fee waivers of
$89,940. For the fiscal year ended June 30, 1993, this Fund paid SEI and
Fairfield administrative fees totalling $88,375, after voluntary fee waivers of
$28,814.
For the fiscal period ended June 30, 1995, Balanced Fund paid SEI
administrative fees totalling $85,636, after voluntary fee waivers of $48,169.
For the fiscal period ended June 30, 1994 Balanced Fund paid SEI administrative
fees totalling $62,159, after voluntary fee waivers of $38,369. For the fiscal
period ended June 30, 1993, Balanced Fund paid SEI administrative fees totalling
$19,360 , after voluntary fee waivers of $12,260.
For the fiscal period ended June 30, 1995, Short Intermediate Bond Fund
paid SEI administrative fees totalling $92,840, after voluntary fee waivers of
$52,211. For the fiscal period ended June 30, 1994, Short Intermediate Bond Fund
paid SEI administrative fees totalling $89,032, after voluntary fee waivers of
$55,791. For the fiscal period ended June 30, 1993, Short Intermediate Bond Fund
paid SEI and Fairfield administrative fees totalling $48,169, after voluntary
fee waivers of $38,499.
For the fiscal period ended June 30, 1995, Government Income Fund paid
SEI administrative fees totalling $18,024, after voluntary fee waivers of
$10,139. For the fiscal period ended June 30, 1993, Government Income Fund paid
SEI administrative fees totalling $14,856, after voluntary fee waivers of
$9,904. For the fiscal period ended June 30, 1993, Government Income Fund paid
SEI administrative fees totalling $0, after voluntary fee waivers of $3,808.
For the fiscal period ended June 30, 1995, Intermediate Municipal Bond
Fund paid SEI administrative fees totalling $2,937, after voluntary fee waivers
of $1,652. For the fiscal period ended June 30, 1994, Intermediate Municipal
Bond Fund paid SEI administrative fees totalling $2,665, after voluntary fee
waivers of $3,994. For the fiscal period ended June 30, 1994, Intermediate
Municipal Bond Fund paid SEI administrative fees totalling $0, after voluntary
fee waivers of $664.
For the fiscal period ended June 30, 1995, Pennsylvania Municipal Bond
Fund paid SEI administrative fees totalling $0, after voluntary fee waivers of
$5,478. For the period ended June 30, 1994, Pennsylvania Municipal Bond Fund
paid SEI administrative fees totalling $0, after voluntary fee waivers of $180.
For the fiscal period ended June 30, 1995, New Jersey Municipal Bond Fund paid
SEI administrative fees totalling $0, after voluntary fee waivers of $4,023. For
the fiscal period ended June 30, 1994, New Jersey Municipal Bond Fund paid SEI
administrative fees totalling $0, after voluntary fee waivers of $394.
For the fiscal period ended June 30, 1995, Global Bond Fund paid SEI
administrative fees totalling $41,460, after voluntary fee waivers of $23,318.
For the fiscal period ended June 30, 1994, Global Bond Fund paid SEI
administrative fees totalling $21,878, after voluntary fee waivers of $12,993.
For the fiscal period ended June 30, 1995, Treasury Reserve paid SEI
administrative fees totalling $755,724, after voluntary fee waivers of $425,121.
For the fiscal year ended June 30, 1994, this Fund paid SEI administrative fees
totalling $745,911, after voluntary fee waivers of $467,414. For the fiscal
period ended June 30, 1993, Treasury Reserve paid SEI and Fairfield
administrative fees totalling $729,031, after voluntary fee waivers of $566,927.
For the fiscal period ended June 30, 1995, Cash Reserve paid SEI
administrative fees totalling $869,998, after voluntary
B-61
<PAGE>
fee waivers of $489,371. For the fiscal year ended June 30, 1994, this Fund paid
Fairfield administrative fees totalling $825,937, after voluntary fee waivers of
$518,125. For the fiscal period ended June 30, 1993, Cash Reserve paid SEI and
Fairfield administrative fees totalling $793,472, after voluntary fee waivers of
$644,849.
For the fiscal period ended June 30, 1995, Tax-Free Reserve paid SEI
administrative fees totalling $125,548, after voluntary fee waivers of $70,639.
For the fiscal period ended June 30, 1994, Tax-Free Reserve paid SEI
administrative fees totalling $137,980, after voluntary fee waivers of $86,767.
For the fiscal period ended June 30, 1993, Tax-Free Reserve paid SEI and
Fairfield administrative fees totalling $118,611, after voluntary fee waivers of
$85,457.
For the fiscal period ended June 30, 1995, Fiduciary Treasury Reserve
paid SEI administrative fees totalling $24,029, after voluntary fee waivers of
$30,578. For the fiscal period ended June 30, 1994, Fiduciary Treasury Reserve
paid SEI administrative fees totalling $22,988, after voluntary fee waivers of
$29,256. For the fiscal period ended June 30, 1993, Fiduciary Treasury Reserve
paid SEI and Fairfield administrative fees totalling $45,206, after voluntary
fee waivers of $98,826.
For the fiscal period ended June 30, 1995, Fiduciary Reserve paid SEI
administrative fees totalling $442,499, after voluntary fee waivers of $563,185.
For the fiscal period ended June 30, 1994, Fiduciary Reserve paid SEI
administrative fees totalling $479,759 after voluntarily fee waivers of
$610,315. For the fiscal period ended June 30, 1993, Fiduciary Reserve paid SEI
and Fairfield administrative fees totalling $479,639, after voluntary fee
waivers of $573,545.
For the fiscal period ended June 30, 1995, Fiduciary Tax-Free Reserve
paid SEI administrative fees totalling $93,316, after voluntary fee waivers of
$118,767. For the fiscal period ended June 30, 1994, Fiduciary Tax-Free Reserve
paid SEI administrative fees totalling $90,162, after voluntary fee waivers of
$114,765. For the fiscal period ended June 30, 1993, this Fund paid SEI and
Fairfield administrative fees totalling $55,637, after voluntary fee waivers of
$77,501.
Elite Cash Reserve, Elite Government Reserve and Elite Treasury Reserve
were not in operation as of June 30, 1995.
DISTRIBUTOR
- All Funds -
SEI Financial Services Company (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.
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 Distributor
is authorized to use this fee as compensation for its distribution-related
services and 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;
B-62
<PAGE>
(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.
For the fiscal year ended June 30, 1995, the Distributor received
distribution fees (which amount solely represents sales expenses) on the
following Funds offering Class A Shares: (a) $4,631 for the Growth Equity Fund;
(b) $12,103 for the Equity Fund; (c) $4,641 for the International Growth Fund;
(d) $5,601 for the Balanced Fund; (e) $15,654 for the Short Intermediate Bond
Fund; (f) $3,465 for the Government Income Fund; (g) $2,870 for the Intermediate
Municipal Bond Fund; (h) $510 for the Pennsylvania Municipal Bond Fund; (i) $19
for the New Jersey Municipal Bond Fund; (j) $416 for the Global Bond Fund. The
Distributor also received distribution fees on the following Funds offering
Class C Shares: (a) $38,272 for the Cash Reserve Fund; (b) $27,023 for the
Treasury Reserve Fund; and (c) $5,265 for the Tax-Free Reserve Fund.
CUSTODIAN AND TRANSFER AGENT
- All Funds -
Custodian Agreement
Cash and securities owned by each Fund are held by CoreStates Bank as
the Company's Custodian pursuant to a Custodian Agreement. Under the Custodian
Agreement, CoreStates Bank (i) holds each Fund's securities and cash items, (ii)
makes receipts and disbursements of money on behalf of each Fund, (iii) collects
and receives all income and other payments and distributions on account of the
Funds' securities, and (iv) 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 Fund's 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.
Transfer Agency Agreement
State Street Bank and Trust Company (the "Transfer Agent") provides
each Fund with transfer agency, dividend disbursing, custodial services for
certain retirement plans, agency services in connection with certain other
activities and accounting services under the terms of the Transfer Agency and
Service Agreement. Under this Agreements, the Transfer Agent has agreed to (i)
issue and redeem shares of each Fund, (ii) forward dividends and distributions
to shareholders, (iii) maintain each Fund's books of original entry, (iv)
maintain shareholder accounts, (v) compute the Funds' net asset value per share
and calculate the Funds' net income, and (vi) perform other related services.
Fees
For the services provided under the retail Transfer Agency Agreement,
the Transfer Agent may receive fees from each Fund. Such fees are based upon
relative asset values and shareholder accounts, and may include certain
transaction charges and out-of-pocket expenses.
B-63
<PAGE>
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 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 regulations, the Adviser(s) and the Distributor will reimburse
the Fund by the amount of such excess in proportion to their respective fees.
Certain of each Fund's expenses may be reduced because the regulations
in various states where Fund Shares may be qualified for sale impose limitations
on the annual expense ratio of a Fund. For example, under California law, a
Fund's aggregate annual expenses (excluding brokerage commissions, interest,
taxes, and extraordinary expenses such as legal claims, liabilities, litigation
costs and indemnification related thereto) may not exceed 2.5% of the first $30
million of its average daily net assets; 2.0% of the next $70 million of average
daily net assets; and 1.5% of average daily net assets in excess of $100
million. The Funds may also seek to qualify their Shares in other jurisdictions
which impose expense limitations.
To the Company's knowledge, as of the date hereof, there are no state
expense limitations applicable to any Fund. 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
B-64
<PAGE>
to give any information or make any representation other than those contained in
the Prospectuses and this Statement of Additional Information.
B-65
<PAGE>
APPENDIX
- All Funds -
Rated Investments
Bonds
Excerpts from Moody's Investors Service, Inc. ("Moody's") descriptions
of its three highest bond 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, fluctuation 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 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.
Modifiers 1, 2, or 3: Moody's applies numerical modifiers with respect
to bonds rated "Aa" or "A". The modifier 1 indicates that the bond being rated
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 bond ranks in the
lower end of its generic rating category.
Excerpts from Standard & Poor's Corporation ("S&P") descriptions of its
three highest bond ratings:
"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 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" has an adequate capacity to pay interest and
repay principal. Whereas such issues normally exhibit 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.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the "AA" or "A" ratings may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within these major rating
categories.
B-66
<PAGE>
Notes
The following summarizes the highest ratings assigned by Moody's to
municipal notes and variable rate demand obligations:
"MIG-1/VMIG-1": Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support, or demonstrated broad-based access to the market for
refinancing.
The following summarizes the two highest ratings assigned by S&P to
municipal notes:
"SP-1": This is the highest rating assigned by S&P to municipal notes
and indicates very strong or strong capacity to pay interest and repay
principal. Those issues determined to possess overwhelming safety
characteristics are given a plus (+) designation.
"SP-2": Issues of this rating display a satisfactory capacity to pay
interest and repay principal, although to a lesser degree than "SP-1" issues.
Commercial Paper
Commercial paper ratings of Moody's are current assessments of the
ability of issuers to repay punctually senior debt obligations which have an
original maturity of no more than one year.
"Prime-1": The rating "Prime-1", or "P-1", is the highest commercial
paper rating assigned by Moody's. These issues (or related supporting
institutions) are considered to have a superior capacity for repayment of
short-term debt obligations.
"Prime-2": The rating "Prime-2", or "P-2", indicates that the issues
(or related supporting institutions) have a strong capacity for repayment of
short-term debt obligations. This will normally be evidenced by many of the
characteristics of "Prime- 1" rated issues, but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
"A-1": This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted "A-1+."
"A-2": This rating indicates that capacity for timely payment is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1." 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 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.
B-67
<PAGE>
FINANCIAL STATEMENTS
- All Funds -
The following are the audited financial statements for the fiscal year
ended June 30, 1995, appearing in CoreFunds' 1995 Annual Reports to Shareholders
and unaudited financial statements as of December 31, 1995 appearing in
CoreFunds' 1995 Semi-Annual Report to Shareholders. For the audited financial
statements, the reports of Ernst & Young LLP, independent accountants, appears
therein.
For the Equity, Special Equity, Bond and Short Term Income Funds,
auditied financial statements for the fiscal year ended October 31, 1995
appearing in Conestoga Funds 1995 Annual Report of Shareholders and the reports
thereon of Coopers & Lybrand LLP, independent accountants, also appears therein.
FS-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS COREFUND
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statements of net assets of the Growth
Equity Fund, Value Equity Fund, Equity Index Fund, Balanced Fund, Government
Income Fund, Intermediate Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, Cash Reserve, Treasury Reserve, and Tax-Free
Reserve and the schedules of investments and statements of assets and
liabilities of the International Growth Fund, Intermediate Municipal Bond
Fund, and Global Bond Fund of CoreFunds, Inc. (the "Fund") as of June 30,
1995, and the related statements of operations for the period then ended, and
the statements of changes in net assets and the financial highlights for each
of the periods 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 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
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, 1995 and confir
mation of securities not held by the Custodian by correspondence with others.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Growth Equity Fund, Value Equity Fund, Equity Index Fund,
International Growth Fund, Balanced Fund, Government Income Fund,
Intermediate Bond Fund, Intermediate Municipal Bond Fund, Global Bond Fund,
Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund, Cash
Reserve, Treasury Reserve, and Tax-Free Reserve of the Fund at June 30, 1995,
the results of their operations for the period then ended, the changes in
their net assets and the financial highlights for each of the periods
presented herein, in conformity with generally accepted accounting
principles.
Philadelphia, Pennsylvania
August 14, 1995
/s/ Ernst & Young LLP
Ernst & Young LLP
24
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
GROWTH EQUITY FUND
[GRAPH]
% of Total Portfolio Investments
Technology 36%
Healthcare 19%
Consumer Cyclical 18%
Financial 12%
Consumer Staples 6%
Capital Goods 4%
Energy 3%
Utilities 2%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 91.4%
BANKS -- 5.0%
Bank of New York 50,591 $ 2,042
Citicorp 16,000 926
Fleet Financial Group 24,000 891
JP Morgan 12,000 842
-----------
4,701
-----------
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 4.5%
Capital Cities ABC 8,900 933
Comcast, Cl A Special 88,600 1,645
Tele-Communications, Cl A* 70,393 1,650
-----------
4,228
-----------
COMMUNICATIONS EQUIPMENT -- 4.9%
General Instrument* 45,902 1,761
Qualcomm* 48,400 1,673
U.S. Robotics* 10,053 1,096
-----------
4,530
-----------
<PAGE>
COMPUTERS & SOFTWARE SERVICES -- 2.9%
Hewlett Packard 13,426 1,000
Silicon Graphics* 43,884 1,750
-----------
2,750
-----------
DRUGS -- 16.4%
Abbott Laboratories 38,600 1,563
Amgen* 25,932 2,086
Glaxo PLC (ADR) 74,000 1,804
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
DRUGS, (continued)
Johnson & Johnson 29,800 $ 2,015
Merck 36,532 1,790
Schering Plough 40,892 1,804
Smith Kline Beecham (ADR) 48,550 2,199
Warner Lambert 24,050 2,077
-----------
15,338
-----------
ENTERTAINMENT -- 4.0%
Circus Circus Enterprises* 25,253 890
Disney 15,764 877
Mirage Resorts* 64,200 1,966
-----------
3,733
-----------
FINANCIAL SERVICES -- 2.9%
American Express 24,000 843
Federal National Mortgage 19,914 1,879
-----------
2,722
-----------
FOOD, BEVERAGE & TOBACCO -- 5.4%
ConAgra 23,100 806
CPC International 27,100 1,673
PepsiCo 38,450 1,755
Sara Lee 28,500 812
-----------
5,046
-----------
HOTELS & LODGING -- 3.6%
Hilton Hotels 22,600 1,588
Promus Companies* 45,100 1,759
-----------
3,347
-----------
INSURANCE -- 2.9%
American International Group 10,600 1,208
<PAGE>
Chubb 18,389 1,474
-----------
2,682
-----------
MACHINERY -- 3.3%
Emerson Electric 12,900 922
General Electric 17,589 992
Lam Research* 18,640 1,193
-----------
3,107
-----------
MEDICAL PRODUCTS & SERVICES -- 1.0%
Health Management, Cl A* 32,900 962
-----------
MISCELLANEOUS BUSINESS SERVICES -- 12.4%
Cisco Systems* 37,000 1,871
Computer Sciences* 47,494 2,701
CUC International* 43,008 1,806
First Data 42,500 2,417
Microsoft* 11,316 1,023
Oracle Systems* 46,083 1,780
-----------
11,598
-----------
PETROLEUM & FUEL PRODUCTS -- 0.9%
Atlantic Richfield 7,200 790
-----------
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
----
25
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
PETROLEUM REFINING -- 1.8%
Amoco 12,745 $ 849
Mobil 8,870 852
-----------
1,701
<PAGE>
-----------
PRINTING & PUBLISHING -- 1.0%
Time Warner 21,675 891
-----------
PROFESSIONAL SERVICES -- 1.9%
Paychex 49,350 1,789
-----------
RETAIL -- 1.1%
McDonalds 26,200 1,025
-----------
SEMICONDUCTORS/INSTRUMENTS -- 4.3%
Amphenol, Cl A* 33,497 976
Intel 18,104 1,146
Linear Technology 15,971 1,054
Molex 22,075 855
-----------
4,031
-----------
TELEPHONES & TELECOMMUNICATION -- 11.2%
Airtouch Communications* 66,600 1,898
ALC Communications* 40,066 1,808
Glenayre Technologies* 38,725 1,976
LCI International* 41,217 1,262
MFS Communications* 48,356 1,559
Mobile Telecommunication* 70,152 1,920
-----------
10,423
-----------
TOTAL COMMON STOCK
(Cost $70,790,326) 85,394
-----------
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 7.2%
Goldman Sachs 6.05%, dated
06/30/95, matures 07/03/95,
repurchase price $2,241,129
(collateralized by U.S.
Treasury Note, par value
$2,335,000, 4.75%, matures
08/31/98: market value,
$2,328,105) $ 2,240 $ 2,240
Republic New York City 6.07%,
dated 06/30/95, matures
07/03/95, repurchase price
$2,240,133 (collateralized by
<PAGE>
U.S. Treasury Note, par value
$2,235,000, 7.5%, matures
12/31/96: market value
$2,285,288) 2,239 2,239
Swiss Bank 6.12%, dated
06/30/95, matures 07/03/95,
repurchase price $2,240,142
(collateralized by U.S.
Treasury Note, par value
$2,240,000, 7.875%, matures
06/30/96: market value
$2,283,904) 2,239 2,239
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,718,000) 6,718
-----------
TOTAL INVESTMENTS -- 98.6%
(Cost $77,508,326) 92,112
-----------
TOTAL OTHER ASSETS AND
LIABILITIES, NET -- 1.4% 1,276
-----------
NET ASSETS:
Portfolio shares -- Series A ($0.001 par value -- 100 million authorized)
based on
8,171,138 outstanding shares 78,691
Portfolio shares -- Series B ($0.001 par value -- 100 million authorized)
based on
182,970 outstanding shares 1,638
Accumulated Net Realized Loss on
Investments (1,547)
Net Unrealized Appreciation on
Investments 14,604
Undistributed Net Investment
Income 2
-----------
TOTAL NET ASSETS -- 100.0% $ 93,388
-----------
-----------
NET ASSET VALUE & REDEMPTION
PRICE PER SHARE
SERIES A $11.18
-----------
-----------
SERIES B $11.17
-----------
<PAGE>
-----------
</TABLE>
*Non-income producing security
- ---- ADR -- American Depository Receipt
26 See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
[GRAPH]
% of Total Portfolio Investments
Capital Goods 28%
Consumer Cyclical 26%
Financial 17%
Energy 9%
Basic Goods 7%
Utilities 5%
Transportation 4%
Staples 3%
Equivalents 1%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 99.4%
AEROSPACE & DEFENSE -- 4.3%
Loral 11,200 $ 580
Rockwell International 20,000 915
-----------
1,495
-----------
AIR TRANSPORTATION -- 1.2%
Southwest Airlines 18,100 432
-----------
AIRCRAFT -- 3.4%
Boeing 11,200 701
Sundstrand 8,000 478
-----------
1,179
<PAGE>
-----------
AUTOMOTIVE -- 3.1%
Allied Signal 24,500 1,090
-----------
BANKS -- 4.0%
Bank of New York 16,000 646
First Union 8,000 362
Park National 8,000 389
-----------
1,397
-----------
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
CHEMICALS -- 1.6%
FMC* 8,000 $ 538
-----------
DRUGS -- 5.3%
Caremark International 36,800 735
Carter-Wallace 60,000 683
Johnson & Johnson 6,000 406
-----------
1,824
-----------
ELECTRICAL SERVICES -- 4.0%
American Electric Power 20,000 702
Peco Energy 25,000 691
-----------
1,393
-----------
FINANCIAL SERVICES -- 11.5%
Caterpillar 9,500 610
Dial 14,300 354
Franklin Resources 20,000 890
Merrill Lynch 19,000 998
Salomon 28,600 1,147
-----------
3,999
-----------
FOOD, BEVERAGE & TOBACCO -- 2.0%
PepsiCo 15,000 684
-----------
GAS/NATURAL GAS -- 1.0%
<PAGE>
Enron 10,000 351
-----------
GLASS PRODUCTS -- 2.2%
Corning 23,200 760
-----------
HOUSEHOLD PRODUCTS -- 1.5%
Sherwin Williams 14,500 517
-----------
INSURANCE -- 4.0%
American International Group 3,600 410
Progressive of Ohio 25,000 960
-----------
1,370
-----------
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
--------
27
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE EQUITY FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
MACHINERY -- 4.7%
Emerson Electric 10,600 $ 758
Harnischfeger Industries 25,000 866
-----------
1,624
-----------
MEDICAL PRODUCTS &
SERVICES -- 6.8%
Columbia/HCA Healthcare 19,900 860
Manor Care 23,100 673
Varian Associates 15,000 829
-----------
2,362
-----------
<PAGE>
PAPER & PAPER PRODUCTS -- 5.9%
Avery Dennison 15,000 600
Mead 12,900 765
Minnesota Mining & Manufacturing 11,800 676
-----------
2,041
-----------
PETROLEUM & FUEL
PRODUCTS -- 6.1%
Anadarko Petroleum 20,000 863
Atlantic Richfield 7,000 768
Western Atlas 11,000 488
-----------
2,119
-----------
PETROLEUM REFINING -- 3.0%
Mobil 11,000 1,056
-----------
PROFESSIONAL SERVICES -- 1.8%
Flight Safety International 13,000 634
-----------
RAILROADS -- 3.0%
Conrail 18,900 1,051
-----------
<CAPTION>
- ------------------------------------------------------------
Description Shares/Par (000) Value (000)
- --------------------------------------------------------------
<S> <C> <C>
RETAIL -- 14.8%
Bombay* 50,000 $ 394
Circuit City Stores 25,500 806
Heilig-Meyers 31,200 796
Price/Costco* 32,000 520
Sears Roebuck 18,000 1,078
Talbots 10,000 398
Toys R US* 15,000 439
Wendy's International 40,000 715
-----------
5,146
-----------
RUBBER AND PLASTICS
FOOTWEAR -- 2.1%
Nike, Cl B 8,500 714
-----------
SEMI-CONDUCTORS/
INSTRUMENTS -- 2.1%
<PAGE>
AMP 17,000 718
-----------
TOTAL COMMON STOCK
(Cost $29,816,002) 34,494
-----------
REPURCHASE AGREEMENTS -- 1.6%
Goldman Sachs 6.05%, dated
06/30/95, matures
07/03/95, repurchase price
$283,143 (collateralized
by U.S. Treasury Note, par
value $295,000, 4.375%,
matures 08/31/98: market
value $294,129) $ 283 283
-----------
Swiss Bank 6.12%, dated
06/30/95, matures
07/03/95, repurchase price
$282,144 (collateralized
by U.S. Treasury Note, par
value $280,000, 7.875%,
matures 06/30/96: market
value $285,488) 282 282
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $565,000) 565
-----------
</TABLE>
- ------
28 See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Value (000)
- -------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS -- 101.0%
Cost $30,381,002) $ 35,059
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET -- (1.0%) (348)
-----------
<PAGE>
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 25 million authorized)
based on
2,173,174 outstanding shares 26,113
Portfolio Shares -- Series B ($0.001 par value -- 25 million authorized)
based on
259,425 outstanding shares 2,357
Accumulated Net Realized Gain on
Investments 1,563
Net Unrealized Appreciation on
Investments 4,678
-----------
TOTAL NET ASSETS -- 100.0% $ 34,711
-----------
-----------
NET ASSET VALUE & REDEMPTION PRICE
PER SHARE
SERIES A $14.27
-----------
-----------
SERIES B $14.29
-----------
-----------
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
--------
29
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
[GRAPH]
% of Total Portfolio Investments
Consumer Cyclicals 15%
Consumer Staples 12%
Utilities 12%
Finance 11%
Technology 11%
Energy 10%
Healthcare 9%
<PAGE>
Capital Goods 8%
Basic Material 7%
Miscellaneous 3%
Transportation 2%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 99.8%
AEROSPACE & DEFENSE -- 0.9%
Lockheed Martin 4,382 $ 276
Loral 1,900 98
Raytheon 3,000 233
Rockwell International 5,763 264
TRW 1,500 120
-----------
991
-----------
AGRICULTURE -- 0.1%
Pioneer Hi-Bred International 2,500 105
-----------
AIR TRANSPORTATION -- 0.6%
AMR* 1,800 134
Delta Air Lines 1,000 74
Federal Express* 1,300 79
Southwest Airlines 3,300 79
UAL* 1,300 182
US Air Group* 15,300 178
-----------
726
-----------
AIRCRAFT -- 1.4%
Aviall 375 3
Boeing 8,937 560
General Dynamics 1,700 75
McDonnell Douglas 2,700 207
Northrop Grumman 1,700 89
Parker Hannifin 2,850 103
Teledyne 3,700 91
Textron 2,000 116
United Technologies 4,300 336
-----------
1,580
-----------
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
<PAGE>
APPAREL/TEXTILES -- 0.2%
Liz Claiborne 5,000 $ 106
Russell 3,100 89
V. F. 1,500 81
-----------
276
-----------
AUTOMOTIVE -- 2.6%
Allied Signal 7,700 343
Chrysler 9,500 455
Echlin 2,500 87
Fleetwood Enterprises 4,055 80
Ford Motor 24,300 723
General Motors 20,100 942
Genuine Parts 2,800 106
Varity* 3,260 143
-----------
2,879
-----------
BANKS -- 5.7%
Banc One 12,222 394
Bank of Boston 2,900 109
Bankamerica 11,372 598
Bankers Trust New York 1,800 112
Barnett Banks 2,200 113
Boatman Bancshares 4,600 162
Chase Manhattan 4,200 197
Chemical Banking 8,000 378
Citicorp 10,500 608
First Chicago 2,100 126
First Fidelity Bancorp 1,800 106
First Interstate Bancorp 1,900 152
First Union 5,500 249
Fleet Financial Group 3,100 115
Golden West Financial 1,800 85
Great Western Financial 3,800 78
H.F. Ahmanson 3,600 79
J P Morgan 5,800 407
Keycorp 7,800 245
MBNA 3,300 111
NBD Bancorp 3,600 115
NationsBank 7,200 386
Norwest 10,900 313
PNC Bank 8,900 235
Shawmut National 3,700 118
Suntrust Banks 4,200 245
U. S. Bancorp 2,900 70
U.S.T. 4,600 137
Wachovia 3,900 139
Wells Fargo 1,500 270
-----------
6,452
-----------
BEAUTY PRODUCTS -- 1.8%
<PAGE>
Alberto Culver 3,200 97
Avon Products 1,600 107
Colgate Palmolive 3,346 245
Dial 3,300 82
International Flavors 2,500 124
Procter & Gamble 19,700 1,416
-----------
2,071
-----------
</TABLE>
- ----- * Non-income producing security
30 See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 1.1%
Capital Cities ABC 4,000 $ 419
CBS 1,500 101
Comcast 5,400 100
Interpublic Group 2,200 83
Tele-Communications, Cl A* 16,000 375
Viacom Variable Common Rights* 5,600 8
Viacom Voting* 448 21
Viacom, Cl B Non-Voting* 3,394 157
-----------
1,264
-----------
BUILDING & CONSTRUCTION -- 0.2%
Fluor 1,900 99
McDermott International 3,400 82
Owens Corning Fiberglas* 2,800 103
-----------
284
-----------
CHEMICALS -- 3.5%
Air Products & Chemical 2,600 145
Albemarle 3,750 59
Cytec Industries* 842 34
Dow Chemical 7,250 521
Dupont (E.I.) De Nemour 15,200 1,045
Eastman Chemical 2,850 170
First Mississippi 3,700 126
FMC* 1,400 94
<PAGE>
Great Lakes Chemical 1,600 96
Hercules 2,700 132
Lilly Eli 7,800 612
Monsanto 3,900 351
Nalco Chemical 2,300 84
Praxair 5,200 130
Rohm & Haas 1,500 82
Union Carbide 3,400 113
W.R. Grace 2,100 129
-----------
3,923
-----------
COMMUNICATIONS EQUIPMENT -- 2.1%
Andrew* 2,400 139
Cisco Systems* 7,200 364
DSC Communications* 2,591 120
ITT 2,600 306
Motorola 16,400 1,101
Northern Telecom 5,700 208
Scientific-Atlantic 3,400 75
-----------
2,313
-----------
COMPUTERS & SERVICES -- 6.4%
Amdahl* 8,100 90
Apple Computer 2,600 121
Autodesk 2,400 103
Automatic Data Processing 3,700 233
Ceridian* 3,000 111
Compaq Computer* 8,700 395
Computer Associates International 3,700 251
Computer Sciences* 1,900 108
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
COMPUTERS & SERVICES, (continued)
Digital Equipment* 3,900 $ 159
Harris 1,600 83
Harris Computer Systems* 80 1
Hewlett Packard 14,200 1,058
International Business Machines 16,800 1,612
Lotus Development* 1,800 115
Microsoft* 16,800 1,518
Novell* 8,300 165
Oracle Systems* 11,450 442
Pitney Bowes 5,000 192
Sun Microsystems* 2,800 136
Tandem Computers* 5,986 97
Tandy 1,800 93
Unisys* 7,400 80
-----------
<PAGE>
7,163
-----------
CONTAINERS & PACKAGING -- 0.2%
Crown Cork & Seal* 2,100 105
Newell 3,600 88
-----------
193
-----------
DRUGS -- 4.8%
Allergan 3,200 87
Alza, Cl A* 3,400 79
American Home Products 8,000 619
Amgen* 3,000 241
Bristol-Myers Squibb 13,620 928
Merck 34,100 1,671
Pfizer 8,800 813
Schering Plough 10,900 481
Therapeutic Discovery* 190 1
Upjohn 3,900 148
Warner Lambert 3,700 320
-----------
5,388
-----------
ELECTRICAL EQUIPMENT -- 2.8%
Emerson Electric 6,300 450
General Electric 46,400 2,616
Westinghouse Electric 8,000 117
-----------
3,183
-----------
ELECTRICAL SERVICES -- 3.4%
American Electric Power 4,200 148
Baltimore Gas & Electric 6,050 151
Carolina Power & Light 3,600 109
Central & South West 7,400 194
Consolidated Edison New York 5,300 156
Detroit Edison 3,300 97
Dominion Resources of Virginia 3,500 128
Duke Power 4,600 191
Entergy 5,200 125
FPL Group 6,100 236
Houston Industries 2,900 122
Niagara Mohawk Power 6,200 91
Northern States Power 1,700 78
Ohio Edison 4,100 93
Pacific Gas & Electric 11,500 334
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
--------
31
<PAGE>
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
EQUITY INDEX FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
ELECTRICAL SERVICES, (continued)
Pacificorp 6,400 $ 120
PECO Energy 5,000 138
Public Service Enterprise Group 5,500 153
SCEcorp 21,000 360
Southern 17,100 382
Texas Utilities 5,100 175
Unicom 4,800 128
Union Electric Power 2,300 86
-----------
3,795
-----------
ENTERTAINMENT -- 0.8%
King World Productions* 2,600 105
Walt Disney 14,000 779
-----------
884
-----------
ENVIRONMENTAL SERVICES -- 0.5%
Browning Ferris Industries 5,900 213
WMX Technologies 12,900 366
-----------
579
-----------
FINANCIAL SERVICES -- 2.5%
American Express 12,600 443
Beneficial 2,400 106
Dean Witter Discover 8,341 392
Federal Home Loan Mortgage
Corporation 4,700 323
Federal National Mortgage
Association 8,200 774
Household International 2,100 104
Lehman Brothers Holdings 2,520 55
Mellon Bank 5,700 237
Merrill Lynch 4,600 242
Providian 2,300 83
Salomon 2,500 100
-----------
2,859
<PAGE>
-----------
FOOD, BEVERAGE & TOBACCO -- 8.7%
American Brands 4,500 179
Anheuser Busch 6,900 392
Archer Daniels Midland 22,826 425
Brown Forman, Cl B 2,700 90
Campbell Soup 6,800 333
Coca Cola 34,900 2,226
Conagra 5,600 195
Coors (Adolph), Cl B 5,600 92
CPC International 3,400 210
General Mills 3,600 185
H J Heinz 5,700 253
Hershey Foods 2,000 111
Kellogg 6,100 435
Pepsico 23,000 1,049
Philip Morris Companies 24,300 1,807
Quaker Oats 3,000 99
Ralcorp Holdings* 1,633 37
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO, (continued)
Ralston-Ralston Purina Group 2,386 $ 122
RJR Nabisco Holdings 4,207 117
Sara Lee 12,600 359
Seagram 10,400 360
Unilever N V 4,200 547
Whitman 5,100 99
Wrigley, William Jr 2,600 121
-----------
9,843
-----------
GAMES AND TOYS -- 0.2%
Hasbro 2,400 76
Mattel 5,000 130
-----------
206
-----------
GAS/NATURAL GAS -- 0.9%
Coastal 2,500 76
Columbia Gas Systems* 3,500 111
Consoldiated Natural Gas 2,100 79
Enron 5,600 197
Nicor 3,700 99
Pacific Enterprises 3,800 93
Panhandle Eastern 4,200 102
Peoples Energy 4,100 106
Sonat 2,300 70
Williams 2,500 87
-----------
<PAGE>
1,020
-----------
GLASS PRODUCTS -- 0.5%
Corning 6,100 200
PPG Industries 7,300 314
-----------
514
-----------
HOTELS & LODGING -- 0.5%
Hilton Hotels 1,100 77
Marriott International 11,000 395
Promus* 2,300 90
-----------
562
-----------
HOUSEHOLD FURNITURE &
FIXTURES -- 0.5%
Armstrong World Industries 1,600 80
Black and Decker 3,500 108
Masco 3,500 95
Sherwin Williams 2,300 82
Snap-On Tools 2,700 105
Stanley Works 1,800 68
-----------
538
-----------
HOUSEHOLD PRODUCTS -- 0.7%
Clorox 1,300 85
Gillette 11,800 526
Maytag 5,600 90
Whirlpool 1,700 94
-----------
795
-----------
</TABLE>
- ----- * Non-income producing security
32 See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Shares Value (000)
- -------------------------------------------------------------
<S> <C> <C>
INSURANCE -- 3.3%
Aetna Life & Casualty 2,500 $ 157
Alexander and Alexander
Services 4,400 105
American General 5,400 182
<PAGE>
American International Group 8,812 1,005
Chubb 2,000 160
Cigna 1,600 124
First Colony 2,508 60
General Re 1,900 254
Jefferson-Pilot 1,400 77
Lincoln National 2,100 92
Marsh & McLennan 1,700 138
Safeco 1,400 80
St. Paul 11,327 558
Torchmark 1,800 68
Transamerica 1,600 93
Travelers 6,481 284
Unum 1,700 80
USF & G 5,500 89
USLife 2,600 105
-----------
3,711
-----------
LUMBER & WOOD PRODUCTS -- 0.5%
Georgia Pacific 2,000 174
Louisiana Pacific 2,500 66
Potlatch 2,100 88
Rayonier 1,000 36
Weyerhaeuser 4,606 217
-----------
581
-----------
MACHINERY -- 1.6%
Caterpillar 6,400 409
Cooper Industries 2,600 103
Deere 1,900 163
Dover 1,400 102
Eaton 1,700 99
Gardner Denver Machinery* 272 5
Harnischfeger Industries 3,300 114
Illinois Tool Works 2,500 138
Ingersoll Rand 2,400 92
National Service Industry 3,000 87
SPX 9,000 102
Tenneco 5,000 230
Tyco International 1,700 92
W W Grainger 1,200 71
-----------
1,807
-----------
MEASURING DEVICES -- 0.6%
General Signal 2,100 83
Honeywell 2,900 125
Johnson Controls 1,500 85
Millipore 1,700 115
Pall 4,500 100
Perkin Elmer 3,725 132
-----------
<PAGE>
640
-----------
<CAPTION>
- -------------------------------------------------------------
Description Shares Value (000)
- -------------------------------------------------------------
<S> <C> <C>
MEDICAL PRODUCTS &
SERVICES -- 2.0%
Bausch & Lomb 2,000 $ 83
Becton Dickinson 1,700 99
Beverly Enterprises* 6,600 82
Biomet* 5,800 90
C R Bard 3,500 105
Columbia/HCA Healthcare 21,132 913
Community Psychiatric* 8,300 93
Manor Care 3,100 90
Medtronic 2,600 201
St. Jude Medical 1,900 95
Tenet Healthcare* 4,100 59
U.S. Healthcare 3,600 110
United Healthcare 3,700 153
United States Surgical 2,900 61
-----------
2,234
-----------
MEDICAL SUPPLIES -- 2.2%
Abbott Laboratories 21,100 855
Baxter International 7,800 284
Caremark International 600 12
Johnson & Johnson 18,400 1,243
Mallinckrodt Group 3,425 122
-----------
2,516
-----------
METALS & MINING -- 0.9%
Alcan Aluminum 5,000 151
Aluminum America 4,000 200
Asarco 3,300 101
Cyprus AMAX Minerals 2,400 68
Englehard 2,800 120
Inco 2,600 73
Newmont Mining 1,900 80
Phelps Dodge 1,600 94
Reynolds Metal 1,500 78
Santa Fe Pacific Gold* 2,519 31
-----------
996
-----------
MISCELLANEOUS BUSINESS
SERVICES -- 0.3%
Ecolab 3,300 81
Ogden 9,600 210
<PAGE>
-----------
291
-----------
MISCELLANEOUS CHEMICAL
PRODUCTS -- 0.1%
Morton International 3,300 96
Raychem 1,900 73
-----------
169
-----------
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
--------
33
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
EQUITY INDEX FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS CONSUMER
SERVICES -- 0.2%
H & R Block 2,400 $ 98
Service International 2,900 92
-----------
190
-----------
PAPER & PAPER PRODUCTS -- 2.3%
Alco Standard 1,200 96
Avery Dennison 2,300 92
Bemis 3,500 91
Boise Cascade 2,800 113
Champion International 2,200 115
Federal Paper Board 2,700 96
International Paper 3,500 300
James River 3,200 88
Kimberly Clark 3,600 216
Mead 1,600 95
Minnesota Mining &
Manufacturing 12,800 733
Moore 4,100 91
Scott Paper 3,400 168
<PAGE>
Stone Container* 3,800 81
Temple Inland 1,400 67
Union Camp 1,550 90
Westvaco 2,100 93
-----------
2,625
-----------
PETROLEUM REFINING -- 9.8%
Amerada Hess 2,100 103
Amoco 15,800 1,053
Ashland Oil 2,100 74
Atlantic Richfield 4,500 494
Baker Hughes 4,000 82
Brunswick 3,500 60
Burlington Resources 2,900 107
Chevron 19,100 891
Dresser Industries 3,900 87
Enserch 6,600 113
Exxon 34,700 2,450
Halliburton 2,600 93
Helmerich & Payne 7,000 207
Kerr-McGee 1,500 80
Louisiana Land & Exploration 3,100 124
Mobil 11,500 1,104
Occidental Petroleum 6,900 158
Oryx Energy* 8,400 116
Pennzoil 1,500 71
Phillips Petroleum 5,900 197
Royal Dutch Petroleum 15,000 1,828
Santa Fe Energy Resources* 22,000 209
Schlumberger 6,400 398
Texaco 6,800 446
Unocal 6,400 177
USX Marathon Group 6,500 128
USX-U.S. Steel Group 1,900 65
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
PETROLEUM REFINING, (continued)
Western Atlas* 2,594 $ 115
-----------
11,030
-----------
PHOTOGRAPHIC EQUIPMENT &
SUPPLIES -- 0.8%
Eastman Kodak 7,100 430
Polaroid 2,300 94
Xerox 2,800 328
-----------
852
-----------
<PAGE>
PRECIOUS METALS -- 0.7%
Barrick Gold 12,000 303
Echo Bay Mines 23,200 209
Homestake Mining 6,800 112
Placer Dome 5,400 141
-----------
765
-----------
PRINTING & PUBLISHING -- 1.4%
American Greetings, Cl A 3,200 94
Deluxe 2,500 83
Donnelley R R & Sons 3,200 115
Dow Jones 5,600 207
Gannett 3,300 179
Knight-Ridder 1,500 85
McGraw-Hill 1,100 83
Meredith 3,800 96
New York Times, Cl A 3,200 75
Time Warner 9,900 408
Times Mirror, Cl A 3,100 74
Times Mirror, Cl C* 880 19
Tribune 1,500 92
-----------
1,610
-----------
PROFESSIONAL SERVICES -- 0.2%
Dun & Bradstreet 3,800 200
-----------
RAILROADS -- 1.0%
Burlington Northern 2,036 129
Conrail 1,800 100
CSX 2,400 180
Norfolk Southern 3,100 209
Santa Fe Pacific 4,200 107
Union Pacific 6,300 349
-----------
1,074
-----------
RETAIL -- 6.3%
Albertsons 6,400 190
American Stores 3,200 90
Bruno's 9,400 109
Circuit City Stores 3,000 95
Darden Restaurants* 3,600 39
Dayton Hudson 1,600 115
Dillard Department Stores 2,700 79
Gap 3,300 115
Giant Food 3,900 111
Great Atlantic and Pacific 4,000 106
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
<PAGE>
- -----
34
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Shares Value (000)
- -------------------------------------------------------------
<S> <C> <C>
RETAIL, (continued)
Harcourt General 2,300 $ 97
Home Depot 11,866 482
J.C. Penney 6,500 312
K Mart 9,200 135
Kroger* 3,100 83
Limited 9,500 209
Lowe's 3,500 105
May Department Stores 6,900 287
McDonald's 18,900 739
Melville 2,400 82
Mercantile Stores 2,200 102
Nordstrom 1,800 74
Pep Boys -- Manny, Moe & Jack 3,226 86
Price/Costco* 4,900 80
Rite Aid 3,700 95
Sears Roebuck 12,100 724
TJX Companies 6,700 89
Toys R US* 6,500 190
Wal Mart Stores 62,300 1,667
Walgreen 2,800 140
Wendy's International 5,900 105
Winn Dixie Stores 1,700 98
Woolworth* 7,500 113
-----------
7,143
-----------
RUBBER & PLASTIC -- 0.5%
Cooper Tire & Rubber 3,000 73
Goodrich B F 2,100 113
Goodyear Tire & Rubber 3,380 139
Premark International 1,700 88
Rubbermaid 6,300 175
-----------
588
-----------
SEMICONDUCTORS/INSTRUMENTS -- 2.0%
Advanced Micro Devices* 2,800 102
AMP 4,800 203
Intel 23,400 1,481
<PAGE>
National Semiconductor* 4,400 122
Texas Instruments 2,600 348
-----------
2,256
-----------
SHOES -- 0.2%
Nike, Cl B 1,700 143
Reebok International 2,000 68
-----------
211
-----------
<CAPTION>
- -------------------------------------------------------------
Description Shares Value (000)
- -------------------------------------------------------------
<S> <C> <C>
STEEL & STEEL WORKS -- 0.3%
Bethlehem Steel* 5,900 $ 96
Nucor 2,000 107
Worthington Industries 4,600 94
-----------
297
-----------
TELEPHONES & TELECOMMUNICATION -- 8.4%
AT&T 48,836 2,596
Airtouch Communications* 24,900 710
Ameritech 14,400 634
Bell Atlantic 11,400 638
Bellsouth 14,700 933
Cox* 2,399 46
GTE 28,100 959
MCI Communications 17,358 382
NYNEX 11,000 443
Pacific Telesis Group 13,700 366
SBC Telecommunications 17,976 856
Sprint 10,800 363
U S West 11,900 495
-----------
9,421
-----------
TRUCKING -- 0.3%
Cummins Engine 1,900 83
Paccar 1,500 70
Pittston Services Group 3,700 89
Roadway Services 1,300 61
Ryder System 1,500 36
-----------
339
-----------
WHOLESALE -- 0.3%
Fleming Companies 4,700 124
McKesson 900 42
Super-Valu 2,700 79
<PAGE>
Sysco 4,100 121
-----------
366
-----------
TOTAL COMMON STOCK
(Cost $92,407,326) 112,299
-----------
CONVERTIBLE PREFERRED STOCKS -- 0%
AIRCRAFT -- 0%
Teledyne Incorporated $1.20
Series E* 37 1
-----------
TOTAL CONVERTIBLE PREFERRED
STOCKS 1
-----------
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
--------
35
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- -------------------------------------------------------------
EQUITY INDEX FUND (concluded)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 0.6%
Goldman Sachs 6.05%, dated
06/30/95, matures 07/03/95,
repurchase price $353,178
(collateralized by U.S.
Treasury Note, par value
$370,000, 4.75%, matures
08/31/98: market value
$368,907) $ 353 $ 353
Sanwa Bank 6.15%, dated
06/30/95, matures 07/03/95,
repurchase price $353,181
(collateralized by U.S.
Treasury Note, par value
$350,000, 6.625%, matures
03/31/97: market value
<PAGE>
$365,825) 353 353
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $706,000) 706
-----------
TOTAL INVESTMENTS -- 100.4%
(Cost $93,113,326) 113,006
-----------
TOTAL OTHER ASSETS AND
LIABILITIES, NET -- (0.4%) (453)
-----------
NET ASSETS:
Portfolio shares ($0.001 par
value -- 500 million
authorized) based on 4,731,823
outstanding shares 92,048
Accumulated Net Realized Gain on
Investments 612
Net Unrealized Appreciation on
Investments 19,893
-----------
TOTAL NET ASSETS -- 100.0% $ 112,553
-----------
-----------
NET ASSET VALUE & REDEMPTION
PRICE PER SHARE $23.79
-----------
-----------
</TABLE>
* Non-income producing security
See accompanying notes to financial statements
- -----
36
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
INTERNATIONAL GROWTH FUND
[GRAPH]
<PAGE>
% of Total Portfolio Investments
Japan 34%
Europe 22%
United Kingdom 18%
Other Pacific Rim 16%
Smaller Markets 7%
Cash Equivalents 3%
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Description Shares Value (000)
- -----------------------------------------------------------
<S> <C> <C>
FOREIGN STOCKS -- 95.6%
ARGENTINA -- 0.5%
Buenos Aires Embotelladora ADR 4,200 $ 106
Capex GDS* 12,500 181
Compania Naviera Perez ADS 36,700 154
YPF Sociedad Anonima ADS 5,400 103
-----------
544
-----------
AUSTRALIA -- 1.3%
Broken Hill Proprietary 121,770 1,497
-----------
AUSTRIA -- 0.8%
Oest Elektrizatswirts Series A 5,047 370
Vienna International Airport 9,500 505
-----------
875
-----------
BELGIUM -- 0.5%
Kredietbank 2,600 615
-----------
<CAPTION>
- -----------------------------------------------------------
Description Shares Value (000)
- -----------------------------------------------------------
<S> <C> <C>
BRAZIL -- 1.1%
Compania Vale Rio Doce ADR 10,300 $ 395
Rhodia-Ster GDR 20,097 281
Telebras ADR 9,550 322
Usiminas ADR 18,600 205
-----------
1,203
-----------
CHILE -- 1.2%
Madeco ADR 14,830 426
<PAGE>
Maderas Y Sintecticos Sociedad
ADR 17,000 319
Sociedad Quimica Y Minera ADR 13,161 622
-----------
1,367
-----------
COLOMBIA -- 0.5%
Cementos Diamante GDS 18,800 536
-----------
ECUADOR -- 0.2%
La Cemento Nacional GDR 832 200
-----------
FRANCE -- 5.6%
AXA 18,500 999
Cie de Saint-Gobain 3,100 375
Imetal SA 3,887 457
L'Oreal 4,800 1,203
Schneider 12,800 1,013
Seita 35,000 1,052
Societe Nationale Elf Aquitaine 16,000 1,183
-----------
6,282
-----------
GERMANY -- 3.0%
Bayerische Motoren Werk 863 474
Mannesmann AG 4,300 1,315
Veba AG 4,000 1,571
-----------
3,360
-----------
HONG KONG -- 6.3%
Amoy Properties 952,000 837
China Light & Power 200,000 1,029
HSBC Holdings 123,501 1,584
Hutchison Whampoa 374,000 1,807
Swire Pacific 235,000 1,792
-----------
7,049
-----------
INDIA -- 1.2%
Himalayan Fund* 77,718 1,050
Himalayan Fund Warrants* 7,243 5
Indian Opportunities Fund* 29,000 352
-----------
1,407
-----------
</TABLE>
*Non-income producing security ADR -- American Depository Receipts ADS --
American Depository Shares GDR -- Global Depository Receipts GDS -- Global
Depository Shares IDR -- International Depository Receipts
<PAGE>
See accompanying notes to financial statements --------
37
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
INTERNATIONAL GROWTH FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
ISRAEL -- 0.7%
Near East Opportunities Fund* 80,000 $ 800
-----------
ITALY -- 1.6%
Rinascente 162,000 921
Telecom Italia 345,000 936
-----------
1,857
-----------
JAPAN -- 32.9%
Amano Corporation 47,000 555
Asahi Chemical Industries 198,000 1,301
Asahi Diamond Industrial 43,000 528
Canon Incorporated 93,000 1,515
Daifuku Company Limited 43,000 482
DDI Corporation 147 1,180
Eidensha Limited 27,000 331
Enplas 15,000 301
Hitachi Limited 163,000 1,625
Hitachi Metals 112,000 1,257
Honda Motor Company 79,000 1,212
Ito Yokado Company 22,000 1,160
Itochu Company 236,000 1,379
Kamigumi Company 102,000 1,023
Kirin Beverage 35,000 582
Kuraray Warrants* 360 117
Kyocera Corporation 21,000 1,730
Mabuchi Motor 9,000 620
Marui Company 67,000 1,067
Maspro Denkoh 12,000 241
Mitsubishi Heavy Industries 254,000 1,727
Mitsui Fudosan 101,000 1,157
Nippon Express 151,000 1,390
Nippon System Development 17,000 207
Nomura Securities 77,000 1,345
Organo 40,000 373
<PAGE>
Riso Kagaku Corporation 6,100 425
Rohm Company 37,000 1,913
Sankyo Company 61,000 1,418
Sekisui Warrants* 155 122
Shimachu 17,000 431
Shin-Etsu Chemical 83,000 1,459
Sony Corporation 24,000 1,153
Sumitomo Electric 109,000 1,299
Sumitomo Forestry 88,000 1,464
Sumitomo Trust & Banking 110,000 1,337
Tochigi Fuji Industrial 41,000 314
Tokio Marine & Fire Insurance 117,000 1,342
-----------
37,082
-----------
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
LUXEMBOURG -- 0.5%
Millicom International* 18,000 $ 533
-----------
MALAYSIA -- 2.6%
Arab-Malaysian Merchant Bank 106,000 1,261
Genting Berhad 114,000 1,127
Resorts World Berhad 88,000 516
-----------
2,904
-----------
NETHERLANDS -- 3.8%
Elsevier NV 131,750 1,556
International Nederlanden 22,700 1,256
International Nederlanden Rights* 26,500 37
Koninkijke PTT Nederland* 17,000 611
Polygram 14,500 857
-----------
4,317
-----------
SINGAPORE -- 3.8%
Development Bank of Singapore 88,000 1,002
First Capital Corporation 227,000 702
Jardine Matheson & Company ADR 156,800 1,152
Singapore Press 98,400 1,472
-----------
4,328
-----------
SOUTH AFRICA -- 1.4%
Iscor* 106,100 121
Malbak 50,000 316
Murray & Roberts* 34,500 199
Safmarine & Rennie Holding Limited 80,000 232
Sasol 35,000 336
<PAGE>
South African Brewery 12,000 342
-----------
1,546
-----------
SOUTH KOREA -- 0.6%
Korea Preferred Share Fund* 41,000 400
Seoul Access Trust IDR* 9 140
Seoul Excel Trust IDR* 18 186
-----------
726
-----------
SPAIN -- 1.7%
Banco de Santander 23,000 908
Fom de Const Y Contratas SA* 5,000 425
Repsol Petroleum SA 19,220 605
-----------
1,938
-----------
SWEDEN -- 1.3%
Electrolux 14,900 678
Stora Kopparbergs Series A 61,000 817
-----------
1,495
-----------
SWITZERLAND -- 3.7%
Nestle SA Registered 1,470 1,531
Roche Holding 210 1,354
Zurich Insurance 1,010 1,270
-----------
4,155
-----------
</TABLE>
* Non-income producing security
ADR -- American Depository Receipts
ADS -- American Depository Shares
GDR -- Global Depository Receipts
GDS -- Global Depository Shares
- ---- IDR -- International Depository Receipts
38 See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Description Shares/Par (000) Value (000)
- ---------------------------------------------------------------
<S> <C> <C>
TAIWAN -- 1.1%
<PAGE>
Taiwan Opportunities Fund* 130,000 $ 1,197
-----------
THAILAND -- 0.2%
Krung Thai Bank 42,000 170
-----------
UNITED KINGDOM -- 17.5%
Argyll Group 170,000 908
Barratt Development 377,000 1,097
British Airways 109,000 714
British Telecommunications 138,000 860
BTR Warrants* 265,000 259
Dixons Group 212,000 866
East Midlands Electricity 76,532 780
GKN 102,000 1,039
Glaxo Wellcome 106,000 1,300
Granada Group 124,000 1,198
Grand Metropolitan 189,000 1,158
Ladbroke 250,000 672
Lex Service 119,000 653
McKenchie 84,000 567
NFC 362,000 926
Reckitt & Coleman 118,000 1,244
Tomkins 361,000 1,291
TSB Group 258,000 992
Unilever 72,000 1,458
Wassall 168,750 697
Wolseley 196,000 1,081
-----------
19,760
-----------
TOTAL FOREIGN STOCKS
(Cost $102,618,242) 107,743
-----------
CONVERTIBLE BONDS -- 0.8%
JAPAN -- 0.8%
Daiwa International
2.000%, 03/31/98 80,000 954
-----------
TOTAL CONVERTIBLE BONDS
(Cost $973,449) 954
-----------
TOTAL INVESTMENTS -- 96.4%
(Cost $103,591,691) $ 108,697
-----------
-----------
</TABLE>
<PAGE>
*Non-income producing security ADR -- American Depository Receipts ADS --
American Depository Shares GDR -- Global Depository Receipts GDS -- Global
Depository Shares IDR -- International Depository Receipts
See accompanying notes to financial statements --------
39
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
BALANCED FUND
[GRAPH]
% of Total Portfolio Investments
Technology 23% Consumer Cyclicals 16% Healthcare 16%
Energy 11% Finance 10% Utilities 8% Capital Goods 7%
Consumer Staples 6% Basic Materials 2%
Transportation 1%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 60.3%
AEROSPACE & DEFENSE -- 1.0%
Loral 12,000 $ 621
-----------
BANKS -- 2.0%
Barnett Banks 11,000 564
J P Morgan 10,000 701
-----------
1,265
-----------
BEAUTY PRODUCTS -- 0.6%
Procter & Gamble 5,275 379
-----------
<PAGE>
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 3.2%
Capital Cities ABC 6,000 629
Comcast 42,522 789
Tele-Communications, Cl A* 25,200 591
-----------
2,009
-----------
COMMUNICATION -- 1.3%
Cisco Systems* 9,100 460
Qualcomm Incorporated* 10,000 346
-----------
806
-----------
<CAPTION>
- ------------------------------------------------------------
Description Shares Value (000)
- ------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS EQUIPMENT -- 3.7%
Amphenol -- C1 A* 21,600 $ 629
General Instrument 10,000 384
Glenayre Technologies* 16,350 834
U.S. Robotics* 4,600 501
-----------
2,348
-----------
COMPUTERS & SERVICES -- 1.6%
Hewlett Packard 7,400 552
Silicon Graphics* 12,500 498
-----------
1,050
-----------
DRUGS -- 6.9%
American Home Products 5,700 441
Amgen* 6,800 547
Chiron* 3,767 245
Glaxo PLC ADR 30,400 738
Merck 11,600 568
Schering Plough 13,800 609
Smith Kline Beecham ADR 16,000 724
Warner Lambert 6,150 531
-----------
4,403
-----------
ELECTRICAL EQUIPMENT -- 1.3%
Emerson Electric 5,750 411
General Electric 7,000 395
-----------
806
-----------
ELECTRICAL UTILITIES -- 3.5%
Central & South West 28,000 735
<PAGE>
Public Service Enterprise Group 26,900 746
Texas Utilities 21,900 753
-----------
2,234
-----------
ENTERTAINMENT -- 2.3%
Circus Circus Enterprises* 10,000 353
Walt Disney 8,500 473
Mirage Resorts* 20,000 612
-----------
1,438
-----------
FINANCIAL SERVICES -- 3.1%
American Express 14,200 499
Chelsea GCA Realty REIT 14,900 402
Federal National Mortgage
Association 7,200 680
Horizon Outlet Centers REIT 15,500 360
-----------
1,941
-----------
FOOD, BEVERAGE & TOBACCO -- 2.6%
Coca Cola 7,600 484
Conagra 12,000 419
Pepsico 8,000 365
Sara Lee 13,300 379
-----------
1,647
-----------
</TABLE>
* Non-income producing security
ADR -- American Depository Receipt
FHLMC -- Federal Home Loan Mortgage Corporation
GNMA -- Government National Mortgage Association
- ---- REIT -- Real Estate Investment Trust
40 See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Shares Value (000)
- -------------------------------------------------------------
<S> <C> <C>
HOTELS & LODGING -- 1.5%
Hilton Hotels 6,600 $ 464
Promus Companies* 12,100 472
-----------
936
<PAGE>
-----------
HOUSEHOLD FURNITURE & FIXTURES -- 0.5%
Masco 11,800 319
-----------
HOUSEHOLD PRODUCTS -- 0.7%
Gillette 10,600 473
-----------
INSURANCE -- 1.4%
American International Group 4,000 456
Chubb 5,300 425
-----------
881
-----------
MEASURING DEVICES -- 1.2%
Honeywell 17,000 733
-----------
MEDICAL PRODUCTS & SERVICES
-- 0.6%
Health Management -- Cl A* 13,050 382
-----------
MEDICAL SUPPLIES -- 1.9%
Abbott Laboratories 12,500 506
Johnson and Johnson 10,600 717
-----------
1,223
-----------
PAPER & PAPER PRODUCTS -- 0.9%
Scott Paper 11,800 584
-----------
PETROLEUM REFINING -- 6.7%
Amoco 7,500 500
Atlantic Richfield 5,875 645
Baker Hughes 24,000 492
Burlington Resources 12,500 461
Chevron 10,000 466
Exxon 10,300 726
Mobil 5,100 490
Texaco 7,000 459
-----------
4,239
-----------
PRINTING & PUBLISHING -- 0.7%
Time Warner 10,800 444
-----------
<CAPTION>
- -------------------------------------------------------------
Description Shares Value (000)
- -------------------------------------------------------------
<S> <C> <C>
PROFESSIONAL SERVICES -- 1.5%
First Data 7,000 $ 398
Paychex 15,000 544
-----------
<PAGE>
942
-----------
RAILROADS -- 0.7%
Conrail 8,300 462
-----------
RESTAURANT -- 0.8%
McDonald's 13,100 513
-----------
RETAIL -- 0.4%
Gap 7,500 262
-----------
SEMI-CONDUCTORS/INSTRUMENTS -- 3.2%
Intel 11,200 709
Lam Research* 9,909 634
Linear Technology 10,000 660
-----------
2,003
-----------
SERVICES-PREPACKAGED SOFTWARE -- 0.9%
Oracle Systems* 15,300 591
-----------
TELEPHONES &
TELECOMMUNICATION -- 3.6%
ALC Communications* 10,000 451
Bellsouth 5,500 349
LCI International* 18,000 551
Mobile Telecommunication* 21,000 576
SBC Telecommunications 8,000 381
-----------
2,308
-----------
TOTAL COMMON STOCK
(Cost $32,973,313) 38,242
-----------
CONVERTIBLE PREFERRED STOCKS -- 0.6%
AUTOMOTIVE -- 0.6%
General Motors, Ser C, 3.25%
annual rate, convertible to
1.4078 shares 6,500 410
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $365,290) 410
-----------
</TABLE>
* Non-income producing security
ADR -- American Depository Receipt FHLMC -- Federal Home Loan Mortgage
Corporation GNMA -- Government National Mortgage Association REIT -- Real
Estate Investment Trust See accompanying notes to financial statements
--------
41
<PAGE>
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- -------------------------------------------------------------
BALANCED FUND (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS -- 2.0%
Browning-Ferris, convertible to
24.39 shares
6.250%, 08/15/12 $ 425 $ 426
Masco, convertible to 23.364
shares
5.250%, 02/15/12 100 88
Oryx Energy, convertible to
25.559 shares
7.500%, 05/15/14 400 350
Time Warner, convertible to
1.0476 shares
8.750%, 01/10/15 396 412
-----------
TOTAL CONVERTIBLE BONDS
(Cost $1,327,167) 1,276
-----------
U.S. TREASURY OBLIGATIONS -- 19.8%
U.S. Treasury Bill
7.140%, 12/14/95 1,000 975
U.S. Treasury Bonds
7.250%, 05/15/16 500 531
7.125%, 02/15/23 500 527
U.S. Treasury Notes
4.625%, 08/15/95 1,500 1,498
3.875%, 08/31/95 500 499
3.875%, 10/31/95 500 497
4.000%, 01/31/96 1,000 990
5.875%, 05/31/96 2,000 2,002
7.250%, 08/31/96 500 508
6.500%, 09/30/96 2,500 2,521
6.000%, 12/31/97 500 501
5.125%, 03/31/98 500 490
6.000%, 10/15/99 500 500
6.375%, 01/15/00 500 507
-----------
TOTAL U.S. TREASURY OBLIGATIONS
<PAGE>
(Cost $12,551,608) 12,546
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
-- 0.8%
FHLMC
6.440%, 01/28/00 500 504
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $500,000) 504
-----------
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED
BONDS -- 1.7%
GNMA
9.000%, 10/15/19 $ 247 $ 260
7.500%, 12/15/22 799 804
-----------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $1,063,499) 1,064
-----------
U.S. AGENCY MORTGAGE-BACKED
BONDS -- 2.7%
FHLMC
6.000%, 05/01/08 855 828
5.500%, 11/01/08 908 864
-----------
TOTAL U.S. AGENCY MORTGAGE-BACKED
BONDS
(Cost $1,744,652) 1,692
-----------
CORPORATE OBLIGATIONS -- 6.7%
Bell Atlantic
5.470%, 04/27/98 500 489
Bellsouth
7.000%, 02/01/05 500 510
Coca Cola
6.000%, 07/15/03 1,000 961
Dayton Hudson
8.500%, 12/01/22 500 536
Ford Motor Credit
6.375%, 04/15/00 500 494
7.500%, 01/15/03 1,000 1,040
Merrill Lynch
7.000%, 04/27/08 250 246
-----------
TOTAL CORPORATE OBLIGATIONS
(Cost $4,248,417) 4,276
<PAGE>
-----------
REPURCHASE AGREEMENTS -- 5.8%
Goldman Sachs 6.05% dated
06/30/95, matures 07/03/95,
repurchase price $924,466
(collateralized by U.S.
Treasury Note, par value
$965,000, 4.75%, matures
08/31/98: market value
$962,151) 924 924
</TABLE>
* Non-income producing security
ADR -- American Depository Receipt
FHLMC -- Federal Home Loan Mortgage Corporation
GNMA -- Government National Mortgage Association
- ---- REIT -- Real Estate Investment Trust
42 See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS, (continued)
Republic New York City 6.07% dated 06/30/95, matures 07/03/95, repurchase
price $923,467 (collateralized by U.S. Treasury Note, par value $920,000,
7.50%, matures 12/31/96: market value
$940,700) $ 923 $ 923
Sanwa Bank 6.15% dated 06/30/95,
matures 07/03/95, repurchase
price $923,473 (collateralized
by U.S. Treasury Note, par
value $915,000, 6.625%,
matures 03/31/97: market value
$956,241) 923 923
Swiss Bank 6.12% dated 06/30/95,
matures 07/03/95, repurchase
price $923,471 (collateralized
by U.S. Treasury Note, par
value $925,000, 7.875%,
matures 03/31/96: market value
$943,130) 923 923
<PAGE>
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $3,693,000) 3,693
-----------
TOTAL INVESTMENTS -- 100.4%
(Cost $58,466,946) 63,703
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET -- (0.4%) (267)
-----------
<CAPTION>
- -------------------------------------------------------------
Description Value (000)
- -------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 100 million authorized)
based on
5,524,814 outstanding shares $ 56,397
Portfolio Shares -- Series B ($0.001 par value -- 100 million authorized)
based on
211,863 outstanding shares 2,158
Undistributed Net Investment
Income 2
Accumulated Net Realized Loss on
Investments (357)
Net Unrealized Appreciation on
Investments 5,236
-----------
TOTAL NET ASSETS -- 100.0% $ 63,436
-----------
-----------
NET ASSET VALUE & REDEMPTION
PRICE PER SHARE
SERIES A $11.06
-----------
-----------
SERIES B $11.06
-----------
-----------
</TABLE>
* Non-income producing security
ADR -- American Depository Receipt
FHLMC -- Federal Home Loan Mortgage Corporation
GNMA -- Government National Mortgage Association
REIT -- Real Estate Investment Trust
<PAGE>
See accompanying notes to financial statements
--------
43
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (000) COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------
INTERNATIONAL
GROWTH FUND
-----------
<S> <C>
ASSETS:
Investments at Market Value (Cost $103,591,691) $ 108,697
Cash 3,029
Other Assets 1,878
-----------
Total Assets 113,604
-----------
LIABILITIES:
Other Liabilities 823
-----------
Total Liabilities 823
-----------
NET ASSETS:
Portfolio Shares--Series A ($0.001 Par Value--25 million authorized) based on
9,021,890 outstanding shares $ 104,794
Portfolio Shares--Series B ($0.001 Par Value--25 million authorized) based on
158,405 outstanding shares 2,039
Accumulated Net Realized Loss on Investments (299)
Accumulated Net Realized Loss on Foreign Currency Transactions (467)
Net Unrealized Appreciation on Foreign Currency and Translation of Other Assets and Liabilities
Denominated in Foreign Currencies 659
Net Unrealized Appreciation on Investments 5,105
Undistributed Net Investment Income 950
-----------
TOTAL NET ASSETS $ 112,781
-----------
-----------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
SERIES A $ 12.29
-----------
-----------
SERIES B $ 12.27
-----------
-----------
</TABLE>
<PAGE>
- -----
44 See accompanying notes to financial statements
<PAGE>
For the year ended June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (000) COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------- ----------- ---------- ----------- ----------
GROWTH VALUE EQUITY INTERNATIONAL BALANCED
EQUITY FUND EQUITY FUND INDEX FUND GROWTH FUND FUND
----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 855 $ 618 $ 2,376 $ 2,218 $ 1,949
Interest 385 46 86 334 317
Less: Foreign taxes withheld -- -- -- (227) --
----------- ----------- ---------- ----------- ----------
Total investment income 1,240 664 2,462 2,325 2,266
----------- ----------- ---------- ----------- ----------
EXPENSES:
Investment advisory fees 580 251 345 919 375
Waiver of Investment advisory fees (193) (51) (260) (57) (134)
Administrative fees 193 84 216 287 134
Waiver of Administrative fees (70) (30) (78) (103) (48)
Transfer agent fees & expenses 25 10 28 45 17
Custodian fees -- -- -- 32 --
Professional fees 13 6 14 15 9
Registration & filing fees 13 5 17 14 7
Organizational costs -- -- -- -- 6
12b-1 fees 5 12 -- 5 6
Taxes--other than income 11 5 13 21 9
Pricing fees 9 1 2 13 2
Miscellaneous 9 7 18 19 11
----------- ----------- ---------- ----------- ----------
Total expenses 595 300 315 1,210 394
----------- ----------- ---------- ----------- ----------
Net investment income 645 364 2,147 1,115 1,872
----------- ----------- ---------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FORWARD FOREIGN
CURRENCY CONTRACTS AND FOREIGN
CURRENCY:
Net realized gain (loss) from
security transactions 308 2,110 3,527 1,400 (155)
Net realized loss on forward
foreign currency contracts and
foreign currency transactions -- -- -- (351) --
Net unrealized appreciation on
<PAGE>
forward foreign currency
contracts and translation of
assets and liabilities in
foreign currency -- -- -- 1,178 --
Net unrealized appreciation
(depreciation) on investments 16,243 2,869 14,303 (3,861) 6,794
----------- ----------- ---------- ----------- ----------
Net realized and unrealized gain
(loss) on investments, forward
foreign currency contracts and
foreign currency 16,551 4,979 17,830 (1,634) 6,639
----------- ----------- ---------- ----------- ----------
Net increase (decrease) in net
assets resulting from operations $17,196 $ 5,343 $ 19,977 $ (519) $ 8,511
----------- ----------- ---------- ----------- ----------
----------- ----------- ---------- ----------- ----------
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE--JUNE 30, 1995:
Series A
(1) Net asset value, offer and
redemption price $ 11.18 $ 14.27 $ 23.79 $ 12.29 $ 11.06
----------- ----------- ---------- ----------- ----------
----------- ----------- ---------- ----------- ----------
Series B
(1) Net asset value,
redemption price 11.17 14.29 12.27 11.06
(2) Maximum sales charge of
4.50% 0.53 0.67 0.58 0.52
----------- ----------- ----------- ----------
Offering price $ 11.70 $ 14.96 $ 12.85 $ 11.58
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>
(1) Net asset value per share, as illustrated, is the amount which would be
paid upon the redemption or repurchase of shares.
(2) The offer price is calculated by dividing the net asset value of Series
B by 1 minus the maximum sales charge of 4.50%.
See accompanying notes to financial statements. ----------
45
<PAGE>
<PAGE>
For the periods ended June 30,
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (000)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------
GROWTH
EQUITY FUND
------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATIONS:
Net investment income $ 645 $ 345
Net realized gain (loss) from security
transactions 308 2,112
Net realized gain (loss) on forward
foreign currency contracts and
foreign currency transactions -- --
Net unrealized appreciation (depreciation) on forward foreign currency
contracts and translation of assets and liabilities in foreign
currencies -- --
Net unrealized appreciation
(depreciation) on investments 16,243 (8,083)
--------- ---------
Net increase (decrease) in net assets
resulting from operations 17,196 (5,626)
--------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Series A (632) (329)
Series B (10) (14)
Net realized gains:
Series A -- --
Series B -- --
--------- ---------
Total dividends distributed (642) (343)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Series A:
Proceeds from shares issued 28,885 28,410
Shares issued in lieu of cash
distributions 528 256
Cost of shares repurchased (19,116) (21,517)
--------- ---------
Increase in net assets from Series A
transactions 10,297 7,149
Series B:
<PAGE>
Proceeds from shares issued 280 6,201
Shares issued in connection with
acquisition of Capstone Cashman
Farrell Value Fund -- --
Shares issued in lieu of cash
distributions 9 14
Cost of shares repurchased (359) (9,789)
--------- ---------
Increase (decrease) in net assets
from Series B transactions (70) (3,574)
--------- ---------
Increase in net assets derived from
capital share transaction 10,227 3,575
--------- ---------
Net increase (decrease) in net
assets 26,781 (2,394)
--------- ---------
NET ASSETS:
Beginning of period 66,607 69,001
--------- ---------
End of period $ 93,388 $ 66,607
--------- ---------
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning
of period 7,309 6,934
--------- ---------
Series A:
Shares issued 2,945 2,826
Shares issued in lieu of cash
distributions 54 26
Shares repurchased (1,947) (2,142)
--------- ---------
Total Series A transactions 1,052 710
--------- ---------
Series B:
Shares issued 29 598
Shares issued in connection with
acquisition of Capstone Cashman
Farrell Value Fund -- --
Shares issued in lieu of cash
distributions 1 1
Shares repurchased (37) (934)
--------- ---------
Total Series B transactions (7) (335)
--------- ---------
Increase in capital share transactions 1,045 375
--------- ---------
Capital shares outstanding at end of
period 8,354 7,309
--------- ---------
--------- ---------
</TABLE>
<PAGE>
- -----
46 See accompanying notes to financial statements.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------ ------------------- -------------------- ------------------
VALUE EQUITY INTERNATIONAL BALANCED
EQUITY FUND INDEX FUND GROWTH FUND FUND
------------------ ------------------- -------------------- ------------------
1995 1994 1995 1994 1995 1994 1995 1994
-------- ------- -------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 364 $ 154 $ 2,147 $ 1,932 $ 1,115 $ 211 $ 1,872 $ 1,393
Net realized gain (loss) from security
transactions 2,110 83 3,527 742 1,400 8,097 (155) (35)
Net realized gain (loss) on forward
foreign currency contracts and
foreign currency transactions -- -- -- -- (351) 3 -- --
Net unrealized appreciation
(depreciation) on forward foreign
currency contracts and translation
of assets and liabilities in
foreign currencies -- -- -- -- 1,178 (516) -- --
Net unrealized appreciation
(depreciation) on investments 2,869 (27) 14,303 (2,366) (3,861) 3,291 6,794 (2,519)
-------- ------- -------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets
resulting from operations 5,343 210 19,977 308 (519) 11,086 8,511 (1,161)
-------- ------- -------- ------- -------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Series A (321) (138) (2,147) (1,932) (373) (907) (1,799) (1,345)
Series B (39) (16) -- -- (3) (10) (71) (51)
Net realized gains:
Series A (611) (354) (3,652) (9) (7,009) (2,205) (171) --
Series B (104) (94) -- -- (129) (26) (8) --
-------- ------- -------- ------- -------- -------- ------- -------
Total dividends distributed (1,075) (602) (5,799) (1,941) (7,514) (3,148) (2,049) (1,396)
-------- ------- -------- ------- -------- -------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Series A:
Proceeds from shares issued 5,102 25,165 31,601 70,028 16,395 98,169 19,859 48,790
Shares issued in lieu of cash
distributions 889 444 5,180 1,277 6,850 3,021 1,818 960
Cost of shares repurchased (4,118) (14,442) (10,958) (47,671) (13,444) (61,836) (9,222) (34,350)
-------- ------- -------- ------- -------- -------- ------- -------
Increase in net assets from
Series A transactions 1,873 11,167 25,823 23,634 9,801 39,354 12,455 15,400
Series B:
Proceeds from shares issued 345 1,231 -- -- 440 2,342 216 1,803
Shares issued in connection with
acquisition of Capstone Cashman
<PAGE>
Farrell Value Fund -- 3,014 -- -- -- -- -- --
Shares issued in lieu of cash
distributions 139 103 -- -- 129 35 79 33
Cost of shares repurchased (2,099) (1,049) -- -- (486) (738) (427) (162)
-------- ------- -------- ------- -------- -------- ------- -------
Increase (decrease) in net assets
from Series B transactions (1,615) 3,299 -- -- 83 1,639 (132) 1,674
-------- ------- -------- ------- -------- -------- ------- -------
Increase in net assets derived from
capital share transaction 258 14,466 25,823 23,634 9,884 40,993 12,323 17,074
-------- ------- -------- ------- -------- -------- ------- -------
Net increase (decrease) in net
assets 4,526 14,074 40,001 22,001 1,851 48,931 18,785 14,517
-------- ------- -------- ------- -------- -------- ------- -------
NET ASSETS:
Beginning of period 30,185 16,111 72,552 50,551 110,930 61,999 44,651 30,134
-------- ------- -------- ------- -------- -------- ------- -------
End of period $ 34,711 $30,185 $112,553 $72,552 $112,781 $110,930 $63,436 $44,651
-------- ------- -------- ------- -------- -------- ------- -------
-------- ------- -------- ------- -------- -------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning
of period 2,399 1,229 3,532 2,411 8,414 5,294 4,520 2,901
-------- ------- -------- ------- -------- -------- ------- -------
Series A:
Shares issued 390 1,872 1,461 3,292 1,282 7,250 1,956 4,605
Shares issued in lieu of cash
distributions 71 31 254 59 567 228 182 91
Shares repurchased (311) (1,055) (515) (2,230) (1,088) (4,482) (908) (3,234)
-------- ------- -------- ------- -------- -------- ------- -------
Total Series A transactions 150 848 1,200 1,121 761 2,996 1,230 1,462
-------- ------- -------- ------- -------- -------- ------- -------
Series B:
Shares issued 27 91 -- -- 34 177 21 170
Shares issued in connection with
acquisition of Capstone Cashman
Farrell Value Fund -- 300 -- -- -- -- -- --
Shares issued in lieu of cash
distributions 11 8 -- -- 11 3 8 3
Shares repurchased (154) (77) -- -- (40) (56) (42) (16)
-------- ------- -------- ------- -------- -------- ------- -------
Total Series B transactions (116) 322 -- -- 5 124 (13) 157
-------- ------- -------- ------- -------- -------- ------- -------
Increase in capital share transactions 34 1,170 1,200 1,121 766 3,120 1,217 1,619
-------- ------- -------- ------- -------- -------- ------- -------
Capital shares outstanding at end of
period 2,433 2,399 4,732 3,532 9,180 8,414 5,737 4,520
-------- ------- -------- ------- -------- -------- ------- -------
-------- ------- -------- ------- -------- -------- ------- -------
</TABLE>
--------
<PAGE>
47
<PAGE>
For the periods ended June 30,
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Net
Net Asset Realized and Dividends Net Assets
- --------- Value Net Unrealized Gains from Net Distributions Asset Value End
GROWTH Beginning Investment or (Losses) on Investment from End Total of Period
EQUITY of Period Income Securities Income Capital Gains of Period Return (000)
- --------- --------- ---------- ----------------- ---------- ------------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES A
1995 $ 9.11 $ 0.08 $ 2.07 $(0.08) -- $ 11.18 23.71% $ 91,345
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777
1992(1) 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418
SERIES B
1995 $ 9.10 $ 0.06 $ 2.07 $(0.06) -- $ 11.17 23.44% $ 2,043
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,730
1993* 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224
- ---------------
VALUE EQUITY
- ---------------
SERIES A
1995 $ 12.58 $ 0.15 $ 1.97 $(0.15) $ (0.28) $ 14.27 17.29% $ 31,003
1994 13.11 0.09 (0.27) (0.09) (0.26) 12.58 (1.51) 25,448
1993 11.22 0.16 1.89 (0.16) -- 13.11 18.31 15,397
1992 10.33 0.15 0.89 (0.15) -- 11.22 9.98 10,882
1991 10.31 0.15 0.18 (0.15) (0.16) 10.33 3.37 5,182
1990(2) 10.00 0.10 0.31 (0.10) -- 10.31 4.10+ 5,154
SERIES B
1995 $ 12.60 $ 0.13 $ 1.96 $(0.12) $ (0.28) $ 14.29 16.96% $ 3,708
1994 13.12 0.06 (0.26) (0.06) (0.26) 12.60 (1.69) 4,737
1993* 12.49 0.05 0.67 (0.09) -- 13.12 5.77+ 714
- ---------------
EQUITY INDEX
- ---------------
SERIES A
1995 $ 20.54 $ 0.52 $ 4.24 $(0.52) $ (0.99) $ 23.79 24.45% $ 112,553
1994 20.97 0.55 (0.43) (0.55) -- 20.54 0.55 72,552
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39 50,551
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59 20,166
1991(3) 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+ 12,117
<PAGE>
- --------------------------
INTERNATIONAL GROWTH
- --------------------------
SERIES A
1995 $ 13.18 $ 0.12 $ (0.17) $(0.04) $ (0.80) $ 12.29 (0.21)% $ 110,838
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582
1990(4) 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513
SERIES B
1995 $ 13.17 $ 0.09 $ (0.17) $(0.02) $ (0.80) $ 12.27 (0.48)% $ 1,943
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019
1993* 10.07 0.05 1.59 -- -- 11.71 16.29+ 344
- -----------
BALANCED
- -----------
SERIES A
1995 $ 9.88 $ 0.35 $ 1.21 $(0.35) $ (0.03) $ 11.06 16.21% $ 61,092
1994 10.39 0.35 (0.51) (0.35) -- 9.88 (1.62) 42,429
1993(5) 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434
SERIES B
1995 $ 9.89 $ 0.34 $ 1.19 $(0.33) $ (0.03) $ 11.06 15.84% $ 2,344
1994 10.38 0.31 (0.49) (0.31) -- 9.89 (1.86) 2,222
1993* 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701
<CAPTION>
Ratio of
Ratio Net
Ratio of Expenses Income(Loss)
Ratio of Net to Average to Average
- --------- of Expenses Income Net Assets Net Assets Portfolio
GROWTH to Average to Average (Excluding (Excluding Turnover
EQUITY Net Assets Net Assets Waivers) Waivers) Rate
- --------- ----------- ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
SERIES A
1995 0.76% 0.84% 1.10% 0.50% 113%
1994 0.69 0.48 1.11 0.06 127
1993 0.43 0.85 1.11 0.17 103
1992(1) 0.14 1.38 1.12 0.40 66
SERIES B
1995 1.01% 0.59% 1.35% 0.25% 113%
1994 0.94 0.23 1.36 (0.19) 127
1993* 0.80 0.39 1.48 (0.29) 103
- ------------
VALUE EQUITY
- ------------
SERIES A
1995 0.86% 1.12% 1.10% 0.88% 108%
1994 0.80 0.73 1.09 0.44 78
1993 0.71 1.29 1.18 0.82 97
<PAGE>
1992 0.99 1.36 1.63 0.72 117
1991 1.74 1.53 2.39 0.88 96
1990(2) 1.76 2.35 2.43 1.68 20
SERIES B
1995 1.11% 0.89% 1.35% 0.65% 108%
1994 1.05 0.48 1.34 0.19 78
1993* 0.85 0.97 1.32 0.50 97
- ------------
EQUITY INDEX
- ------------
SERIES A
1995 0.37% 2.48% 0.76% 2.09% 27%
1994 0.35 2.63 0.75 2.23 13
1993 0.49 2.82 0.88 2.43 4
1992 0.57 2.66 1.06 2.17 27
1991(3) 0.97 1.79 1.20 1.56 --
- -------------
INTERNATIONAL
- -------------
SERIES A
1995 1.05% 0.98% 1.19% 0.84% 59%
1994 0.99 0.23 1.18 0.04 67
1993 0.99 1.22 1.28 0.93 59
1992 0.96 1.67 1.40 1.23 87
1991 0.99 1.80 1.56 1.23 49
1990(4) 1.22 2.57 1.99 1.80 20
SERIES B
1995 1.30% 0.73% 1.44% 0.59% 59%
1994 1.24 0.05 1.43 (0.14) 67
1993* 1.15 1.51 1.44 1.22 59
- -----------
BALANCED
- -----------
SERIES A
1995 0.73% 3.51% 1.07% 3.17% 46%
1994 0.62 3.46 1.08 3.00 56
1993(5) 0.45 3.38 1.39 2.45 21
SERIES B
1995 0.98% 3.27% 1.32% 2.93% 46%
1994 0.87 3.21 1.33 2.75 56
1993* 0.55 5.76 1.48 4.83 21
</TABLE>
+ Returns are for the period indicated and have not been annualized.
* Series B has been offered since January 4, 1993. Balanced has
offered Series B since March 16, 1993.
1 Growth Equity commenced operations on February 3, 1992. All ratios for
the period have been annualized.
2 Value Equity commenced operations on February 6, 1990. All ratios for
the period have been annualized.
3 Equity Index commenced operations on June 1, 1991. All ratios for the
period have been annualized.
- ---- 4 International Growth commenced operations on February 12, 1990.
48 All ratios for the period have been annualized.
<PAGE>
5 Balanced commenced operations on January 4, 1993. All ratios for the
period have been annualized.
See accompanying notes to financial statements
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- -------------------------------------------------------------
GOVERNMENT INCOME FUND
[GRAPH]
% of Total Portfolio Investments
U.S. Government Backed Bonds 71%
U.S. Treasury Notes 16%
U.S. Agency Backed Bonds 10%
Cash Equivalents 3%
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED
BONDS -- 70.5%
GNMA 8.000%, 09/15/22 $ 73 $ 75
8.000%, 09/15/09 983 1,015
8.000%, 02/15/22 445 456
8.000%, 10/15/22 323 331
8.000%, 11/15/22 508 521
7.000%, 04/15/23 418 412
7.500%, 08/15/23 1,548 1,557
7.000%, 01/15/24 981 966
8.500%, 09/15/24 989 1,027
9.500%, 01/15/25 1,456 1,544
8.000%, 05/15/25 1,011 1,036
-----------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $8,867,465) 8,940
-----------
U.S. AGENCY MORTGAGE-BACKED BONDS --
10.2%
FHLMC
6.000%, 05/01/08 420 407
FNMA
7.000%, 10/01/22 898 884
<PAGE>
-----------
TOTAL U.S. AGENCY MORTGAGE-BACKED
BONDS
(Cost $1,325,364) 1,291
-----------
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 16.1%
U.S. Treasury Notes
6.875%, 10/31/96 $ 500 $ 507
6.500%, 05/15/05 1,500 1,531
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,046,294) 2,038
-----------
REPURCHASE AGREEMENT -- 3.1%
Swiss Bank 6.12%, dated
06/30/95, matures 07/03/95,
repurchase price $397,202
(collateralized by U.S.
Treasury Note, par value
$395,000, 7.875%, matures
06/30/96: market value
$402,742) 397 397
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $397,000) 397
-----------
TOTAL INVESTMENTS -- 99.9%
(Cost $12,636,123) 12,666
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET -- 0.1% 13
-----------
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 100 million authorized)
based on
1,149,549 outstanding shares 11,485
Portfolio Shares -- Series B ($0.001 par value -- 100 million authorized)
based on
139,659 outstanding shares 1,426
Accumulated Net Realized Loss on
<PAGE>
Investments (260)
Net Unrealized Appreciation on
Investments 30
Distributions in Excess of Net
Investment Income (2)
-----------
TOTAL NET ASSETS: -- 100.0% $ 12,679
-----------
-----------
NET ASSET VALUE & REDEMPTION PRICE
PER SHARE
SERIES A $9.83
-----------
-----------
SERIES B $9.84
-----------
-----------
</TABLE>
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
See accompanying notes to financial statements
--------
49
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
INTERMEDIATE BOND FUND
[GRAPH]
% of Total Portfolio Investments
Corporate Bonds 39%
U.S. Treasury Notes 28%
U.S. Government Backed Bonds 13%
Cash Equivalents 10%
U.S. Agency Backed Bonds 10%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<PAGE>
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 27.7%
U.S. Treasury Notes
6.875%, 10/31/96 $ 3,000 $ 3,040
7.250%, 11/30/96 3,500 3,565
7,375%, 11/15/97 4,000 4,129
6.250%, 05/31/00 1,000 1,010
6.500%, 05/15/05 4,000 4,085
-----------
TOTAL U. S. TREASURY OBLIGATIONS
(Cost $15,640,683) 15,829
-----------
U.S. AGENCY OBLIGATION -- 5.2%
FNMA
6.260%, 12/22/97 3,000 2,992
-----------
TOTAL U.S. AGENCY OBLIGATION
(Cost $2,872,770) 2,992
-----------
U.S. GOVERNMENT MORTGAGE-BACKED
BONDS -- 13.3%
GNMA
9.500%, 09/15/16 91 97
9.500%, 12/15/16 75 79
9.500%, 06/15/20 87 93
8.000%, 07/15/22 632 648
8.500%, 08/15/24 3,462 3,597
9.000%, 01/15/25 1,985 2,086
8.000%, 05/15/25 979 1,003
-----------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $7,403,774) 7,603
-----------
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
U.S. AGENCY MORTGAGE-BACKED
BONDS -- 4.8%
FHLMC
5.500%, 11/01/08 $ 2,297 $ 2,186
FNMA
8.000%, 04/01/07 538 553
-----------
TOTAL U.S. AGENCY MORTGAGE-BACKED
BONDS
(Cost $2,820,339) 2,739
-----------
NON AGENCY MORTGAGE-BACKED BOND -- 3.1%
Advanta, Ser 93-3, CMO 4.900%,
10/25/09 1,836 1,760
<PAGE>
-----------
TOTAL NON AGENCY MORTGAGE-BACKED
BOND
(Cost $1,835,528) 1,760
-----------
CORPORATE OBLIGATIONS -- 14.0%
Associates Corporation of North
America
4.730%, 05/06/96 1,000 989
Dean Witter Discover
6.000%, 03/01/98 1,250 1,241
Ford Motor Credit
6.800%, 08/15/97 1,000 1,013
6.413%, 09/16/98 (A) 1,250 1,248
John Deere Capital
4.625%, 09/02/96 1,500 1,476
Merrill Lynch
5.250%, 10/30/95 500 499
Norwest Financial
6.250%, 02/15/97 1,500 1,502
-----------
TOTAL CORPORATE OBLIGATIONS
(Cost $7,990,734) 7,968
-----------
ASSET BACKED SECURITIES -- 22.0%
American Express Master Trust,
Ser 94-1 A
7.150%, 08/15/99 1,000 1,026
Daimler-Benz Grantor Trust,
Ser 93-A A
3.900%, 10/15/98 833 820
Discover Card Master
Trust I, Ser 94-3 A
6.253%, 04/16/02 (A) 2,000 2,001
Ford Credit Grantor Trust,
Ser 94-A A
6.350%, 05/15/99 1,520 1,525
Premier Auto Trust,
Ser 95-1 A4
7.850%, 02/04/98 2,000 2,054
Sears Credit Master
Trust, Ser 95-3 A
7.000%, 10/15/04 3,000 3,085
</TABLE>
CMO -- Collateralized Mortgage Obligation FHLMC -- Federal Home Loan
Mortgage Corporation FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association (A) Variable Rate
Security -- The rate reported on the Statement
- ---- of Net Assets is the rate in effect on June 30, 1995.
50 See accompanying notes to financial statements
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
ASSET BACKED SECURITIES (continued)
Standard Credit Card Master
Trust, Ser 95-6 A
6.750%, 06/07/00 $ 2,000 $ 2,037
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $12,313,990) 12,548
-----------
REPURCHASE AGREEMENTS -- 9.6%
HSBC Securities
5.90%, dated 06/30/95, matures
07/03/95, repurchase price
$2,743,348.15
(collateralized by U.S.
Treasury Note, par value
$2,695,000, 7.375%, matures
11/01/97: market value
$2,829,531) 2,742 2,742
Swiss Bank
6.12%, dated 06/30/95, matures
07/03/95, repurchase price
$2,743,398.42
(collateralized by U.S.
Treasury Note, par value
$2,690,000, 7.375%, matures
11/15/97: market value
$2,821,860) 2,742 2,742
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $5,484,000) 5,484
-----------
<CAPTION>
- -------------------------------------------------------------
Description Value (000)
- -------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS -- 99.7%
(Cost $56,361,818) $ 56,923
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
<PAGE>
NET 0.3% 166
-----------
NET ASSETS:
Portfolio shares -- Series A ($0.001 par value -- 100 million authorized)
based on
5,601,569 outstanding shares 55,928
Portfolio shares -- Series B ($0.001 par value -- 100 million authorized)
based on
199,308 outstanding shares 2,529
Accumulated Net Realized Loss on
Investments (1,929)
Net Unrealized Appreciation on
Investments 561
-----------
TOTAL NET ASSETS: -- 100% $ 57,089
-----------
-----------
NET ASSET VALUE &
REDEMPTION PRICE PER SHARE
SERIES A $9.84
-----------
-----------
SERIES B $9.84
-----------
-----------
</TABLE>
CMO -- Collateralized Mortgage Obligation
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
(A) Variable rate security -- The rate reported on the Statement of Net Assets
is the rate in effect on June 30, 1995. See accompanying notes to financial
statements --------
51
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
[GRAPH]
% of Total Portfolio Investments
<PAGE>
General Obligations 43%
Revenue Bonds 36%
Pre-Refunded Securities 21%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 91.2%
FLORIDA -- 3.7%
Jacksonville, Florida Electric
Authority Revenue Bond,
Ser 3-A
5.200%, 10/01/02 $ 50 $ 51
-----------
GEORGIA -- 3.7%
De Kalb County, Georgia Health
Facilities Bond, GO
5.300%, 01/01/03 50 51
-----------
HAWAII -- 3.6%
Hawaii State, GO
5.200%, 06/01/04 50 50
-----------
MARYLAND -- 3.6%
Maryland State Health & Higher
Educational Facilities
Authority for Johns Hopkins
Project
5.125%, 07/01/03 50 50
-----------
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
MASSACHUSETTS -- 3.6%
Massachusetts Bay Transportation
Authority Revenue Bond, Ser A
5.300%, 03/01/05 $ 50 $ 50
-----------
MICHIGAN -- 6.9%
Grand Haven, Michigan Electric
Revenue Bond (MBIA)
5.000%, 07/01/04 100 97
-----------
NEW JERSEY -- 3.6%
Burlington County, New Jersey
Community Bridge Systems
Revenue Bond, Callable
<PAGE>
10/01/03 at 101
5.050%, 10/01/04 CG 50 50
-----------
PENNSYLVANIA -- 55.6%
Allegheny County, Pennsylvania
Community College Project Ser
A
4.375%, 07/15/02 CGIC 100 93
Allegheny County, Pennsylvania,
Ser C-33, GO
7.450%, 02/15/98 50 53
Bethlehem Pennsylvania School
District GO (FGIC)
4.800%, 09/01/01 50 49
Governor Mifflin, Pennsylvania
School District, GO (AMBAC)
4.850%, 11/15/01 50 49
Luzerne County, Pennsylvania,
Ser A, GO, Callable 09/15/00
at 100 (FGIC)
5.850%, 09/15/02 50 51
Pennsylvania State Higher
Educational Facilities
Authority Hospital Revenue
Bond for Thomas Jefferson
University Project, Pre-
refunded 01/01/98 at 102
8.000%, 01/01/18 100 111
</TABLE>
AMBAC -- American Municipal Bond Assurance Company
CG -- County Guaranty
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guaranty Insurance Company
MBIA -- Municipal Bond Investors Assurance
- ---- GO -- General Obligation
52 See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA, (Continued)
Pennsylvania State Turnpike
Commission Revenue Bond,
Pre-refunded 12/01/99 at 102
<PAGE>
(AMBAC)
7.250%, 12/01/17 $ 100 $ 113
Pennsylvania State Turnpike
Commission Revenue Bond,
Series I, Pre-refunded
12/01/01 at 102 (FGIC)
7.150%, 12/01/11 50 57
Pittsburgh, Pennsylvania School
District, Ser A, GO (FGIC)
4.850%, 09/01/03 100 96
Reading, Pennsylvania Parking
Authority (MBIA)
4.950%, 11/15/02 50 50
Wallenpaupack, Pennsylvania Area
School District, Ser C, GO,
Callable 09/01/00 at 100
(FGIC)
6.000%, 09/01/03 50 52
-----------
TOTAL PENNSYLVANIA 774
-----------
TENNESSEE -- 3.7%
Tennessee State, Ser B, GO
5.900%, 06/01/98 50 52
-----------
WISCONSIN -- 3.2%
Wisconsin State Transportation,
Ser A
5.000%, 07/01/01 45 45
-----------
<CAPTION>
- -------------------------------------------------------------
Description Value (000)
- -------------------------------------------------------------
<S> <C>
TOTAL MUNICIPAL BONDS
(Cost $1,285,772) $ 1,270
-----------
TOTAL INVESTMENTS -- 91.2%
(Cost $1,285,772) $ 1,270
-----------
-----------
</TABLE>
AMBAC -- American Municipal Bond Assurance Company CG -- County Guaranty CGIC
-- Capital Guaranty Insurance Company FGIC -- Financial Guaranty Insurance
Company MBIA -- Municipal Bond Investors Assurance GO -- General Obligation
See accompanying notes to financial statements --------
53
<PAGE>
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
GLOBAL BOND FUND
[GRAPH]
% of Total Portfolio Investments
United States 24%
Germany 19%
France 18%
Denmark 10%
United Kingdom 9%
New Zealand 6%
Australia 5%
Netherlands 5%
Other 4%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
FOREIGN BONDS -- 64.6%
AUSTRALIA -- 4.5%
Australian Government
6.250%, 03/15/99 $ 1,858 $ 1,231
-----------
DENMARK -- 8.8%
Kingdom of Denmark
8.000%, 05/15/03 10,958 1,974
8.000%, 03/15/06 2,350 415
-----------
2,389
-----------
FRANCE -- 15.6%
Electric de France
7.500%, 05/11/12 5,950 1,151
Government of France OAT
7.500%, 04/25/05 6,228 1,273
Kansai Electric Power
7.000%, 08/04/03 2,700 533
Republic of Portugal
7.700%, 06/07/05 6,210 1,256
-----------
4,213
<PAGE>
-----------
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
GERMANY -- 16.3%
Bundesrepublic
7.375%, 01/03/05 $ 5,205 $ 3,844
World Bank
7.125%, 04/12/05 800 576
-----------
4,420
-----------
IRELAND -- 2.2%
Government of Ireland
9.250%, 07/11/03 356 598
-----------
NETHERLANDS -- 4.5%
Kingdom of Netherlands
8.250%, 09/15/07 1,546 1,078
7.500%, 01/15/23 215 138
-----------
1,216
-----------
NEW ZEALAND -- 4.9%
Government of New Zealand
10.000%, 07/15/97 1,901 1,313
-----------
UNITED KINGDOM -- 7.8%
European Investment Bank
10.375%, 11/22/04 420 732
United Kingdom Treasury
9.000%, 07/12/11 830 1,372
-----------
2,104
-----------
TOTAL FOREIGN BONDS
(Cost $16,762,082) 17,484
-----------
FOREIGN CURRENCY OPTIONS -- 0.5%
UNITED STATES -- 0.5%
Deutsche Mark Put
09/20/95 5,000 134
-----------
TOTAL FOREIGN CURRENCY OPTIONS
(Cost $137,000) 134
-----------
U. S. TREASURY OBLIGATIONS -- 20.3%
UNITED STATES -- 20.3%
U.S. Treasury Notes
8.625%, 10/15/95 870 877
6.125%, 05/31/97 1,790 1,798
<PAGE>
6.875%, 07/31/99 1,180 1,217
7.750%, 11/30/99 1,510 1,612
-----------
TOTAL U. S. TREASURY OBLIGATIONS
(Cost $5,367,698) 5,504
-----------
TOTAL INVESTMENTS -- 85.4%
(Cost $22,266,780) $ 23,122
-----------
-----------
</TABLE>
- -----
54 See accompanying notes to financial statements
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- -------------------------------------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 98.4%
PENNSYLVANIA -- 98.4%
Allegheny County, Pennsylvania
Hospital Development
Authority Revenue Bond,
Callable 11/01/02
at 102 (MBIA)
6.000%, 11/01/12 $ 25 $ 25
Allegheny County, Pennsylvania
Redevelopment Authority Home
Improvement Loan-Impac
XIV-A, Callable 02/01/04
at 102 (FHA)
5.700%, 02/01/07 15 15
Allegheny County, Pennsylvania
Sanitation Authority Sewer
Revenue Bond, Ser B,
Callable 06/01/99
at 100 (FGIC)
7.450%, 12/01/09 130 144
Allegheny County, Pennsylvania,
Ser C-43, GO, Callable
<PAGE>
09/15/04 at 100 (MBIA)
5.875%, 09/15/10 60 61
5.875%, 09/15/13 100 100
Bedford, Pennsylvania, Bedford
Area School District, Ser A,
GO, Callable 04/15/04 at
100 (MBIA)
6.200%, 04/15/24 25 25
Berks County, Pennsylvania,
Reading Hospital & Medical
Center Project Revenue
Bond, Ser B, Callable
10/01/04 at 102 (MBIA)
5.600%, 10/01/06 65 65
Center City District,
Pennsylvania Business
Improvement Assessment,
Callable 12/01/07 at 100
(AMBAC)
5.600%, 12/01/08 60 60
Crawford, Pennsylvania
Central School District,
GO (FGIC)
7.000%, 02/15/05 100 112
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
Dover Township, Pennsylvania
Sewer Authority
Revenue Bond
6.250%, 05/01/12 $ 20 $ 21
Elizabeth Forward School
District, Pennsylvania,
Ser A, GO, Callable
09/01/02 at 100 (MBIA)
6.000%, 09/01/09 35 36
Lehigh County, Pennsylvania
Industrial Development
Authority Pollution Control
Revenue Bond for Pennsylvania
Power and Light Project, Ser A,
Callable 11/01/02
at 102 (MBIA)
6.400%, 11/01/21 25 26
Lower Merion Township,
Pennsylvania, GO, Callable
08/01/02 at 100
5.625%, 08/01/05 100 102
Manheim, Pennsylvania,
Manheim Central School
District, GO, Callable
<PAGE>
05/15/04 at 100 (FGIC)
6.100%, 05/15/14 100 101
North Penn, Pennsylvania Water
Authority Revenue Bond,
Callable 11/01/02 at
101 (FGIC)
5.800%, 11/01/05 90 93
6.200%, 11/01/22 25 25
North Wales, Pennsylvania Water
Authority Revenue Bond,
Callable 11/01/04 at
100 (FGIC)
6.750%, 11/01/10 100 107
5.600%, 11/01/20 20 19
Pennsylvania State Convention
Center Authority Revenue
Bond, Ser A (FGIC)
6.700%, 09/01/16 75 84
Pennsylvania State Higher
Education Facilities Authority
for Health Services, Ser A,
Callable 01/01/04 at 102
6.000%, 01/01/10 100 101
</TABLE>
AMBAC -- American Municipal Bond Assurance Company FGIC -- Financial Guaranty
Insurance Company FHA -- Federal Housing Agency FNMA -- Federal National
Mortgage Association MBIA -- Municipal Bond Investors Assurance GO -- General
Obligation
See accompanying notes to financial statements --------
55
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND (Cont.)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
Pennsylvania State Higher
Education Facilities
Authority for
<PAGE>
University of Pennsylvania,
Ser B
5.850%, 09/01/13 $ 100 $ 99
Pennsylvania State Higher
Education Thomas Jefferson
University, Ser A,
Callable 07/01/99 at 102
6.000%, 07/01/19 150 147
Pennsylvania State Housing
Finance Agency Revenue
Bond, Callable 07/01/02
at 102 (FNMA)
6.400%, 07/01/12 300 301
Pennsylvania State Industrial
Development Authority,
(AMBAC)
6.000%, 01/01/05 25 26
Pennsylvania State Industrial
Development Authority,
Callable 01/01/04 at
102 (AMBAC)
6.000%, 01/01/12 100 101
Pennsylvania State Turnpike
Commission Revenue Bond,
Ser O, Callable 12/01/02
at 102 (FGIC)
5.900%, 12/01/08 125 127
Pennsylvania State Turnpike
Commission Revenue Bond,
Ser P
5.800%, 12/01/06 75 77
Pennsylvania State University,
Callable 03/01/04 at 100
6.150%, 03/01/05 40 42
Pennsylvania State, GO
6.000%, 07/01/05 25 26
Pennsylvania State,
Ser 2, GO
6.250%, 07/01/11 60 63
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
Pittsburgh, Pennsylvania
University of Pittsburgh Higher
Education University Capital
Improvements, Ser A, Callable
06/01/02 at 102 (MBIA)
6.125%, 06/01/21 $ 115 $ 117
Pittsburgh, Pennsylvania, Ser D,
GO, Callable 09/01/02 at 102
(AMBAC)
<PAGE>
6.125%, 09/01/17 25 25
York, Pennsylvania, York City
School District, GO, Callable
03/01/03 at 100 (FGIC)
5.600%, 03/01/07 75 75
-----------
TOTAL MUNICIPAL BONDS
(Cost $2,488,122) 2,548
-----------
TOTAL INVESTMENTS -- 98.4%
(Cost $2,488,122) 2,548
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET -- 1.6% 41
-----------
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 100 million authorized)
based on 223,677
outstanding shares 2,228
Portfolio shares -- Series B ($0.001 par value -- 100 million authorized)
based on 31,188
outstanding shares 313
Accumulated Net Realized Loss on
Investments (12)
Net Unrealized Appreciation on
Investments 60
-----------
TOTAL NET ASSETS: -- 100.0% $ 2,589
-----------
-----------
NET ASSET VALUE & REDEMPTION PRICE
PER SHARE
SERIES A $ 10.16
-----------
-----------
SERIES B $ 10.16
-----------
-----------
</TABLE>
AMBAC -- American Municipal Bond Assurance Company
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Agency
FNMA -- Federal National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
- ---- GO -- General Obligation
56 See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
NEW JERSEY MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 97.3%
NEW JERSEY -- 97.3%
Atlantic County, New Jersey,
GO, (MBIA)
6.000%, 01/01/11 $ 55 $ 56
Bayonne, New Jersey, GO,
Callable 05/01/05 at 100 (FGIC)
5.900%, 05/01/08 175 179
Cherry Hill Township, New
Jersey, GO, Callable 06/01/02 at
102
5.900%, 06/01/05 50 52
Cinnaminson Township, New Jersey
Cinnaminson Township School
District GO, Callable 07/15/04
at 100, (MBIA)
5.800%, 07/15/05 55 57
Flemington-Raritan, New Jersey
Regional School District GO,
Callable 05/01/04 at 102
5.700%, 05/01/06 50 51
Gloucester County, New Jersey
Improvement Authority Revenue
Bond, Callable 04/01/05 at 100
5.800%, 04/01/06 20 20
Mercer County, New Jersey
Improvement Authority Revenue
Bond
5.400%, 12/01/05 50 51
Monmouth County, New Jersey
Improvement Authority Revenue
Bond
6.625%, 12/01/05 40 43
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
New Jersey Health Care Facilities
Finance Authority Revenue
Bond for Bridgeton Hospital
Association, Ser B
<PAGE>
6.000%, 07/01/13 $ 50 $ 51
New Jersey Health Care Facilities
Finance Authority Revenue
Bond for Burlington County
Memorial Hospital Project
6.000%, 07/01/12 50 51
New Jersey State Economic
Development Authority
Revenue Bond for Peddie
School Project, Ser A
5.400%, 02/01/06 50 50
New Jersey State Economic
Development Authority Revenue
Bond for Rutgers State
University -- Civic Square
(AMBAC)
6.125%, 07/01/24 55 56
New Jersey State, GO
5.500%, 02/15/04 230 236
New York & New Jersey States
Port Authority Revenue Bond,
Eighty-First Series
5.700%, 08/01/07 50 51
North Brunswick Township,
New Jersey, GO
6.125%, 05/15/04 45 48
6.300%, 02/01/12 150 155
North Jersey District Water
Supply Revenue Bond for
Wanaque South Project,
Callable 07/01/03 at 102
(MBIA)
6.000%, 07/01/21 50 50
Secaucus, New Jersey Sewer
Revenue Authority Bond,
Ser A
6.100%, 12/01/10 60 63
</TABLE>
AMBAC -- American Municipal Bond Assurance Company
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
See accompanying notes to financial statements --------
57
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------
NEW JERSEY MUNICIPAL BOND FUND (Cont.)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
South Monmouth, New Jersey
Sewer Authority Revenue Bond,
Callable 01/15/04 at 102
(MBIA)
5.550%, 01/15/06 $ 50 $ 51
Teaneck Township, New Jersey
Board of Education, GO
5.750%, 07/01/13 55 54
West Windsor Township, New
Jersey Parking Authority
Revenue Bond, Callable
12/01/04 at 102
6.100%, 12/01/12 50 51
Winslow Township, New Jersey,
GO (AMBAC)
5.950%, 12/01/16 55 55
-----------
TOTAL MUNICIPAL BONDS
(Cost $1,500,935) 1,531
-----------
TOTAL INVESTMENTS -- 97.3%
(Cost $1,500,935) $ 1,531
-----------
<CAPTION>
- -------------------------------------------------------------
Description Value (000)
- -------------------------------------------------------------
<S> <C>
TOTAL OTHER ASSETS AND LIABILITIES --
NET 2.7% $ 43
-----------
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 100 million authorized)
based on
153,170 outstanding shares 1,516
Portfolio Shares -- Series B
($0.001 par value -- 100
<PAGE>
million authorized) based on
2,351 outstanding shares 24
Accumulated Net Realized Gain on
Investments 4
Net Unrealized Appreciation on
Investments 30
-----------
TOTAL NET ASSETS: -- 100.0% $ 1,574
-----------
-----------
NET ASSET VALUE & REDEMPTION PRICE
PER SHARE
SERIES A $ 10.12
-----------
-----------
SERIES B $ 10.12
-----------
-----------
</TABLE>
AMBAC -- American Municipal Bond Assurance Company
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
- ---- MBIA -- Municipal Bond Investors Assurance
58 See accompanying notes to financial statements
<PAGE>
As of June 30, 1995
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (000) COREFUND FIXED INCOME FUNDS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------
INTERMEDIATE
MUNICIPAL
BOND FUND
---------------
<S> <C>
ASSETS:
Investments at Market Value (Cost
$1,285,772) $ 1,270
Receivable -- Investment Securities
<PAGE>
Sold 77
Cash 12
Other Assets 25
----------------
Total Assets 1,384
----------------
LIABILITIES:
Other Liabilities 8
----------------
Total Liabilities 8
----------------
NET ASSETS:
Portfolio Shares -- Series A ($0.001 Par Value -- 100 million authorized)
based on 37,105
outstanding shares 406
Portfolio Shares -- Series B ($0.001
Par Value -- 100 million
authorized) based on 104,526
outstanding shares 1,079
Accumulated Net Realized Loss on
Investments (76)
Net Unrealized Loss on Investments (17)
----------------
TOTAL NET ASSETS $ 1,392
----------------
----------------
NET ASSET VALUE REDEMPTION PRICE PER
SHARE
SERIES A $ 9.83
----------------
----------------
SERIES B $ 9.83
----------------
----------------
--------------
GLOBAL
BOND FUND
--------------
ASSETS:
Investments at Market Value (Cost
$22,266,780) $ 23,122
Cash 3,511
Foreign Currency (Cost $304,586) 305
Interest Receivable 502
Other Assets 12
--------------
Total Assets 27,452
--------------
LIABILITIES:
Other Liabilities 384
--------------
Total Liabilities 384
<PAGE>
--------------
NET ASSETS:
Portfolio Shares--Series A ($0.001
Par Value--25 million authorized)
based on 2,796,181 outstanding
shares 27,872
Portfolio Shares--Series B ($0.001
Par Value--25 million authorized)
based on 17,704 outstanding shares 176
Accumulated Net Realized Loss on
Investments (1,203)
Accumulated Net Realized Loss on
Foreign Currency Transactions (2,052)
Net Unrealized Depreciation on
Foreign Currency and Translation
of Other Assets and Liabilities
Denominated in Foreign Currencies (94)
Net Unrealized Appreciation on
Investments 855
Undistributed Net Investment Income 1,514
--------------
TOTAL NET ASSETS $ 27,068
--------------
--------------
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE
SERIES A $ 9.62
--------------
--------------
SERIES B $ 9.61
--------------
--------------
</TABLE>
See accompanying notes to financial statements --------
59
<PAGE>
<PAGE>
For the year ended June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (000)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------- --------------
GOVERNMENT INTERMEDIATE
INCOME FUND BOND FUND
------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 802 $ 3,673
------------- --------------
EXPENSES:
Investment advisory fees 56 290
Waiver of Investment advisory fees (34) (87)
Administrative fees 28 145
Waiver of Administrative fees (10) (52)
Transfer agent fees 4 19
Custodian fees -- --
Professional fees 2 10
Registration & filing fees 9 5
Organizational costs 6 --
12b-1 fees 3 16
Taxes--other than income 2 3
Pricing fees -- 7
Miscellaneous 4 6
------------- --------------
Total expenses 70 362
------------- --------------
Net investment income 732 3,311
------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FORWARD FOREIGN
CURRENCY CONTRACTS AND FOREIGN
CURRENCY:
Net realized gain (loss) from
security transactions (213) (738)
Net realized loss on forward
foreign currency contracts and
foreign currency transactions -- --
Net unrealized appreciation on
forward foreign currency
contracts and translations of
assets and liabilities in
foreign currency -- --
Net unrealized appreciation on
investments 611 1,857
------------- --------------
<PAGE>
Net realized and unrealized gain
on investments 398 1,119
------------- --------------
Net increase in net assets
resulting from operations $ 1,130 $ 4,430
------------- --------------
------------- --------------
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE--JUNE 30, 1995:
SERIES A:
(1) Net asset value, offer
and redemption price $ 9.83 $ 9.84
------------- --------------
------------- --------------
SERIES B:
(1) Net asset value,
redemption price 9.84 9.84
(2) Maximum sales charge
4.50% 0.46 0.46
------------- --------------
Offering Price $ 10.30 $ 10.30
------------- --------------
------------- --------------
</TABLE>
(1) Net asset value per share, as illustrated, is the amount which would be
paid upon the redemption or repurchase of shares.
(2) The offer price is calculated by dividing the net asset value of Series B
by 1 minus the maximum sales charge of 4.50%. Amounts designated as '--'
are either $0 or have been rounded to $0.
See accompanying notes to financial statements
- -----
60
<PAGE>
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------- ---------- -------------- -----------
PENNSYLVANIA NEW JERSEY
INTERMEDIATE GLOBAL MUNICIPAL MUNICIPAL
MUNICIPAL BOND FUND BOND FUND BOND FUND BOND FUND
------------------- ---------- -------------- -----------
<PAGE>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 87 $ 1,937 $ 124 $ 91
-------- ---------- ------- -----------
EXPENSES:
Investment advisory fees 9 155 11 8
Waiver of Investment advisory fees (7) (78) (11) (8)
Administrative fees 5 65 5 4
Waiver of Administrative fees (2) (23) (5) (4)
Transfer agent fees 1 15 1 1
Custodian fees -- 2 -- --
Professional fees -- 7 1 --
Registration & filing fees 2 3 2 2
Organizational costs 6 1 3 2
12b-1 fees 3 -- -- --
Taxes--other than income -- 8 1 --
Pricing fees -- 4 -- --
Miscellaneous 1 6 1 2
-------- ---------- ------- -----------
Total expenses 18 165 9 7
-------- ---------- ------- -----------
Net investment income 69 1,772 115 84
-------- ---------- ------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FORWARD FOREIGN
CURRENCY CONTRACTS AND FOREIGN
CURRENCY:
Net realized gain (loss) from
security transactions (57) 1,044 (12) 4
Net realized loss on forward
foreign currency contracts and
foreign currency transactions -- (1,224) -- --
Net unrealized appreciation on
forward foreign currency
contracts and translations of
assets and liabilities in
foreign currency -- 344 -- --
Net unrealized appreciation on
investments 70 503 64 40
-------- ---------- ------- -----------
Net realized and unrealized gain
on investments 13 667 52 44
-------- ---------- ------- -----------
Net increase in net assets
resulting from operations $ 82 $ 2,439 $ 167 $ 128
-------- ---------- ------- -----------
-------- ---------- ------- -----------
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE--JUNE 30, 1995:
<PAGE>
SERIES A:
(1) Net asset value, offer and
redemption price $ 9.83 $ 9.62 $10.16 $ 10.12
-------- ---------- ------- -----------
-------- ---------- ------- -----------
SERIES B:
(1) Net asset value, redemption
price 9.83 9.61 10.16 10.12
(2) Maximum sales charge 4.50% 0.46 0.45 0.48 0.48
-------- ---------- ------- -----------
Offering Price $ 10.29 $ 10.06 $10.64 $ 10.60
-------- ---------- ------- -----------
-------- ---------- ------- -----------
</TABLE>
--------
61
<PAGE>
For the periods ended June 30,
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
--------------------
GOVERNMENT
INCOME FUND
--------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATIONS:
Net investment income $ 732 $ 486
Net realized gain (loss) from security
transactions (213) (34)
Net realized loss on forward foreign
currency contracts and foreign
currency translations -- --
Net unrealized appreciation (depreciation) on forward foreign currency
contracts and translation of assets and liabilities in foreign
currencies -- --
Net unrealized appreciation
(depreciation) on investments 611 (655)
--------- ---------
Net increase (decrease) in net assets
resulting from operations 1,130 (203)
--------- ---------
DIVIDENDS DISTRIBUTED FROM:
<PAGE>
Net investment income:
Series A (648) (439)
Series B (86) (47)
Net realized gains:
Series A (1) (38)
Series B -- (5)
Dividends in excess of net realized gains:
Series A -- --
Series B -- --
--------- ---------
Total dividends distributed (735) (529)
CAPITAL SHARE TRANSACTIONS:
Series A:
Proceeds from shares issued 3,952 4,302
Shares issued in lieu of cash
distributions 268 135
Cost of shares repurchased (2,353) (1,039)
--------- ---------
Increase (decrease) in net assets
from Series A transactions 1,867 3,398
--------- ---------
Series B:
Proceeds from shares issued 170 1,556
Shares issued in lieu of cash
distributions 72 38
Cost of shares repurchased (450) (159)
--------- ---------
Increase (decrease) in net assets
from Series B transactions (208) 1,435
--------- ---------
Increase (decrease) in net assets
derived from capital share
transactions 1,659 4,833
--------- ---------
Net increase (decrease) in net
assets 2,054 4,101
--------- ---------
NET ASSETS:
Beginning of period 10,625 6,524
--------- ---------
End of period $ 12,679 $ 10,625
--------- ---------
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning
of period 1,116 641
--------- ---------
Series A:
Shares issued 415 425
Shares issued in lieu of cash
distributions 28 13
Shares repurchased (248) (105)
--------- ---------
<PAGE>
Total Series A transactions 195 333
--------- ---------
Series B:
Shares issued 18 154
Shares issued in lieu of cash
distributions 8 4
Shares repurchased (47) (16)
--------- ---------
Total Series B transactions (22) 142
--------- ---------
Increase (decrease) derived from capital
share transaction 173 475
--------- ---------
Capital shares outstanding at end of
period 1,289 1,116
--------- ---------
--------- ---------
</TABLE>
(1) Global Bond Fund commenced operations December 15, 1993.
- ---- (2) Pennsylvania Municipal Bond and New Jersey Municipal Bond Funds
62 commenced operations May 16, 1994.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------- -------------------- -------------
INTERMEDIATE
INTERMEDIATE MUNICIPAL GLOBAL
BOND FUND BOND FUND BOND FUND(1)
-------------------- -------------------- -------------
1995 1994 1995 1994 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 3,311 $ 2,468 $ 69 $ 102 $ 1,772
Net realized gain (loss) from security
transactions (738) (824) (57) (2,247) 1,044
Net realized loss on forward foreign
currency contracts and foreign
currency translations -- -- -- -- (1,224)
Net unrealized appreciation (depreciation) on forward foreign currency
contracts and translation of assets and liabilities in foreign
currencies -- -- -- -- 344
Net unrealized appreciation
(depreciation) on investments 1,857 (1,870) 70 (106) 503
------------- ------------- ------ ------ -------------
<PAGE>
Net increase (decrease) in net assets
resulting from operations 4,430 (226) 82 (23) 2,439
------------- ------------- ------ ------ -------------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Series A (2,981) (2,115) (27) (68) (845)
Series B (331) (347) (42) (34) (5)
Net realized gains:
Series A (9) (172) -- -- --
Series B (2) (32) -- -- --
Dividends in excess of net realized gains:
Series A -- (301) -- -- --
Series B -- (55) -- -- --
------------- ------------- ------ ------ -------------
Total dividends distributed (3,323) (3,022) (69) (102) (850)
CAPITAL SHARE TRANSACTIONS:
Series A:
Proceeds from shares issued 17,116 22,755 -- 439 327
Shares issued in lieu of cash
distributions 2,752 2,358 10 15 564
Cost of shares repurchased (14,254) (18,757) (732) (1,317) (529)
------------- ------------- ------ ------ -------------
Increase (decrease) in net assets
from Series A transactions 5,614 6,356 (722) (863) 362
------------- ------------- ------ ------ -------------
Series B:
Proceeds from shares issued 62 4,089 76 1,474 76
Shares issued in lieu of cash
distributions 325 386 33 23 4
Cost of shares repurchased (7,763) (283) (407) (285) (87)
------------- ------------- ------ ------ -------------
Increase (decrease) in net assets
from Series B transactions (7,376) 4,192 (298) 1,212 (7)
------------- ------------- ------ ------ -------------
Increase (decrease) in net assets
derived from capital share
transactions (1,762) 10,548 (1,020) 349 355
------------- ------------- ------ ------ -------------
Net increase (decrease) in net
assets (655) 7,300 (1,007) 224 1,944
------------- ------------- ------ ------ -------------
NET ASSETS:
Beginning of period 57,744 50,444 2,399 2,175 25,124
------------- ------------- ------ ------ -------------
End of period $57,089 $57,744 $ 1,392 $ 2,399 $27,068
------------- ------------- ------ ------ -------------
------------- ------------- ------ ------ -------------
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning
of period 5,995 4,954 248 215 2,774
------------- ------------- ------ ------ -------------
Series A:
<PAGE>
Shares issued 1,777 2,262 -- 43 36
Shares issued in lieu of cash
distributions 286 235 1 2 62
Shares repurchased (1,484) (1,863) (76) (131) (58)
------------- ------------- ------ ------ -------------
Total Series A transactions 579 634 (75) (86) 40
------------- ------------- ------ ------ -------------
Series B:
Shares issued 6 403 8 146 8
Shares issued in lieu of cash
distributions 34 39 3 2 1
Shares repurchased (813) (35) (42) (29) (9)
------------- ------------- ------ ------ -------------
Total Series B transactions (773) 407 (31) 119 --
------------- ------------- ------ ------ -------------
Increase (decrease) derived from capital
share transaction (194) 1,041 (106) 33 40
------------- ------------- ------ ------ -------------
Capital shares outstanding at end of
period 5,801 5,995 142 248 2,814
------------- ------------- ------ ------ -------------
------------- ------------- ------ ------ -------------
<CAPTION>
PENNSYLVANIA NEW JERSEY
GLOBAL MUNICIPAL MUNICIPAL
BOND FUND(1) BOND FUND(2) BOND FUND(2)
-------------- ------------------------------ ------------------------------
1994 1995 1994 1995 1994
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 703 $ 115 $ 4 $ 84 $ 8
Net realized gain (loss) from security
transactions (2,247) (12) -- 4
Net realized loss on forward foreign
currency contracts and foreign
currency translations (828) -- -- -- --
Net unrealized appreciation (depreciation) on forward foreign currency
contracts and translation of assets and liabilities in foreign
currencies (438) -- -- -- --
Net unrealized appreciation
(depreciation) on investments 352 64 (4) 40 (10)
------------- ------ ----- ------ ------
Net increase (decrease) in net assets
resulting from operations (2,458) 167 -- 128 (2)
------------- ------ ----- ------ ------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
<PAGE>
Series A (110) (105) (3) (84) (8)
Series B (1) (10) (1) -- --
Net realized gains:
Series A -- -- -- -- --
Series B -- -- -- -- --
Dividends in excess of net realized gains:
Series A -- -- -- -- --
Series B -- -- -- -- --
------------- ------ ----- ------ ------
Total dividends distributed (111) (115) (4) (84) (8)
CAPITAL SHARE TRANSACTIONS:
Series A:
Proceeds from shares issued 27,751 1,718 440 520 1,445
Shares issued in lieu of cash
distributions -- 73 1 54 2
Cost of shares repurchased (241) -- (4) (499) (6)
------------- ------ ----- ------ ------
Increase (decrease) in net assets
from Series A transactions 27,510 1,791 437 75 1,441
------------- ------ ----- ------ ------
Series B:
Proceeds from shares issued 206 154 189 21 3
Shares issued in lieu of cash
distributions -- 9 -- -- --
Cost of shares repurchased (23) (14) (25) -- --
------------- ------ ----- ------ ------
Increase (decrease) in net assets
from Series B transactions 183 149 164 21 3
------------- ------ ----- ------ ------
Increase (decrease) in net assets
derived from capital share
transactions 27,693 1,940 601 96 1,444
------------- ------ ----- ------ ------
Net increase (decrease) in net
assets 25,124 1,992 597 140 1,434
------------- ------ ----- ------ ------
NET ASSETS:
Beginning of period -- 597 -- 1,434 --
------------- ------ ----- ------ ------
End of period $25,124 $ 2,589 $ 597 $ 1,574 $ 1,434
------------- ------ ----- ------ ------
------------- ------ ----- ------ ------
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning
of period -- 60 -- 144 --
------------- ------ ----- ------ ------
Series A:
Shares issued 2,781 173 44 54 145
Shares issued in lieu of cash
distributions -- 7 -- 5 --
Shares repurchased (25) -- -- (50) (1)
------------- ------ ----- ------ ------
<PAGE>
Total Series A transactions 2,756 180 44 9 144
------------- ------ ----- ------ ------
Series B:
Shares issued 21 15 19 2 --
Shares issued in lieu of cash
distributions -- 1 -- -- --
Shares repurchased (3) (1) (3) -- --
------------- ------ ----- ------ ------
Total Series B transactions 18 15 16 2 --
------------- ------ ----- ------ ------
Increase (decrease) derived from capital
share transaction 2,774 195 60 11 144
------------- ------ ----- ------ ------
Capital shares outstanding at end of
period 2,774 255 60 155 144
------------- ------ ----- ------ ------
------------- ------ ----- ------ ------
</TABLE>
--------
63
<PAGE>
For the periods ended June 30,
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Realized and
Net Unrealized
Asset Gains Dividends Distributions Net Net
Value Net or (Losses) from Net from Asset Value Assets
Beginning Investment on Investment Capital End Total End
of Period Income Securities Income Gains of Period Return of Period
--------- ---------- ------------ ---------- ------------- ----------- ------ ---------
- ------------------------
GOVERNMENT INCOME
- ------------------------
SERIES A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9.52 $ 0.62 $ 0.31 $(0.62) $ -- $ 9.83 10.26% $ 11,305
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089
1993(1) 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323
SERIES B
1995 $ 9.51 $ 0.61 $ 0.33 $(0.61) $ -- $ 9.84 10.23% $ 1,374
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536
1993* 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201
- ----------------------
INTERMEDIATE BOND
- ----------------------
<PAGE>
SERIES A
1995 $ 9.63 $ 0.53 $ 0.21 $(0.53) $ -- $ 9.84 8.22% $ 55,128
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692
1992(2) 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623
SERIES B
1995 $ 9.63 $ 0.54 $ 0.20 $(0.53) $ -- $ 9.84 7.95% $ 1,961
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365
1993* 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752
- ------------------------------------
INTERMEDIATE MUNICIPAL BOND
- ------------------------------------
SERIES A
1995 $ 9.68 $ 0.38 $ 0.15 $(0.38) -- $ 9.83 5.58% $ 365
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088
1993(3) 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009
SERIES B
1995 $ 9.67 $ 0.35 $ 0.16 $(0.35) -- $ 9.83 5.42% $ 1,027
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311
1993* 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166
- ---------------
GLOBAL BOND
- ---------------
SERIES A
1995 $ 9.06 $ 0.62 $ 0.24 $(0.30) -- $ 9.62 9.70% $ 26,898
1994(4) 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957
SERIES B
1995 $ 9.04 $ 0.61 $ 0.24 $(0.28) -- $ 9.61 9.57% $ 170
1994(4) 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167
- ------------------------------------
PENNSYLVANIA MUNICIPAL BOND
- ------------------------------------
SERIES A
1995 $ 9.95 $ 0.51 $ 0.21 $(0.51) -- $ 10.16 7.50% $ 2,272
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434
SERIES B
1995 $ 9.95 $ 0.49 $ 0.21 $(0.49) -- $ 10.16 7.25% $ 317
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163
- ----------------------------------
NEW JERSEY MUNICIPAL BOND
- ----------------------------------
SERIES A
1995 $ 9.94 $ 0.52 $ 0.18 $(0.52) -- $ 10.12 7.25% $ 1,550
1994(5) 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432
SERIES B
1995 $ 9.95 $ 0.49 $ 0.17 $(0.49) -- $ 10.12 6.84% $ 24
1994(5) 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2
<CAPTION>
Ratio Ratio of
<PAGE>
Ratio of Expenses Net Income
Ratio of Net to Average to Average
of Expenses Income Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers) Waivers) Rate
----------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
- -----------------
GOVERNMENT INCOME
- -----------------
SERIES A
1995 0.59% 6.53% 0.98% 6.14% 368%
1994 0.50 4.93 1.00 4.43 157
1993(1) 0.44 5.41 1.10 4.75 93
SERIES B
1995 0.85% 6.25% 1.24% 5.86% 368%
1994 0.75 4.68 1.25 4.18 157
1993* 0.63 5.35 1.29 4.69 93
- -----------------
INTERMEDIATE BOND
- -----------------
SERIES A
1995 0.60% 5.76% 0.84% 5.52% 405%
1994 0.58 4.30 0.86 4.02 299
1993 0.42 4.62 0.86 4.18 188
1992(2) 0.11 5.73 0.84 5.00 51
SERIES B
1995 0.85% 5.27% 1.09% 5.03% 405%
1994 0.83 4.05 1.11 3.77 299
1993* 0.75 3.78 1.19 3.34 188
- ---------------------------
INTERMEDIATE MUNICIPAL BOND
- ---------------------------
SERIES A
1995 0.82% 3.91% 1.26% 3.47% 9%
1994 0.63 3.91 1.17 3.37 43
1993(3) 0.58 2.74 1.45 1.87 10
SERIES B
1995 1.08% 3.65% 1.52% 3.21% 9%
1994 0.88 3.66 1.42 3.12 43
1993* 0.81 2.51 1.68 1.64 10
- -------------
GLOBAL BOND
- -------------
SERIES A
1995 0.64% 6.84% 1.03% 6.45% 133%
1994(4) 0.73 5.04 1.12 4.65 161
SERIES B
1995 0.89% 6.59% 1.28% 6.20% 133%
1994(4) 0.98 4.79 1.37 4.40 161
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
SERIES A
<PAGE>
1995 0.39% 5.26% 1.14% 4.51% 18%
1994(5) 0.42 5.09 1.17 4.34 3
SERIES B
1995 0.64% 4.95% 1.39% 4.20% 18%
1994(5) 0.67 4.84 1.42 4.09 3
- -------------------------
NEW JERSEY MUNICIPAL BOND
- -------------------------
SERIES A
1995 0.42% 5.21% 1.17% 4.46% 32%
1994(5) 0.43 5.07 1.35 4.15 13
SERIES B
1995 0.68% 4.97% 1.44% 4.21% 32%
1994(5) 0.68 4.82 1.60 3.90 13
</TABLE>
<TABLE>
<S> <C> <C>
Series B has been offered since January 4, 1993. Government
Income and Intermediate-Term Municipal Funds have + offered Series
B since May 3, 1993. Ratios for these periods have been annualized.
* Government Income commenced operations on April 1, 1993. Ratios
for this period have been annualized.
Intermediate Bond commenced operations on February 3, 1992. Ratios for this period have been annualized.
(1) Intermediate Municipal Bond commenced operations on May 3, 1993. Ratios for this period have been annualized.
(2) Global Bond commenced operations on December 15, 1993. Ratios for this period have been annualized.
(3) Pennsylvania Municipal Bond and New Jersey Municipal Bond Funds commenced operation on May 16, 1994. Ratios for
(4) this period have been annualized.
(5) See accompanying notes to financial statements.
</TABLE>
- ----
64
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
CASH RESERVE
[GRAPH]
% of Total Portfolio Investments
Corporate Securities 80%
Time Deposits 9%
U.S. Government Securities 8%
Cash Equivalents 3%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<PAGE>
<S> <C> <C>
COMMERCIAL PAPER -- 78.3%
A.I. Credit
5.930%, 07/19/95 $ 5,000 $ 4,985
5.930%, 08/02/95 10,000 9,947
American Express Credit
6.010%, 07/17/95 10,000 9,973
Ameritech Capital
6.000%, 07/24/95 10,500 10,460
5.630%, 03/05/96 16,000 15,379
Arco Coal Australia
6.080%, 07/10/95 5,000 4,992
5.780%, 09/19/95 6,191 6,111
Asset Securitization
5.930%, 07/05/95 10,000 9,993
5.900%, 07/21/95 10,000 9,967
AT&T
5.970%, 07/13/95 10,000 9,980
5.970%, 07/26/95 10,000 9,959
5.880%, 08/11/95 5,000 4,967
Barclay's Bank, Canada
5.940%, 07/19/95 5,000 4,985
Caisse Des Depots En Consignations
6.000%, 07/18/95 10,000 9,972
5.890%, 08/21/95 10,000 9,917
Canadian Imperial Bank of Commerce
5.840%, 09/29/95 10,000 9,854
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
Corporate Asset Funding
5.800%, 09/13/95 $10,000 $ 9,881
Dupont (E.I. De Nemours)
6.000%, 07/07/95 10,000 9,990
Ford Motor Credit
6.000%, 07/11/95 10,000 9,983
General Electric Capital
5.910%, 08/07/95 10,000 9,939
General Electric Credit
5.770%, 09/21/95 5,000 4,934
Goldman Sachs
5.700%, 09/01/95 5,000 4,951
Hewlett-Packard
5.990%, 07/18/95 10,000 9,972
5.870%, 09/28/95 10,000 9,855
J.C. Penney Funding
5.940%, 07/14/95 5,000 4,989
Metropolitan Life Funding
5.900%, 08/07/95 10,000 9,939
Minnesota Mining & Manufacturing
5.600%, 09/08/95 7,300 7,222
<PAGE>
Motorola
5.880%, 07/27/95 6,400 6,373
New Center Asset Trust
6.300%, 07/03/95 20,000 19,994
Province of Alberta
5.900%, 07/10/95 10,000 9,985
Province of British Columbia
6.040%, 08/04/95 12,900 12,826
5.860%, 09/15/95 10,000 9,876
Province of Quebec
5.900%, 08/08/95 10,000 9,938
5.890%, 08/29/95 5,000 4,952
5.880%, 08/30/95 10,000 9,902
Shell Oil
5.750%, 09/15/95 10,000 9,879
Siemens
6.430%, 07/25/95 10,000 9,957
Southwest Bell Capital
6.035%, 07/12/95 15,000 14,972
Swedish Export Credit
6.080%, 07/06/95 10,000 9,992
5.870%, 08/08/95 10,000 9,938
Teco Finance
5.930%, 07/13/95 3,500 3,493
5.930%, 07/14/95 3,500 3,493
Toyota Motor Credit
5.880%, 07/28/95 10,000 9,956
Unilever Capital
6.090%, 10/11/95 15,000 14,741
US West Capital Funding
5.990%, 07/07/95 10,000 9,990
-----------
TOTAL COMMERCIAL PAPER
(Cost $413,353,037) 413,353
-----------
</TABLE>
See accompanying notes to financial statements --------
65
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
CASH RESERVE (continued)
<TABLE>
<CAPTION>
<PAGE>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 8.1%
FNMA
5.700%, 09/22/95 $13,500 $ 13,323
5.420%, 12/04/95 10,000 9,765
5.520%, 12/05/95 10,000 9,759
5.610%, 02/16/96 (A) 10,000 10,000
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $42,846,988) 42,847
-----------
CORPORATE OBLIGATION -- 1.9%
American Express Centurion Bank
6.000%, 06/07/96 (A) 10,000 10,000
-----------
TOTAL CORPORATE OBLIGATION
(Cost $10,000,000) 10,000
-----------
TIME DEPOSITS -- 9.5%
Banque Paribas
6.250%, 07/03/95 25,000 25,000
Sumitomo Bank
6.375%, 07/03/95 25,000 25,000
-----------
TOTAL TIME DEPOSITS
(Cost $50,000,000) 50,000
-----------
MASTER NOTES -- 0.8%
Associates Corporation of North
America
5.867%, (A) 4,328 4,328
Student Loan Marketing
Association
5.660%, (A) 39 39
-----------
TOTAL MASTER NOTES
(Cost $4,366,969) 4,367
-----------
REPURCHASE AGREEMENT -- 1.9%
First National Bank of Chicago 6.18%, dated 06/30/95, matures 07/03/95,
repurchase price $10,005,150 (collateralized by
<PAGE>
U.S. Treasury Bill, par value
$10,345,000, 7.00%, matures
09/28/95: market value
$10,218,791) 10,000 10,000
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $10,000,000) 10,000
-----------
<CAPTION>
- ------------------------------------------------------------
Description Value (000)
- ------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS -- 100.5%
(Cost $530,566,994) $ 530,567
-----------
TOTAL OTHER ASSETS AND LIABILITIES, NET --
(0.5%) (2,643)
-----------
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 1 billion authorized) based
on 510,344,357
outstanding shares 510,344
Portfolio Shares -- Series B ($0.001 par value -- 1 billion authorized) based
on 17,583,902
outstanding shares 17,584
Accumulated Net Realized Loss on
Investments (4)
-----------
TOTAL NET ASSETS -- 100.0% $ 527,924
-----------
-----------
NET ASSET VALUE & REDEMPTION
PRICE PER SHARE
SERIES A $1.00
-----------
-----------
SERIES B $1.00
-----------
-----------
</TABLE>
(A) Variable Rate Securities--The rate reflected on the Statement of
Net Assets is the rate in effect on June 30, 1995.
FNMA -- Federal National Mortgage Association
See accompanying notes to financial statements.
- ----
66
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
TREASURY RESERVE
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 40.5%
U.S. Treasury Bills
5.840%, 07/13/95 $ 10,000 $ 9,981
5.800%, 07/27/95 10,000 9,958
5.800%, 07/27/95 10,000 9,958
6.105%, 08/10/95 10,000 9,932
5.840%, 08/17/95 10,000 9,924
5.350%, 08/24/95 5,000 4,960
5.350%, 08/24/95 5,000 4,960
5.790%, 08/31/95 10,000 9,902
5.520%, 09/07/95 5,000 4,948
5.480%, 09/14/95 5,000 4,943
5.485%, 09/21/95 5,000 4,938
5.550%, 10/05/95 5,000 4,926
5.630%, 10/05/95 6,000 5,910
5.750%, 10/12/95 10,000 9,835
5.460%, 10/19/95 5,000 4,917
5.410%, 10/26/95 5,000 4,912
5.340%, 11/02/95 5,000 4,908
5.635%, 11/02/95 6,000 5,884
5.660%, 11/09/95 5,000 4,897
5.715%, 11/16/95 5,000 4,890
6.620%, 11/16/95 3,000 2,924
5.365%, 11/24/95 5,000 4,891
5.405%, 12/07/95 5,000 4,881
5.415%, 12/21/95 5,000 4,870
5.475%, 04/04/96 5,000 4,789
5.475%, 05/02/96 5,000 4,767
U.S. TREASURY NOTES
4.250%, 11/30/95 20,000 19,863
5.500%, 04/30/96 5,000 4,978
U.S. TREASURY STRIPS
5.651%, 11/15/95 10,000 9,794
6.195%, 05/15/96 6,000 5,691
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $202,930,759) 202,931
-----------
<CAPTION>
<PAGE>
- ------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 60.0%
First National Bank of Chicago 6.10%, dated 06/30/95, matures 07/03/95,
repurchase price $10,005,083 (collateralized by various U.S. Treasury Notes,
total par value $10,230,000, 4.75% - 6.00%, 12/31/97 - 09/30/98: total
market value
$10,238,927) $ 10,000 $ 10,000
First National Bank of Chicago 6.18%, dated 06/30/95, matures 07/03/95,
repurchase price $2,465,269 (collateralized by U.S. Treasury Bill, par value
$2,545,000, 7.00%, matures 09/28/95: market value
$2,513,951) 2,464 2,464
Goldman Sachs 6.05%, dated
06/30/95, matures 07/03/95,
repurchase price $10,005,042
(collateralized by U.S. Treasury
Note, par value $10,430,000,
4.75%, matures 08/31/98: market
value $10,399,203) 10,000 10,000
HSBC Securities 5.90%, dated
06/30/95, matures 07/03/95,
repurchase price $18,008,850
(collateralized by U.S. Treasury
Note, par value $17,690,000,
7.375%, matures 11/15/97: market
value $18,573,063) 18,000 18,000
Morgan Stanley 6.02%, dated
06/30/95, matures 07/03/95,
repurchase price 18,009,030
(collateralized by U.S. Treasury
Note, par value $16,685,000,
8.00%, matures 08/15/99: market
value $18,864,633) 18,000 18,000
Republic New York City 6.07%,
dated 06/30/95, matures
07/03/95, repurchase price
$112,056,653 (collateralized by
various U.S. Treasury Notes,
total par value $110,945,000,
5.375% - 7.125%, 5/31/98 -
09/30/99: total market value
$115,659,109) 112,000 112,000
Sanwa Bank 6.15%, dated 06/30/95,
matures 07/03/95, repurchase
<PAGE>
price $120,006,150
(collateralized by various U.S.
Treasury Notes, total par value
$118,280,000, 4.75% - 8.875%,
10/31/98 - 02/29/00: total
market value $123,889,995) 120,000 120,000
</TABLE>
STRIPS -- Separately Traded Registered Interest and Principal Securities See
accompanying notes to financial statements
--------
67
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
TREASURY RESERVE (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
Swiss Bank 6.12%, dated 06/30/95,
matures 07/03/95, repurchase
price $10,005,100
(collateralized by various U.S.
Treasury Notes, total value
$9,940,000, 7.875% - 8.50%,
08/15/95 - 06/30/96: total
market value $10,354,069) $10,000 $ 10,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $300,464,000) 300,464
-----------
TOTAL INVESTMENTS -- 100.5%
(Cost $503,394,759) 503,395
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET (0.5%) (2,577)
-----------
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 1 billion authorized) based
on 479,203,905
outstanding shares 479,204
Portfolio Shares -- Series B
($0.001 par value -- 1 billion
<PAGE>
authorized) based on 21,611,365
outstanding shares 21,611
Accumulated Net Realized Gain on
Investments 3
-----------
TOTAL NET ASSETS: -- 100.0% $ 500,818
-----------
-----------
<CAPTION>
NET ASSET VALUE & REDEMPTION PRICE PER SHARE
SERIES A $1.00
-----------
-----------
SERIES B $1.00
-----------
-----------
</TABLE>
- ----------------------------------------------------------
TAX-FREE RESERVE
[GRAPH]
% of Total Portfolio Investments
Revenue Bonds 54%
Tax-Exempt Commercial Paper 39%
General Obligations 6%
Pre-Refunded Securities 1%
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 97.3%
ALABAMA -- 10.9%
Alabama Housing TECP
3.600%, 09/22/95(C) $ 500 $ 500
Alabama State Housing
Finance Authority Revenue Bond
for Heatherboro Project
4.250%, 07/07/95(A)(B)(C) 900 900
Mobile, Alabama Industrial
Development Authority Revenue
Bond for Scott Paper Project,
Ser A
4.050%, 07/07/95(A)(B)(C) 2,000 2,000
Montgomery, Alabama TECP
4.100%, 07/31/95(C) 380 380
3.250%, 09/21/95(C) 2,000 2,000
Winfield, Alabama Industrial
Development Authority Revenue
<PAGE>
Bond for Union Underwear
Project
4.250%, 07/07/95(A)(B)(C) 1,200 1,200
-----------
6,980
-----------
CALIFORNIA -- 0.6%
Santa Clara, California
Electric Revenue Bond,
Ser A
4.050%, 07/07/95(A)(B)(C) 400 400
-----------
</TABLE>
- ----- STRIPS--Separate Trading of Registered Interest and Principal
68 of Securities.
See accompanying notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
DELAWARE -- 0.2%
Wilmington, Delaware
Hospital Revenue Bond
for Franciscan Health
Systems Project, Ser B
4.350%, 07/03/95(A)(B)(C) $ 100 $ 100
-----------
FLORIDA -- 4.8%
Dade County, Florida Fixed
Capital Asset Acquisition
Revenue Bond 11/01/90
4.300%, 07/07/95(A)(B)(C) 1,500 1,500
Sunshine State TECP
4.250%, 08/15/95(C) 1,600 1,600
-----------
3,100
-----------
HAWAII -- 1.2%
Hawaii State GO, Ser CD
3.850%, 02/01/96 750 750
-----------
ILLINOIS -- 1.1%
<PAGE>
Illinois State Health
Facilities Authority Revenue
Bond for Franciscan
Village Project, Ser A
4.300%, 07/07/95(A)(B)(C) 700 700
-----------
INDIANA -- 8.9%
Gary, Indiana Environmental
Improvement Revenue Bond for
U.S. Steel Project
3.600%, 07/07/95(A)(B)(C) 1,600 1,600
Jasper, Indiana TECP
4.150%, 08/10/95(C) 1,000 1,000
3.600%, 09/25/95(C) 1,590 1,590
Sullivan, Indiana TECP
3.650%, 07/13/95(C) 455 455
3.600%, 08/21/95(C) 500 500
3.650%, 10/02/95(C) 600 600
-----------
5,745
-----------
IOWA -- 3.3%
Des Moines, Iowa Commercial
Development Revenue for
Capitol Center III Project
4.250%, 07/07/95(A)(B)(C) 400 400
West Des Moines, Iowa
Commercial Development
Revenue Bond for Greyhound
Lines Project
4.150%, 07/07/95(A)(B)(C) 1,700 1,700
-----------
2,100
-----------
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
KANSAS -- 5.8%
City of Burlington, Kansas TECP
3.650%, 07/13/95(C) $ 1,000 $ 1,000
3.850%, 08/03/95(C) 1,000 1,000
3.850%, 09/01/95(C) 1,000 1,000
3.650%, 10/02/95(C) 400 400
Kansas City, Kansas
Industrial Revenue Bond
for PQ Project
4.350%, 07/03/95(A)(B)(C) 200 200
Wichita, Kansas Revenue Bond
for Wichita Health Systems
<PAGE>
Project, Ser XXV
4.250%, 07/07/95(A)(B)(C) 100 100
-----------
3,700
-----------
LOUISIANA -- 3.0%
East Baton Rouge,
Louisiana Pollution Control
Revenue Bond
4.250%, 07/03/95(A)(B)(C) 450 450
Jefferson Parish, Louisiana
Industrial Development Board
Revenue Bond for
George J. Ackel, Sr. Project
4.300%, 07/07/95(A)(B)(C) 800 800
Parish of Desota, Louisiana
Pollution Control Revenue
Bond for Central Louisiana
Electric Project, Ser A
3.950%, 07/07/95(A)(B)(C) 700 700
-----------
1,950
-----------
MICHIGAN -- 2.3%
Delta County, Michigan
Environmental Improvement
Revenue Bond for
Escanaba Paper Project,
Ser C
4.250%, 07/03/95(A)(B)(C) 1,500 1,500
-----------
MINNESOTA -- 2.6%
Golden Valley, Minnesota
Industrial Development
Authority Revenue Bond
for Unicare Homes Project
4.150%, 07/07/95(A)(B)(C) 1,300 1,300
Saint Louis Park, Minnesota
Industrial Development
Authority Revenue Bond for
Unicare Homes Project
4.000%, 07/03/95(A)(B)(C) 400 400
-----------
1,700
-----------
</TABLE>
See accompanying notes to financial statements --------
69
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
- -------------------------------------------------------------
TAX-FREE RESERVE (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
MISSOURI -- 7.7%
Independence, Missouri TECP
3.300%, 07/12/95(C) $ 2,100 $ 2,100
Missouri State Environmental
Improvement and Energy
Resources Authority Revenue
Bond for Union Electric
Project, Ser B
4.000%, 07/03/95(A)(B)(C) 750 750
Missouri State Environmental
Improvement Authority
TECP
4.250%, 08/09/95(C) 600 600
3.850%, 11/21/95(C) 1,500 1,500
-----------
4,950
-----------
MONTANA -- 3.9%
Forsyth, Montana Pollution
Control Revenue Bond
for Portland General
Electric Project
4.050%, 07/07/95(A)(B)(C) 200 200
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Ser A
4.050%, 07/07/95(A)(B)(C) 600 600
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Ser B
4.050%, 07/07/95(A)(B)(C) 100 100
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Ser C
4.050%, 07/07/95(A)(B)(C) 1,000 1,000
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Ser D
<PAGE>
4.050%, 07/07/95(A)(B)(C) 600 600
-----------
2,500
-----------
NEVADA -- 0.8%
Nevada State Housing Division
Revenue Bond for Multi-Unit
Park Vista Project, Ser A
4.200%, 07/07/95(A)(B)(C) 500 500
-----------
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA -- 0.6%
Wake County, North Carolina
Pollution Control Finance
Authority Revenue Bond for
Carolina Power & Light Project,
Ser A
4.000%, 07/07/95(A)(B)(C) $ 400 $ 400
-----------
OREGON -- 0.9%
Oregon State GO, Ser 73-G
4.150%, 07/07/95(A)(B)(C) 500 500
Umatilla County, Oregon
Hospital Facilities Authority
Revenue Bond for Franciscan
Health Project, Ser B
4.350%, 07/03/95(A)(B)(C) 100 100
-----------
600
-----------
PENNSYLVANIA -- 8.1%
Beaver County Industrial
Development Authority,
Pennsylvania, TECP
4.500%, 10/10/95(C) 2,000 2,000
Beaver County, Pennsylvania
Industrial Development
Authority Revenue Bond for
Duquesne-Mansfield Project,
Ser B
4.150%, 07/07/95(A)(B)(C) 100 100
Langhorne, Pennsylvania
Saint Mary's Hospital
Authority Revenue Bond
for Franciscan Health
Systems, Ser B
4.250%, 07/03/95(A)(B)(C) 550 550
Lehigh County, Pennsylvania
Industrial Development
<PAGE>
Authority Revenue Bond
for Allegheny Electric Project
4.000%, 07/03/95(A)(B)(C) 300 300
Washington County, Pennsylvania
Authority Lease Revenue
Bond for Higher Education
Pooled Equipment Lease
4.250%, 07/07/95(A)(B)(C) 2,255 2,255
-----------
5,205
-----------
</TABLE>
- -----
70 See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
RHODE ISLAND -- 1.6%
Rhode Island State Port
Authority & Economic
Development Facilities
Revenue Bond for
Newport Electric Project
4.150%, 07/07/95(A)(B)(C) $ 1,000 $ 1,000
-----------
SOUTH CAROLINA -- 2.2%
Piedmont, South Carolina
Municipal Power Agency
Revenue Bond, Prerefunded
01/01/96 @ 103
9.700%, 01/01/24 500 529
Richland County, South
Carolina Hospital Facilities
Revenue Bond for
Sunhealth-Orangeburg
Project, Ser C-2
4.450%, 07/07/95(A)(B)(C) 450 450
York County, South Carolina
Pollution Control Revenue
Bond for Electric Project,
Ser NRU-84N-2
4.300%, 07/07/95(A)(B)(C) 450 450
<PAGE>
-----------
1,429
-----------
SOUTH DAKOTA -- 1.2%
Rapid City, South Dakota
Industrial Development
Authority Revenue Bond
for Corporate Property
Association Project
4.050%, 07/07/95(A)(B)(C) 765 765
-----------
TENNESSEE -- 0.5%
Sullivan County, Tennessee
Industrial Development
Authority Revenue Bond
for Mead Project
4.350%, 07/03/95(A)(B)(C) 300 300
-----------
TEXAS -- 9.4%
Austin, Texas TECP
3.400%, 09/14/95(C) 1,400 1,400
Camp County, Texas Industrial
Development Authority
Revenue Bond for Texas
Oil & Gas Project
4.450%, 07/07/95(A)(B)(C) 500 500
Dallas/Fort Worth, Texas TECP
3.700%, 09/08/95(C) 1,900 1,900
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
TEXAS (continued)
Harris County, Texas
Industrial Development
Authority Revenue Bond
4.250%, 07/03/95(A)(B)(C) $ 400 $ 400
4.250%, 07/03/95(A)(B)(C) 100 100
Montgomery County, Texas
Industrial Development
Revenue Bond for Dallas Tile
Project, Ser A
4.300%, 07/07/95(A)(B)(C) 100 100
Nueces County, Texas
Health Facilities Development
Revenue Bond for Driscoll
Children's Foundation Project
4.300%, 07/07/95(A)(B)(C) 1,675 1,675
-----------
<PAGE>
6,075
-----------
VERMONT -- 2.2%
Vermont State Student Loan
Revenue Bond
4.000%, 07/03/95(A)(B)(C) 1,400 1,400
-----------
WASHINGTON -- 7.8%
Seattle Light & Power TECP
3.250%, 09/07/95(C) 1,000 1,000
4.200%, 09/11/95(C) 2,000 2,000
Seattle Washington Municipality
Sewer Revenue Bond
3.500%, 07/01/95 2,000 2,000
-----------
5,000
-----------
WASHINGTON, D.C. -- 1.3%
District of Columbia
Revenue Bond for American
University Issue, Ser A
4.300%, 07/07/95(A)(B)(C) 805 805
-----------
WEST VIRGINIA -- 0.6%
West Virginia State Hospital
Finance Authority Revenue
Bond for Saint Mary's
Hospital Project
4.300%, 07/07/95(A)(B)(C) 400 400
-----------
</TABLE>
See accompanying notes to financial statements --------
71
<PAGE>
<PAGE>
As of June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------
<S> <C> <C>
WISCONSIN -- 1.2%
Lac Du Flambeau, Wisconsin,
Lake Superior Chippewa
Indian's Special Obligation
Bond for Simpson
Electric Project
4.100%, 07/07/95(A)(B)(C) $ 800 $ 800
-----------
WYOMING -- 2.6%
Platte County, Wyoming
Pollution Control Revenue
Bond, Ser B
4.350%, 07/03/95(A)(B)(C) 1,300 1,300
Sublette County, Wyoming
Pollution Control Revenue
Bond for Exxon Project
4.200%, 07/03/95(A)(B)(C) 400 400
-----------
1,700
-----------
TOTAL MUNICIPAL BONDS
(Cost $62,554,221) 62,554
-----------
TOTAL INVESTMENTS -- 97.3%
(Cost $62,554,221) 62,554
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET -- 2.7% 1,726
-----------
NET ASSETS:
Portfolio Shares -- Series A ($0.001 par value -- 250 million authorized) based
on 62,803,924 outstanding
shares 62,804
Portfolio Shares -- Series B ($0.001
par value -- 250 million authorized)
based on 1,525,087 outstanding
<PAGE>
shares 1,525
Accumulated Net Realized Loss on
Investments (49)
-----------
TOTAL NET ASSETS -- 100.0% $ 64,280
-----------
-----------
NET ASSET VALUE & REDEMPTION PRICE
PER SHARE
SERIES A $1.00
-----------
-----------
SERIES B $1.00
-----------
-----------
</TABLE>
GO -- General Obligation
TECP -- Tax Exempt Commercial Paper
(A) Variable rate securities -- the rate reflected on the Statement of
Net Assets is the rate in effect on June 30, 1995.
(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.
- -----
72 See accompanying notes to financial statements.
<PAGE>
For the year ended June 30, 1995
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------- -------- -------
TAX-
CASH TREASURY FREE
RESERVE RESERVE RESERVE
------- -------- -------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $30,019 $25,449 $2,802
------- -------- -------
EXPENSES:
Investment Advisory fees 2,719 2,362 392
<PAGE>
Less Investment Advisory fees waived (1,522) (1,322) (220)
Administrative fees 1,359 1,181 196
Less Administrative fees waived (489) (425) (71)
Transfer Agent fees 176 153 26
Insurance 16 14 3
Professional fees 91 79 13
Registration & Filing fees 70 56 12
12b-1 fees 38 27 5
Taxes--other than income 79 65 11
Printing 66 58 10
Miscellaneous 47 41 7
------- -------- -------
Total expenses 2,650 2,289 384
------- -------- -------
Net investment income 27,369 23,160 2,418
Net realized gain (loss) on securities
transactions (30) 4 (27)
------- -------- -------
Net increase in net assets resulting
from operations $27,339 $23,164 $2,391
------- -------- -------
------- -------- -------
</TABLE>
See accompanying notes to financial statements. --------
73
<PAGE>
For the period ended June 30,
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------- --------------------- ------------------
CASH TREASURY TAX-FREE
RESERVE RESERVE RESERVE
--------------------- --------------------- ------------------
1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 27,369 $ 15,827 $ 23,160 $ 13,910 $ 2,418 $ 1,794
Net realized gain (loss) on securities
transactions (30) 9 4 2 (27) (22)
---------- ---------- ---------- ---------- --------- ---------
Net increase in net assets resulting from
operations 27,339 15,836 23,164 13,912 2,391 1,772
---------- ---------- ---------- ---------- --------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Series A (26,626) (15,507) (22,642) (13,703) (2,359) (1,757)
<PAGE>
Series B (743) (320) (518) (207) (59) (37)
Net realized gain:
Series A -- -- -- -- -- --
Series B -- -- -- -- -- --
---------- ---------- ---------- ---------- --------- ---------
Total dividends distributed (27,369) (15,827) (23,160) (13,910) (2,418) (1,794)
CAPITAL SHARE TRANSACTIONS:
Series A:
Proceeds from shares issued 1,153,765 1,182,462 1,884,529 1,580,054 196,955 233,149
Shares issued in lieu of cash distributions 3,226 1,911 5,268 3,520 228 243
Cost of shares repurchased (1,151,894) (1,139,941) (1,895,568) (1,545,390) (213,785) (226,241)
---------- ---------- ---------- ---------- --------- ---------
Increase (decrease) in net assets from Series
A transactions 5,097 44,432 (5,771) 38,184 (16,602) 7,151
Series B:
Proceeds from shares issued 42,775 45,016 31,754 16,771 3,788 7,641
Shares issued in lieu of cash distributions 690 289 257 192 55 35
Cost of shares repurchased (37,332) (49,184) (17,973) (17,062) (5,026) (6,763)
---------- ---------- ---------- ---------- --------- ---------
Increase (decrease) in net assets from Series
B transactions 6,133 (3,879) 14,038 (99) (1,183) 913
---------- ---------- ---------- ---------- --------- ---------
Increase (decrease) in net assets derived from
capital share transactions 11,230 40,553 8,267 38,085 (17,785) 8,064
---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease) in net assets 11,200 40,562 8,271 38,087 (17,812) 8,042
---------- ---------- ---------- ---------- --------- ---------
NET ASSETS:
Beginning of year 516,724 476,162 492,547 454,460 82,092 74,050
---------- ---------- ---------- ---------- --------- ---------
End of year $ 527,924 $ 516,724 $ 500,818 $ 492,547 $ 64,280 $ 82,092
---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- --------- ---------
CAPITAL SHARE TRANSACTIONS
Capital shares outstanding at beginning of period 516,698 476,145 492,548 454,463 82,113 74,049
Series A:
Shares issued 1,153,765 1,182,462 1,884,530 1,580,054 196,955 233,149
Shares issued in lieu of cash distributions 3,226 1,911 5,268 3,520 228 243
Shares repurchased (1,151,894) (1,139,941) (1,895,567) (1,545,390) (213,785) (226,241)
---------- ---------- ---------- ---------- --------- ---------
Total Series A transactions 5,097 44,432 (5,771) 38,184 (16,602) 7,151
Series B:
Shares issued 42,775 45,016 31,754 16,771 3,788 7,641
Shares issued in lieu of cash distributions 690 289 257 192 55 35
Shares repurchased (37,332) (49,184) (17,973) (17,062) (5,026) (6,763)
---------- ---------- ---------- ---------- --------- ---------
Total Series B transactions 6,133 (3,879) 14,038 (99) (1,183) 913
---------- ---------- ---------- ---------- --------- ---------
Increase (decrease) derived from capital share
transactions 11,230 40,553 8,267 38,085 (17,785) 8,064
---------- ---------- ---------- ---------- --------- ---------
Capital shares outstanding at end of period 527,928 516,698 500,815 492,548 64,328 82,113
---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- --------- ---------
<PAGE>
</TABLE>
- -----
74 See accompanying notes to financial statements.
<PAGE>
For the period ended June 30,
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Net Net Ratio
Asset Dividends Net Assets Ratio of Net
Value Net from Net Asset Value End of Expenses Income
- ---------------- Beginning Investment Investment End Total of Period to Average to Average
CASH RESERVE of Period Income Income of Period Return (000) Net Assets Net Assets
- ---------------- --------- ---------- ---------- ----------- ------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES A
1995 $1.00 $ 0.05 $(0.05) $1.00 5.15% $ 510,341 0.48% 5.04%
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54
1987 1.00 0.06 (0.06) 1.00 5.85 35,054 0.54 5.60
1986(1) 1.00 0.06 (0.06) 1.00 3.36+ 56,416 0.59 6.93
SERIES B
1995 $1.00 $ 0.05 $(0.05) $1.00 4.89% $ 17,583 0.73% 4.86%
1994 1.00 0.03 (0.03) 1.00 2.74%+ 11,451 0.72 2.70
1993* 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52
- --------------------
TREASURY RESERVE
- --------------------
SERIES A
1995 $1.00 $ 0.05 $(0.05) $1.00 4.98% $ 479,206 0.48% 4.91%
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03
1989(2) 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26
SERIES B
1995 $1.00 $ 0.05 $(0.05) $1.00 4.72% $ 21,612 0.73% 4.81%
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62
<PAGE>
1993* 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46
- --------------------
TAX-FREE RESERVE
- --------------------
SERIES A
1995 $1.00 $ 0.03 $(0.03) $1.00 3.12% $ 62,756 0.48% 3.09%
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39
1991(3) 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20
SERIES B
1995 $1.00 $ 0.03 $(0.03) $1.00 2.86% $ 1,524 0.73% 2.80%
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75
1993* 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71
<CAPTION>
Ratio Ratio of
of Expenses Net Income
to Average to Average
Net Assets Net Assets
- ---------------- (Excluding (Excluding
CASH RESERVE Waivers) Waivers)
- ---------------- ----------- ----------
<S> <C> <C>
SERIES A
1995 0.85% 4.67%
1994 0.85 2.57
1993 0.85 2.58
1992 0.82 4.24
1991 0.82 6.49
1990 0.80 7.82
1989 0.90 8.05
1988 1.14 5.96
1987 1.01 5.13
1986(1) 1.21 6.31
SERIES B
1995 1.10% 4.49%
1994 1.10 2.32
1993* 1.15 2.13
- --------------------
TREASURY RESERVE
- --------------------
SERIES A
1995 0.85% 4.54%
1994 0.86 2.49
1993 0.85 2.50
1992 0.82 4.14
1991 0.82 6.35
1990 0.84 7.56
1989(2) 0.84 8.62
SERIES B
1995 1.10% 4.44%
1994 1.11 2.24
<PAGE>
1993* 1.14 2.07
- --------------------
TAX-FREE RESERVE
- --------------------
SERIES A
1995 0.85% 2.72%
1994 0.87 1.62
1993 0.89 1.82
1992 0.88 2.88
1991(3) 0.81 3.45
SERIES B
1995 1.10% 2.43%
1994 1.12 1.37
1993* 1.14 1.33
</TABLE>
+ Returns are for the period indicated and have not been annualized.
* Series B has been offered since January 4, 1993. Ratios for this period have
been annualized.
(1) Cash Reserve commenced operations on August 16, 1985. Ratios for this period
have been annualized.
(2) Treasury Reserve commenced operations on November 21, 1988. Ratios for this
period have been annualized.
(3) Tax-Free Reserve commenced operations on April 16, 1991. Ratios for this
period have been annualized.
See accompanying notes to financial statements. --------
75
<PAGE>
<PAGE>
June 30, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
The CoreFund Growth Equity Fund, Value Equity Fund, Equity Index Fund,
International Growth Fund, Balanced Fund (the Equity Funds), Government Income
Fund, Intermediate Bond Fund, Intermediate Municipal Bond Fund, Global Bond
Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund (the
Fixed Income Funds), Cash Reserve, Treasury 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 offer 17 separate portfolios
(the Portfolios):
EQUITY PORTFOLIOS: MONEY MARKET PORTFOLIOS:
Growth Equity Fund Cash Reserve
Value Equity Fund Treasury Reserve
Equity Index Fund Tax-Free Reserve
International Growth Fund Fiduciary Reserve
Balanced Fund Fiduciary Treasury Reserve
Fiduciary Tax-Free Reserve
FIXED INCOME PORTFOLIOS:
Government Income Fund
Intermediate Bond Fund
Intermediate Municipal Bond Fund
Global Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements of the Equity Funds are included on pages 25 to
48, the financial statements of the Fixed Income Funds are included on pages 49
to 64 and the financial statements of the Money Market Funds are included on
pages 65 to 75. The financial statements of the Fiduciary Reserve, Fiduciary
Treasury Reserve and Fiduciary 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.
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 which 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.
<PAGE>
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 basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
- -----
76
<PAGE>
- --------------------------------------------------------------------------------
COREFUND
- --------------------------------------------------------------------------------
The International Growth Fund does not isolate that portion of gains and
losses in investments in equity securities which is due to changes in the
foreign exchange rates from that which is due to changes in market prices of
equity securities.
The International Growth Fund and Global Bond Fund report certain foreign
currency related transactions as components of 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 foreign currency contracts as hedges against either
specific transactions or portfolio positions. The aggregate principal amounts of
the contracts are not recorded as 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.
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-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
<PAGE>
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 Portfolios are
charged directly to that Portfolio. Other operating expenses of the Company are
prorated to the Portfolios on the basis of relative net asset value. Series
specific expenses, such as the 12b-1 fees, are borne by that series. Income,
other expenses and accumulated realized and unrealized gains and losses of a
Portfolio are allocated to the respective series on the basis of the relative
net asset value each day.
Distribution to Shareholders--The Growth Equity, Value Equity, Equity
Index, Balanced, and Global Bond Funds declare and pay dividends on a quarterly
basis. The International Growth Fund declares and pays dividends on a
semi-annual basis. Such dividends are reinvested in additional shares unless
otherwise requested. The Government Income Fund, Intermediate Bond Fund,
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund, Cash Reserve, Treasury 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 Portfolio are distributed to its
shareholders at least annually.
Federal Income Taxes--It is each Portfolio'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 was made. For Federal
income tax purposes required distributions related to realized gains from
security transactions are computed as of October 31st. Dividends distributed
exceed net realized gains from the Intermediate Bond Fund for financial
reporting purposes primarily due to the timing of distributions for tax
purposes.
Other--All organizational costs incurred with the start-up of the Balanced
Fund, Government 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 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 organization cost balance in the same
proportion as the number of shares redeemed bears to the initial shares
outstanding immediately preceding the redemption.
--------
77
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to investment advisory agreements dated June 23, 1987 (Treasury
<PAGE>
Reserve and Cash Reserve), December 5, 1989 (International Growth and Value
Equity), March 25, 1991 (Equity Index, Growth Equity, Balanced, Government
Income Bond Fund, Intermediate Bond Fund, Intermediate Municipal Bond Fund,
Global Bond Fund and Tax-Free Reserve), and May 15, 1994 (Pennsylvania Municipal
Bond Fund and New Jersey Municipal Bond Fund), investment advisory services are
provided to the Funds 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 Management Corporation.
CoreStates Advisers is entitled to receive an annual fee of 0.75% on the average
net assets of the Growth Equity and Value Equity Funds, 0.40% on the average net
assets of the Equity Index Fund, 0.80% on the average net assets of the
International Growth Fund, 0.70% on the average net assets of the Balanced Fund,
0.60% on the average net assets of the Global Bond Fund and 0.50% on the average
net assets of the Government Income Fund, Intermediate Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund and each of the Money Market Funds. Such fee is computed daily and paid
monthly. During the year ended June 30, 1995, CoreStates Advisers voluntarily
waived a portion of their fees in order to assist the Funds in maintaining a
competitive expense ratio.
CoreStates Bank serves as Custodian to the Company. No fees are being paid
to CoreStates Bank for such Services. Sub-Advisory services are provided to the
CoreStates Advisers for Value Equity Fund by Cashman, Farrell and Associates and
for the International Growth Fund by Martin Currie, Inc. (The 'Sub-Advisers')
pursuant to a sub-advisory agreements dated December 5, 1989. Sub-Advisory
services are provided for the Global Bond Fund by Alpha Global Fixed Income
Managers, Inc. pursuant to a sub-advisory agreement dated December 15, 1993.
Under the terms of such agreements, the Sub-Advisers are entitled to receive a
fee from CoreStates Advisers. Such a fee is computed daily and paid monthly.
CoreStates Advisers is responsible for the supervision of, and payment of fees
to, the Sub-Adviser 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 Financial Management Company (SEI) acts as the Portfolio's
Administrator. Under the terms of such agreement, SEI is entitled to receive an
annual fee of 0.25% on the average net assets of the Portfolios. Such fee is
computed daily and paid monthly. SEI voluntarily waives a portion of their fees
in order to assist the Funds in maintaining a competitive expense ratio.
Pursuant to a Transfer Agency agreement dated March 4, 1993, SEI acts as
Transfer Agent to the Portfolios. As such, SEI provides transfer agency,
dividend disbursing and shareholder servicing for the Portfolios.
On November 2, 1992, SEI Financial Services Company (SFS), a wholly owned
subsidiary of SEI, became the Portfolios' exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the Plan) for those Portfolios
offering Series 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 Series B
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
<PAGE>
certain securities broker/dealers and financial institutions which enter into
shareholder servicing agreements or broker agreements with the Distributor. The
Portfolios paid approximately $468,000 to affiliated brokers for commissions
earned on the sales of the Funds.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Portfolio.
The Portfolios have paid legal fees to a law firm in which the Secretary of
the Company is partner.
- -----
78
<PAGE>
- --------------------------------------------------------------------------------
COREFUND
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
During the year ended June 30, 1995, 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>
Growth Equity Fund -- 91,968 91,968 -- 70,432 70,432
Value Equity Fund -- 36,870 36,870 -- 34,961 34,961
Equity Index -- 46,813 46,813 -- 22,923 22,923
International Growth Fund -- 71,752 71,752 -- 64,683 64,683
Balanced 3,428 30,989 34,417 1,313 20,651 21,964
Government Income 30,917 9,577 40,494 31,916 6,833 38,749
Intermediate Bond Fund 163,832 35,731 199,563 159,485 39,691 199,176
Intermediate Municipal Fund -- 153 153 -- 1,149 1,149
Global Bond 10,061 21,798 31,859 10,329 24,490 34,819
Pennsylvania Municipal Bond Fund -- 2,289 2,289 -- 369 369
New Jersey Municipal Bond Fund -- 722 722 -- 504 504
</TABLE>
- --------------------------------------------------------------------------------
At June 30, 1995, the Growth Equity Fund, Balanced Fund, Government Income
Fund, Intermediate Bond Fund, Intermediate Municipal Bond Fund, Global Bond
Fund, Cash Reserve and Tax-Free Reserve had capital loss carryforwards for
federal tax purposes of approximately $1,520,000, $3,000, $240,000, $1,509,000,
$38,000, $1,203,000, $23,000 and $48,000, respectively, resulting from security
<PAGE>
sales. 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. The
carryforward for the Growth Equity Fund expires in 2002. The carryforward for
the Balanced Fund, Government Income Fund, Intermediate Bond Fund, Intermediate
Municipal Bond Fund, Global Bond Fund, Cash Reserve and Tax-Free Reserve Funds
expires in 2003. On June 30, 1995, 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, 1995 for each
portfolio within CoreFunds is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------ ------------ -------
AGGREGATE AGGREGATE
GROSS GROSS
AGGREGATE GROSS UNREALIZED GAIN/(LOSS) (000) APPRECIATION DEPRECIATION NET
------------ ------------ -------
<S> <C> <C> <C>
Growth Equity Fund 14,994 (390) 14,604
Value Equity Fund 4,943 (265) 4,678
Equity Index 22,147 (2,254) 19,893
International Growth Fund 10,263 (5,158) 5,105
Balanced 5,877 (641) 5,236
Government Income 154 (124) 30
Intermediate Bond Fund 825 (264) 561
Intermediate Municipal Fund 1 (18) (17)
Global Bond 986 (131) 855
Pennsylvania Municipal Bond Fund 63 (3) 60
New Jersey Municipal Bond Fund 31 (1) 30
</TABLE>
- --------------------------------------------------------------------------------
--------
79
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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.
<PAGE>
The following forward foreign currency contracts were outstanding at June
30, 1995:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------- ----------- --------------
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
MATURITY DATE DELIVER/RECEIVE FOR (DEPRECIATION)
----------------------------- ----------------- ----------- --------------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH FUND:
FOREIGN CURRENCY SALES:
07/21/95 JY 818,686,161 $10,323,000 $ 631,947
----------- --------------
----------- --------------
GLOBAL BOND FUND:
FOREIGN CURRENCY SALES:
07/13/95-08/22/95 DM 6,425,143 $4,566,510 $ (88,345)
07/13/95-08/22/95 FF 21,182,350 4,328,430 (33,745)
08/16/95-08/22/95 DK 13,270,000 2,445,662 (10,970)
08/16/95-08/22/95 UK 1,363,000 2,180,429 19,556
08/22/95 NG 1,926,000 1,247,409 557
08/30/95 AD 1,800,000 1,284,930 10,299
----------- --------------
$16,053,370 $ (102,648)
----------- --------------
----------- --------------
</TABLE>
- --------------------------------------------------------------------------------
CURRENCY LEGEND
AD Australian Dollars
DK Danish Kroner
DM German Marks
FF French Francs
JY Japanese Yen
NG Netherlands Guilders
UK British Pounds Sterling
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, the
issuers' ability to meet their obligations may be affected by economic
developments in a specific state or region.
- -----
80
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COREFUND
- --------------------------------------------------------------------------------
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in securities which
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At June 30, 1995, the percentage of
portfolio investments by each revenue source was as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------ ------------ ---------- --------
INTERMEDIATE PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL MUNICIPAL TAX-FREE
BOND FUND BOND FUND BOND FUND RESERVE
------------ ------------ ---------- --------
<S> <C> <C> <C> <C>
REVENUE BONDS
Education Bonds 19 16 7 7
Health Care Bonds -- 8 7 9
Transportation Bonds 23 8 3 4
Utility Bonds 11 16 14 7
Housing Bonds -- 12 -- 2
Pollution Control Bonds -- -- -- 11
Industrial Bonds -- 6 -- 13
Other 4 5 11 2
GENERAL OBLIGATIONS 43 29 58 6
TAX EXEMPT COMMERCIAL PAPER -- -- -- 39
--- --- --- ---
100% 100% 100% 100%
</TABLE>
- --------------------------------------------------------------------------------
The rating of long-term debt as a percentage of total value of investments
at June 30, 1995 is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------ ------------ ---------- ------ ------------ ------------
PENNSYLVANIA NEW JERSEY
INTERMEDIATE INTERMEDIATE GOVERNMENT GLOBAL INTERMEDIATE INTERMEDIATE
BOND MUNICIPAL INCOME BOND MUNICIPAL MUNICIPAL
FUND FUND FUND FUND FUND FUND
------------ ------------ ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
STANDARD & POORS RATINGS:
AAA 71 64 97 70 77 39
AA+ -- 10 -- 2 -- 15
AA -- 15 -- 8 4 23
AA- 4 7 -- -- 9 12
<PAGE>
A+ 5 4 -- -- 6 --
A 5 -- -- -- 4 --
NR 15 -- 3 20 -- 11
--- --- --- ------ --- ---
100% 100% 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 June 30, 1995, 54.7% of the investments held by the
Intermediate Municipal Bond Fund were insured, of which FGIC insured 22.1%,
Municipal Bond Insurance Association insured 10.6% and American Municipal Bond
insured 11.7%. At June 30, 1995, 71.7% of the investments held by the
Pennsylvania Municipal Bond Fund were insured, of which FGIC insured 34.0%,
American Municipal Bond insured 8.1% and Municipal Bond Insurance Association
insured 17.4%. At June 30, 1995, 13.5% of the investments held by the New Jersey
Municipal Bond Fund were insured, of
--------
81
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded) COREFUND
- --------------------------------------------------------------------------------
which FGIC insured 11.3%. At June 30, 1995, 93.9% of the investments held by the
Tax-Free Reserve Fund had credit enhancements, of which Swiss Bank held 13.5%,
Bank of Nova Scotia insured 6.7%, Morgan Guaranty insured 10.2%, National Rural
Utility Cooperative Financial Corp. insured 8.4%, Barclay's Bank insured 6.7%,
Sanwa Bank insured 5.8% and National West PLC insured 10.2%.
8. ACQUISITION OF CAPSTONE CASHMAN FARRELL VALUE FUND
On November 26, 1993 CoreFund Value Equity acquired all net assets of
Capstone Cashman Farrell Value Fund (Capstone) pursuant to a plan of
reorganization approved by Capstone shareholders on November 2, 1993. The
acquisition was accompanied by a tax-free exchange of 330,695 shares of Capstone
for 300,247 shares of Value Equity Fund Series B outstanding on November 29,
1993. Capstone's net assets at the date were combined with those of CoreFund
Value Equity. The aggregate net assets of CoreFund Value Equity and Capstone
before the acquisition were $18,685,000 and $3,978,000 respectively.
- -----
82
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
Growth Equity Fund
[GRAPHIC 20]
[See Appendix A for Description]
% of Total Portfolio Investments
- --------------------------------------------------------------------------------
Description Shares Value(000)
- --------------------------------------------------------------------------------
Common Stocks -- 96.9%
Banks -- 8.5%
Bank of New York 40,591 $1,979
Barnett Banks of Florida 35,000 2,065
Citicorp 32,000 2,152
J.P. Morgan 24,000 1,926
Wachovia 18,000 823
------
8,945
------
Broadcasting, Newspapers &
Advertising -- 3.3%
Comcast, Class A Special 88,600 1,611
Liberty Media Group 17,598 473
Tele-Communications
Incorporated, Class A 70,393 1,399
------
3,483
------
Communications Equipment -- 3.5%
Glenayre Technologies* 30,025 1,869
U.S. Robotics* 20,106 1,764
------
3,633
------
Computers & Software Services -- 4.9%
Compaq Computer* 19,300 926
DST Systems* 3,313 94
Electronic Arts* 33,000 862
Hewlett Packard 13,426 1,125
Intuit* 24,500 1,911
- --------------------------------------------------------------------------------
Description Shares Value(000)
- --------------------------------------------------------------------------------
Computers & Software Services (continued)
Silicon Graphics* 6,554 $ 180
------
5,098
------
Drugs -- 15.5%
American Home Products 24,100 2,338
Amgen* 41,864 2,486
Glaxo PLC (ADR) 74,000 2,090
Johnson & Johnson 24,500 2,098
Merck 33,732 2,218
Schering Plough 40,892 2,239
SmithKline Beecham (ADR) 48,550 2,695
------
16,164
------
Electrical Services -- 2.1%
Texas Utilities 54,000 2,221
------
Entertainment -- 3.5%
Circus Circus Enterprises 48,253 1,345
Mirage Resorts* 68,486 2,363
------
3,708
------
Financial Services -- 4.3%
American Express 48,000 1,986
Federal National Mortgage
Association 19,914 2,472
------
4,458
------
Food, Beverage & Tobacco -- 9.0%
Coca Cola 29,300 2,176
ConAgra 33,100 1,365
CPC International 27,100 1,860
PepsiCo 38,450 2,148
Sara Lee 58,500 1,865
------
9,414
------
Household Products -- 2.1%
Gillette 42,800 2,231
------
Insurance -- 3.8%
American International Group 23,400 2,165
Chubb 18,389 1,779
------
3,944
------
Machinery -- 3.1%
GE 33,589 2,418
Lam Research* 17,900 819
------
3,237
------
Miscellaneous Business
Services -- 13.9%
Cisco Systems* 23,200 1,731
Computer Sciences* 30,494 2,142
26 See accompanying notes to financial statements.
<PAGE>
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Shares/Par (000) Value (000)
- --------------------------------------------------------------------------------
Miscellaneous Business Services (continued)
CUC International* 64,512 $ 2,201
First Data 32,500 2,173
Microsoft* 19,516 1,713
Oracle Systems* 46,083 1,953
Peoplesoft* 24,000 1,032
UUNet Technologies* 24,500 1,544
-------
14,489
-------
Professional Services -- 3.6%
Health Management Associates,
Class A 49,350 1,289
Paychex 49,350 2,461
-------
3,750
-------
Retail -- 1.2%
Office Depot* 66,000 1,304
-------
Semi-Conductors/Instruments -- 2.6%
Intel 14,700 834
Linear Technology 25,000 981
Molex 27,593 876
-------
2,691
-------
Telephones &
Telecommunication -- 12.0%
Bellsouth 24,000 1,044
Frontier 40,410 1,212
GTE 23,000 1,012
LCI International* 82,434 1,690
MCI Communications 86,000 2,247
MFS Communications* 38,356 2,042
Mobile Telecommunications
Technologies* 55,152 1,179
Qualcomm* 25,400 1,092
Worldcom* 30,000 1,058
-------
12,576
-------
Total Common Stocks
(Cost $79,934,160) 101,346
-------
Repurchase Agreements -- 3.2%
Aubrey Lanston 5.875%, dated
12/29/95, matures 1/02/96,
repurchase price $1,100,718
(collateralized by U.S.
Treasury Note, par value
$1,045,000, 8.75%, matures
10/15/97: market value $1,146,792) $1,100 1,100
- --------------------------------------------------------------------------------
Description Shares/Par (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreements (continued)
Nations Bank 5.92%, dated 12/29/95,
matures 1/02/96, repurchase price
$1,100,724 (collateralized by
U.S. Treasury Note, par value
$1,090,000, 6.125%, matures 5/15/98:
market value $1,128,957) $1,100 $ 1,100
Sanwa Bank 5.85%,dated 12/29/95,
matures 1/02/96,repurchase price
$1,100,715 (collateralized
by U.S. Treasury Note, par value
$1,100,000, 5.75%, matures 10/31/00:
market value $1,124,530) 1,100 1,100
-------
Total Repurchase Agreements
(Cost $3,300,000) 3,300
--------
Total Investments -- 100.1%
(Cost $83,234,160) 104,646
--------
Total Other Assets and Liabilities,
Net -- (0.1)% (61)
--------
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 100 million
authorized) based on
8,270,943 outstanding shares 79,986
Portfolio Shares - Series B
($0.001 par value - 100 million
authorized) based on
185,935 outstanding shares 1,677
Accumulated Net Realized
Gain on Investments 1,516
Net Unrealized Appreciation
on Investments 21,412
Distributions in Excess of Net
Investment Income (6)
--------
Total Net Assets -- 100% $104,585
========
Net Asset Value & Redemption Price
Per Share
Series A $12.37
======
Series B $12.35
======
See accompanying notes to financial statements. 27
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- --------------------------------------------------------------------------------
Value Equity Fund
[GRAPHIC 21]
[See Appendix A for Description]
% of Total Portfolio Investments
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 97.9%
Aerospace & Defense -- 6.1%
Loral 21,100 $ 746
Rockwell International 25,000 1,322
------
2,068
------
Aircraft -- 4.9%
Boeing 15,000 1,175
Sundstrand 7,000 493
------
1,668
------
Apparel/Textiles -- 3.6%
Bernard Chaus* 50,000 181
Kellwood 50,000 1,019
------
1,200
------
Banks -- 4.7%
PNC Bank 38,000 1,226
Park National 8,000 381
------
1,607
------
Chemicals -- 1.4%
FMC* 7,300 494
------
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Drugs -- 8.2%
Caremark International* 60,000 $1,087
Elan 35,000 1,702
------
2,789
------
Financial Services -- 7.3%
Franklin Resources 12,000 604
Household International 11,800 698
Merrill Lynch 5,000 255
Paine Webber Group 45,000 900
------
2,457
------
Food, Beverage & Tobacco -- 2.1%
Schweitzer-Manduit International* 30,000 694
------
Household Products -- 4.9%
Sherwin Williams 14,500 591
Stanley Works 20,800 1,071
------
1,662
------
Insurance -- 6.0%
Progressive of Ohio 30,000 1,466
Reliance Group Holdings 63,900 551
------
2,017
------
Machinery -- 4.7%
General Instrument* 25,000 584
Harnischfeger Industries 30,000 998
------
1,582
------
Medical Products &
Services -- 6.6%
Columbia/HCA Healthcare 25,000 1,269
Varian Associates 20,000 955
------
2,224
------
Miscellaneous
Manufacturing -- 4.6%
Hasbro 50,000 1,550
------
Paper & Paper Products -- 2.5%
Kimberly Clark 10,000 828
------
Petroleum & Fuel
Products -- 4.7%
Anadarko Petroleum 15,000 812
Western Atlas 15,300 773
------
1,585
------
28 See accompanying notes to financial statements.
<PAGE>
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Petroleum Refining -- 5.4%
Atlantic Richfield 7,000 $ 775
Murphy Oil 25,000 1,037
------
1,812
------
Precious Metals -- 3.0%
Barrick Gold 38,400 1,013
------
Printing & Publishing -- 6.4%
Gannett 17,900 1,099
Knight-Ridder* 17,000 1,062
------
2,161
------
Professional Services -- 2.9%
Flight Safety International 20,000 1,005
------
Railroads -- 2.1%
Conrail 10,000 700
------
Retail -- 5.8%
Circuit City Stores 30,900 853
Sears Roebuck 28,200 1,100
------
1,953
------
Total Common Stocks
(Cost $30,015,168) 33,069
------
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreements -- 0.4%
Aubrey Lanston 5.875%, dated
12/29/95, matures 1/02/96,
repurchase price $72,047
(collateralized by U.S. Treasury
Note, par value $70,000, 8.75%
matures 10/15/97: market
value $76,819) $72 $ 72
Sanwa Bank 5.85%, dated 12/29/95,
matures 1/02/96, repurchase price
$72,047 (collateralized by U.S.
Treasury Note, par value $70,000,
5.75%, matures 10/31/00: market
value $73,440) 72 72
------
Total Repurchase Agreements
(Cost $144,000) 144
------
Total Investments -- 98.3%
(Cost $30,159,168) 33,213
------
Total Other Assets and Liabilities,
Net -- 1.7% 564
------
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 25
million authorized) based on
2,406,064 outstanding shares 28,929
Portfolio Shares - Series B
($0.001 par value - 25 million
authorized) based on
210,607 outstanding shares 1,580
Accumulated Net Realized Gain
on Investments 214
Net Unrealized Appreciation on
Investments 3,054
-------
Total Net Assets -- 100% $33,777
=======
Net Asset Value & Redemption Price
Per Share
Series A $12.91
======
Series B $12.92
======
* Non-income producing security
See accompanying notes to financial statements. 29
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- --------------------------------------------------------------------------------
Equity Index Fund
[GRAPHIC 22]
[See Appendix A for Description]
% of Total Portfolio Investments
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 95.5%
Aerospace & Defense -- 0.9%
Lockheed Martin 5,800 $ 458
Loral 3,800 134
Raytheon 6,000 284
Rockwell International 5,763 305
TRW 1,500 116
------
1,297
------
Agriculture -- 0.1%
Pioneer Hi-Bred International 2,500 139
------
Air Transportation -- 0.4%
AMR* 1,800 133
Delta Air Lines 1,000 74
Federal Express* 1,300 96
Southwest Airlines 3,300 77
US Air Group* 15,300 203
------
583
------
Aircraft -- 1.4%
Boeing 9,937 779
General Dynamics 1,700 100
McDonnell Douglas 2,700 248
Northrop Grumman 1,700 109
Parker Hannifin 2,850 98
Teledyne 3,700 95
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Aircraft (continued)
Textron 2,000 $ 135
United Technologies 4,300 408
------
1,972
------
Apparel/Textiles -- 0.4%
Liz Claiborne 5,000 139
Nike 3,400 237
Russell 3,100 86
V.F 1,500 79
------
541
------
Automotive -- 2.5%
Allied Signal 7,700 366
Chrysler 10,700 593
Dana 4,600 135
Echlin 2,500 91
Fleetwood Enterprises 4,055 104
Ford Motor 28,700 832
General Motors 20,900 1,105
Paccar 1,500 63
Varity* 2,700 100
------
3,389
------
Banks -- 6.3%
Banc One 12,222 461
Bank of Boston* 2,900 134
Bank of New York 5,500 268
BankAmerica 10,800 699
Bankers Trust New York 1,800 120
Barnett Banks of Florida 2,200 130
Boatmens Bancshares 4,600 188
Chase Manhattan 4,200 255
Chemical Banking 7,100 417
Citicorp 11,500 773
Comerica 3,600 144
First Bank System 3,800 189
First Chicago NBD 8,901 352
First Fidelity Bancorp 1,800 136
First Interstate 1,900 259
First Union 5,500 306
Fleet Financial Group 6,401 261
Golden West Financial 1,800 99
Great Western Financial 3,800 97
H.F. Ahmanson 3,600 95
J.P. Morgan 5,800 465
Keycorp 7,800 283
MBNA 3,300 122
National City 4,300 142
NationsBank 7,200 501
30 See accompanying notes to financial statements.
<PAGE>
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Banks (continued)
Norwest 10,900 $ 360
PNC Bank 8,900 287
Suntrust Banks 4,200 288
U.S. Bancorp 4,300 145
UST 4,600 154
Wachovia 3,900 178
Wells Fargo 1,500 324
-----
8,632
-----
Beauty Products -- 1.8%
Alberto Culver, Class B 3,200 110
Avon Products 1,600 121
Colgate Palmolive 4,246 298
Dial 3,300 98
Ecolab 3,300 99
International Flavors & Fragrances 2,500 120
Procter & Gamble 19,200 1,593
-----
2,439
-----
Broadcasting, Newspapers &
Advertising -- 1.1%
Capital Cities ABC 4,000 493
Comcast, Class A 5,400 98
Interpublic Group 2,200 95
Tele-Communications, Class A* 18,900 376
Viacom, Class B* 10,526 499
-----
1,561
-----
Building & Construction -- 0.3%
Fluor 1,900 125
Halliburton 2,600 131
McDermott International 3,400 75
Owens Corning Fiberglas* 2,800 126
-----
457
-----
Chemicals -- 3.2%
Air Products & Chemical 2,600 137
B.F. Goodrich 2,100 143
Dow Chemical 8,150 574
E.I. DuPont de Nemours 16,000 1,118
Eastman Chemical 1,900 119
FMC* 1,400 95
Great Lakes Chemical 1,600 115
Hercules 2,700 152
Lilly (Eli) 17,400 979
Monsanto 3,900 478
Nalco Chemical 2,300 69
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Chemicals (continued)
Rohm & Haas 1,500 $ 97
Union Carbide 3,400 127
W.R. Grace 2,100 124
------
4,327
------
Communications Equipment -- 2.2%
Cisco Systems* 7,200 537
ITT Industries* 3,100 74
ITT* 3,100 164
Motorola 17,400 992
Northern Telecom 7,300 314
Scientific-Atlanta 11,200 168
Sprint 10,800 431
Tellabs 3,100 115
US West Media Group 13,600 258
------
3,053
------
Computers & Services -- 5.9%
Amdahl 8,100 69
Apple Computer 2,600 83
Automatic Data Processing 3,700 275
Compaq Computer* 8,700 418
Ceridian* 3,400 140
Computer Associates International 6,900 392
Computer Sciences* 1,900 133
Cray Research* 4,200 104
Digital Equipment* 3,900 250
DSC Communications* 2,591 96
First Data 6,500 435
Harris Computer Systems 1,600 87
Hewlett Packard 15,100 1,265
International Business Machines 15,700 1,440
Microsoft* 16,800 1,474
Novell* 8,300 118
Oracle Systems* 11,450 485
Pitney Bowes 5,000 235
Silicon Graphics 4,600 127
Sun Microsystems* 5,600 255
Tandem Computers* 5,986 64
Tandy 2,000 83
Unisys* 23,500 132
------
8,160
------
Containers & Packaging -- 0.1%
Crown Cork & Seal* 2,100 88
Newell 3,600 93
------
181
------
See accompanying notes to financial statements. 31
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- --------------------------------------------------------------------------------
Equity Index Fund (continued)
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Drugs -- 7.7%
Abbott Labs 23,600 $ 985
Alza* 3,400 84
American Home Products 8,900 863
Amgen* 7,600 451
Baxter International 7,800 327
Bristol-Myers Squibb 14,720 1,264
Johnson & Johnson 18,400 1,576
Mallinckrodt Group 3,300 120
Merck 34,600 2,275
Pfizer 17,600 1,109
Pharmacia & Upjohn 14,155 549
Schering Plough 10,900 597
Warner Lambert 3,700 359
-------
10,559
-------
Electrical Equipment -- 2.9%
Emerson Electric 6,300 515
General Electric 47,800 3,442
-------
3,957
-------
Electrical Services -- 3.2%
American Electric Power 4,200 170
Baltimore Gas & Electric 4,700 134
Carolina Power & Light 3,600 124
Central & South West 5,400 150
Cinergy 4,600 141
Consolidated Edison of New York 5,300 170
Detroit Edison 3,300 114
Dominion Resources of Virginia 5,500 227
Duke Power 6,100 289
Entergy 5,200 152
FPL Group 6,100 283
General Public Utilities 4,200 143
Houston Industries 5,800 141
Niagara Mohawk Power 11,200 108
Northern States Power 1,700 83
Ohio Edison 4,100 96
Pacific Gas and Electric 11,500 326
PECO Energy 5,000 151
Pacificorp 6,400 136
Public Service Enterprise Group 5,500 168
SCEcorp 13,400 238
Southern 17,100 421
Texas Utilities 5,100 210
Unicom 4,800 157
Union Electric Power 2,300 96
------
4,428
------
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Entertainment -- 0.7%
King World Productions* 2,600 $ 101
Walt Disney 15,100 891
------
992
------
Environmental Services -- 0.4%
Browning Ferris Industries 5,900 174
WMX Technologies 12,900 385
------
559
------
Financial Services -- 2.8%
Allstate* 13,000 535
American Express 14,400 596
Beneficial 2,400 112
Dean Witter Discover 3,700 174
Federal Home Loan Mortgage
Corporation 4,700 392
Federal National Mortgage
Association 8,200 1,018
Household International 2,100 124
Mellon Bank 5,700 306
Merrill Lynch 4,600 234
Morgan Stanley Group 2,100 169
Providian 2,300 94
Salomon 2,500 89
------
3,843
------
Food, Beverage & Tobacco -- 8.3%
American Brands 4,500 201
Anheuser Busch 6,900 461
Archer Daniels Midland 15,672 282
Brown Forman, Class B 2,700 99
Campbell Soup 6,800 408
CPC International 3,400 233
Coca Cola 35,600 2,643
ConAgra 7,300 301
Coors, Adolph Class B 5,600 124
General Mills 5,900 341
H.J. Heinz 10,650 353
Hershey Foods 2,000 130
Kellogg 6,100 471
PepsiCo 23,000 1,285
Philip Morris 24,300 2,199
Quaker Oats 3,000 103
Ralston-Ralston Purina Group 2,300 143
Sara Lee 12,600 402
Seagram 10,300 357
Unilever NV 4,400 619
Whitman 5,100 119
Wrigley, William Jr. 2,600 137
------
11,411
------
32 See accompanying notes to financial statements.
<PAGE>
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Gas/Natural Gas--1.0%
Coastal 2,500 $ 93
Columbia Gas Systems* 3,500 154
Consolidated Natural Gas 2,100 95
Enron 7,300 278
Nicor 3,700 102
Noram Energy 17,800 158
Pacific Enterprises 3,800 107
Panhandle Eastern 4,200 117
Peoples Energy 4,100 130
Sonat 2,300 82
Williams 2,500 110
-------
1,426
-------
Glass Products--0.4%
Corning 6,100 195
PPG Industries 7,300 334
-------
529
-------
Hotels & Lodging--0.2%
Harrah's Entertainment 2,300 56
Hilton Hotels 1,100 67
Marriott International 2,900 111
-------
234
-------
Household Furniture &
Fixtures--0.5%
Armstrong World Industries 1,600 99
Illinois Tool Works 2,500 147
Masco 3,500 110
Sherwin Williams 2,300 94
Snap-On Tools 2,700 122
Stanley Works 1,800 93
-------
665
-------
Household Products--0.7%
Clorox 1,300 93
Gillette 11,800 615
Maytag 5,600 113
National Service Industries 3,000 97
Whirlpool 1,700 91
-------
1,009
-------
Insurance--3.8%
Aetna Life & Casualty 2,500 173
Alexander & Alexander Services 4,400 84
American General 5,400 188
American International Group 13,268 1,227
Chubb 2,000 194
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Insurance (continued)
Cigna 2,900 $ 299
General Re 2,400 372
ITT Hartford Group* 3,100 150
Jefferson-Pilot 2,100 98
Lincoln National 2,100 113
Loews 3,400 266
Marsh and McLennan 1,700 151
Safeco 2,800 97
St. Paul 4,727 263
Torchmark 1,800 81
Transamerica 1,600 117
Travelers 8,400 528
U.S. Healthcare 3,600 167
United Healthcare 5,100 334
Unum 1,700 93
USF&G 5,500 93
USLife 3,900 117
-------
5,205
-------
Lumber & Wood Products--0.2%
Georgia Pacific 2,700 185
Potlatch 2,100 84
------
269
------
Machinery--1.6%
Applied Materials* 4,600 181
Baker Hughes 4,000 98
Black & Decker 3,500 124
Brunswick 3,500 84
Caterpillar 4,700 276
Crane 3,100 114
Deere 7,800 275
Dover 2,800 103
Dresser Industries 3,900 95
Eaton 1,700 91
Ingersoll Rand 2,400 84
Tenneco 5,000 248
Texas Instruments 5,200 269
Timken 2,500 96
Tyco Labs 3,400 121
------
2,259
------
Measuring Devices--0.4%
General Signal 2,100 68
Honeywell 2,900 141
Johnson Controls 1,500 103
See accompanying notes to financial statements.
33
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- --------------------------------------------------------------------------------
Equity Index Fund (continued)
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Measuring Devices (continued)
Millipore 3,400 $ 140
Pall 4,500 121
------
573
------
Medical Products &
Services--1.5%
Bausch & Lomb 2,000 79
Becton Dickinson 1,900 143
Beverly Enterprises 6,600 70
Boston Scientific* 4,300 211
Columbia/HCA Healthcare 12,400 629
Humana 4,800 131
Medtronic 8,000 447
St. Jude Medical 3,300 142
Tenet Healthcare 4,100 85
United States Surgical 2,900 62
------
1,999
------
Metals & Mining--0.9%
Alcan Aluminum 5,000 156
Aluminum Company of America 5,200 275
Asarco 3,300 105
Cyprus AMAX Minerals 2,400 63
Engelhard 3,900 85
Freeport-McMoran Copper &
Gold, Class B 6,000 169
Inco 2,600 86
Newmont Mining 1,900 86
Phelps Dodge 1,600 99
Reynolds Metals 1,500 85
------
1,209
------
Miscellaneous Business
Services--0.0%
Ogden 2,600 56
------
Miscellaneous Chemical
Products--0.2%
Morton International 3,300 118
Raychem 1,900 108
------
226
------
Miscellaneous Consumer
Services--0.2%
H & R Block 2,400 97
Service International 2,900 128
------
225
------
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Miscellaneous
Manufacturing--0.2%
Hasbro 2,400 $ 74
Mattel 5,000 154
------
228
------
Paper & Paper Products--2.5%
Avery Dennison 2,300 115
Bemis 3,500 90
Boise Cascade 2,800 97
Champion International 2,200 92
Federal Paper Board 2,700 140
International Paper 7,000 265
James River 3,200 77
Kimberly Clark 11,252 931
Mead 1,600 84
Minnesota Mining &
Manufacturing 12,800 848
Moore 4,100 76
Stone Container* 3,800 55
Temple Inland 1,400 62
Union Camp 1,550 74
Westvaco 3,150 87
Weyerhaeuser 6,006 260
Willamette Industries 1,900 107
------
3,460
------
Petroleum Refining--8.5%
Amerada Hess 2,100 111
Amoco 13,900 999
Ashland 2,100 74
Atlantic Richfield 4,500 498
Burlington Resources 2,900 114
Chevron 19,100 1,003
Enserch 6,600 107
Exxon 35,100 2,812
Helmerich and Payne 2,000 60
Kerr-McGee 1,500 95
Louisiana Land & Exploration 3,100 133
Mobil 11,500 1,288
Occidental Petroleum 6,900 148
Oryx Energy 8,400 112
Pennzoil 1,500 63
Phillips Petroleum 7,200 246
Royal Dutch Petroleum 15,000 2,117
Santa Fe Energy Resources 7,300 70
Schlumberger 6,400 443
Texaco 8,500 667
Unocal 6,400 187
USX Marathon Group 6,500 127
See accompanying notes to financial statements.
34
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Petroleum Refining (continued)
USX--U.S. Steel Group 1,900 $ 59
Western Atlas 2,500 126
------
11,659
------
Photographic Equipment &
Supplies--0.8%
Eastman Kodak 9,600 643
Polaroid 2,300 109
Xerox 2,800 384
------
1,136
------
Precious Metals--0.5%
Barrick Gold 12,000 317
Echo Bay Mines 9,100 94
Homestake Mining 6,800 106
Placer Dome Group 5,400 130
------
647
------
Printing & Publishing--1.3%
American Greetings, Class A 3,200 88
Deluxe 2,500 73
Dow Jones 5,600 223
Gannett 3,300 203
Knight-Rider* 1,500 94
McGraw-Hill 1,100 96
Meredith 3,000 126
New York Times, Class A 3,200 95
R.R. Donnelley & Sons 3,200 126
Time Warner, Class A 9,900 375
Times Mirror, Class A 3,900 132
Tribune 1,500 92
------
1,723
------
Professional Services--0.2%
Dun & Bradstreet 4,700 304
------
Railroads--1.0%
Burlington Northern Santa Fe 3,964 309
Conrail 1,800 126
CSX 6,200 283
Norfolk Southern 3,100 246
Union Pacific 6,300 416
------
1,380
------
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Retail--5.1%
Albertson's 6,400 $ 210
Campbell Soup 3,200 86
Circuit City Stores 3,000 83
Dayton-Hudson 1,600 120
Dillard Department Stores, Class A 2,700 77
Federated Department Stores* 5,700 157
Gap 3,300 139
Giant Food, Class A 3,900 123
Great Atlantic & Pacific Tea 4,000 92
Harcourt General 2,300 96
Home Depot 13,466 645
J.C. Penney 6,500 310
K Mart 10,000 73
Kroger* 3,100 116
Limited 9,500 165
Lowes 3,500 117
May Department Stores 6,900 292
McDonald's 20,600 930
Melville 2,400 74
Mercantile Stores 2,200 102
Nordstrom 1,800 73
Pep Boys - Manny Moe & Jack 3,226 83
Price/Costco* 4,900 75
Rite Aid 3,700 127
Sears Roebuck 11,500 448
TJX Companies 6,700 126
Toys R Us* 6,500 141
Wal Mart Stores 64,900 1,452
Walgreen 5,600 167
Wendy's International 5,900 125
Winn Dixie Stores 3,400 125
Woolworth* 7,500 97
------
7,046
------
Rubber & Plastic--0.4%
Cooper Tire & Rubber 3,000 74
Goodyear Tire & Rubber 3,380 153
Premark International 1,700 86
Reebok International 2,000 57
Rubbermaid 6,300 161
------
531
------
Semi-Conductors/
Instruments--1.5%
AMP 6,200 238
Intel 23,100 1,311
LSI Logic 4,000 131
Micron Technology 5,900 234
National Semiconductor* 5,600 125
------
2,039
------
See accompanying notes to financial statements.
35
As of December 31, 1995 (Unaudited)
Statement of Net Assets
Equity Index Fund (concluded)
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Specialty Machinery--0.2%
Cooper Industries 2,600 $ 96
Westinghouse Electric 8,000 132
--------
228
--------
Steel & Steel Works--0.2%
Bethlehem Steel* 5,900 83
Nucor 2,000 114
Worthington Industries 4,600 96
--------
293
--------
Technology, Services--0.2%
Cabletron Systems* 2,000 162
CUC International* 5,000 171
--------
333
--------
Telephones &
Telecommunication--7.9%
AT&T 46,736 3,026
Airtouch Communications* 13,100 370
Alltel 5,500 162
Ameritech 16,000 944
Bell Atlantic 11,900 796
Bellsouth 27,800 1,209
GTE 28,100 1,237
MCI Communications 20,158 527
NYNEX 12,600 680
Pacific Telesis Group 11,500 387
SBC Telecommunications 17,076 982
US West 13,600 486
--------
10,806
--------
Trucking--0.2%
Cummins Engine 1,900 70
Pittston Services Group 3,700 116
Roadway Services 1,300 64
Ryder System 1,500 37
--------
287
--------
Wholesale--0.5%
Alco Standard 2,400 110
Fleming Companies 5,000 103
Genuine Parts 2,800 115
Praxair 3,500 118
Super-Valu 2,700 85
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Wholesale (continued)
Sysco 4,100 $ 133
W.W. Grainger 1,200 79
--------
743
--------
Total Common Stocks
(Cost $100,103,075) 131,207
--------
Repurchase Agreements--0.5%
Aubrey Lanston 5.875%, dated
12/29/95, matures 01/02/96,
repurchase price $349,228
(collateralized by U.S.
Treasury Note, par value
$330,000, 8.75%, matures
10/15/97: market value
$362,145) $ 349 349
Swiss Bank 5.85%, dated
12/29/95, matures 01/02/96,
repurchase price $348,226
(collateralized by U.S.
Treasury Note, par value
$345,000, 6.000%, matures
08/31/97: market
value $363,426) 348 348
--------
Total Repurchase Agreements
(Cost $697,000) 697
--------
Total Investments--96.0%
(Cost $100,800,075) 131,904
--------
Total Other Assets and Liabilities,
Net--4.0% 5,446
--------
Net Assets:
Portfolio Shares ($0.001 par value -
500 million authorized) based on
5,259,006 outstanding shares 105,797
Accumulated Net Realized Gain
on Investments 450
Net Unrealized Appreciation on
Investments 31,104
Distributions in Excess of Net
Investment Income (1)
---------
Total Net Assets--100% $ 137,350
---------
---------
Net Asset Value & Redemption Price
Per Share $ 26.12
---------
---------
* Non-income producing security
See accompanying notes to financial statements.
36
<PAGE>
/ / CoreFund Equity Funds
International Growth Fund
- --------------------------------------------------------------------------------
[Graphic 23]
[See Appendix A for Description]
% of Total Portfolio Investments
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Foreign Stocks--97.5%
Argentina--0.5%
Buenos Aires Embotelladora ADS 5,200 $ 107
Capex GDR 12,500 175
Compania Naviera Perez ADS,
series B 36,700 195
YPF Sociedad Anonima ADS 5,400 117
---------
594
---------
Australia--2.4%
Broken Hill Proprietary 121,770 1,719
M.I.M. Holdings 340,000 470
Qantas Airways 313,000 521
---------
2,710
---------
Austria--0.8%
Oest Elektrizatswirts, Series A 5,047 303
Vienna International Airport 9,500 632
---------
935
---------
Belgium--0.6%
Kredietbank 2,600 712
---------
Brazil--1.8%
Cemig ADR 12,100 270
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Brazil (continued)
Compania Vale Rio Doce ADR 11,200 $ 465
Eletrobras ADR* 24,500 334
Rhodia-Ster GDR 20,097 180
Telebras ADR 13,450 637
Usiminas ADR 18,600 149
---------
2,035
---------
Chile--0.6%
Madeco ADR 7,930 214
Maderas y Sinteticos Sociedad ADS 12,500 244
Sociedad Quimica y Minera ADR 4,861 228
---------
686
---------
Colombia--0.3%
Cementos Diamante GDS 18,800 334
---------
Ecuador--0.2%
La Cemento Nacional GDR* 1,232 216
---------
France--5.4%
AXA 13,500 911
Imetal SA 3,887 465
L'Oreal 4,800 1,287
Peugeot 7,500 991
Schneider 25,600 876
Seita 22,000 799
Societe Nationale Elf Aquitaine 10,466 772
---------
6,101
---------
Germany--3.4%
Hoechst 3,000 817
Mannesmann 4,300 1,370
Veba 40,000 1,714
---------
3,901
---------
Hong Kong--6.6%
Amoy Properties 1,062,000 1,058
China Light & Power 200,000 921
HSBC Holdings 153,081 2,316
Hutchison Whampoa 265,000 1,614
Swire Pacific, Series A 207,000 1,606
---------
7,515
---------
India--1.1%
Himilayan Fund* 77,718 913
Himilayan Fund Warrants* 7,243 2
Indian Opportunities Fund* 41,982 386
---------
1,301
---------
See accompanying notes to financial statements.
37
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- --------------------------------------------------------------------------------
International Growth Fund (continued)
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Israel--0.5%
Near East Opportunities Fund* 59,000 $ 591
-------
Italy--1.8%
Rinascente 162,000 982
Telecom Italia Mobile* 635,000 1,120
-------
2,102
-------
Japan--31.4%
Amano 47,000 592
Asahi Chemical Industries 198,000 1,515
Asahi Diamond Industrial 43,000 604
Canon 81,000 1,468
Daifuku 43,000 608
DDI 147 1,139
Eiden Sakakiya 27,000 340
Hitachi 163,000 1,642
Hitachi Metals 97,000 1,212
Ito Yokado 15,000 924
Itochu 201,000 1,353
Kamigumi 102,000 979
Kirin Beverage 35,000 471
Komori 3,000 76
Kuraray Warrants* 360 189
Kyocera 21,000 1,560
Mabuchi Motor 9,000 560
Marui Company 44,000 917
Maspro Denkoh 14,400 201
Mitsubishi Heavy Industries 231,000 1,842
Mitsui Fudosan 83,000 1,021
Nippon Express 137,000 1,319
Nippon System Development 17,000 245
Nomura Securities 77,000 1,679
Organo 40,000 438
Riso Kagaku Corporation 6,100 515
Rohm Company 32,000 1,807
Sekisui Warrants* 155 349
Shimachu 17,000 545
Shin-Etsu Chemical 66,000 1,368
Sony Corporation 24,000 1,439
Sumitomo Electric 61,000 733
Sumitomo Forestry 88,000 1,347
Sumitomo Trust & Banking 110,000 1,556
Taisho Pharmaceutical 21,000 415
Tokio Marine & Fire Insurance 109,000 1,426
Toyota Motor 63,000 1,337
-------
35,731
-------
Luxembourg--0.2%
Millicom International Cellular* 6,800 207
-------
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Malaysia--4.1%
AMMB Holdings 106,000 $ 1,211
Edaran Otomobil 80,000 602
Genting Berhad 157,000 1,311
Resorts World Berhad 88,000 471
United Engineers 150,000 957
-------
4,552
-------
Mexico--0.7%
Corporacion Ind Alfa,
series A NPV * 13,000 167
Empresas ICA Sociedad
Controlladora ADR 16,000 164
Grupo Carso SA ADS* 15,500 171
Grupo Financiero Banamex,
series B * 75,000 125
Kimberly Clark ADR 5,500 164
-------
791
-------
Netherlands--3.5%
Elsevier NV 131,750 1,760
ING Groep 17,382 1,164
Koninkijike PTT Nederland 17,000 619
Polygram 8,500 452
-------
3,995
-------
Singapore--4.2%
Development Bank of
Singapore 106,000 1,320
First Capital Corporation 227,000 629
Jardine Matheson &
Company (U.S.) 156,800 1,074
Singapore Press 98,400 1,740
-------
4,763
-------
South Africa--1.4%
Iscor 140,100 126
Malbak 50,000 346
Murray & Roberts 34,500 244
Safmarine & Rennie Holding
Limited 80,000 291
Sasol 35,000 287
South African Brewery 7,400 271
-------
1,565
-------
South Korea--0.5%
CITC Seoul Excel Trust IDR* 18 191
Korea Preferred Share Fund* 41,000 411
-------
602
-------
See accompanying notes to financial statements.
38
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Spain--1.9%
Banco de Santander 23,000 $ 1,155
Fom de Const y Contratas SA 5,000 384
Repsol Petroleum SA 19,220 630
---------
2,169
---------
Sweden--1.1%
Ericsson, series B 29,000 569
Stora Kopparbergs, series A Free 61,000 717
---------
1,286
---------
Switzerland--3.2%
Nestle SA Registered 1,040 1,152
Roche Holding 197 1,561
Zurich Insurance* 3,150 943
---------
3,656
---------
Taiwan--1.5%
Taiwan Opportunities Fund* 204,500 1,693
---------
Thailand--1.2%
Thai Military Bank 335,000 1,357
---------
United Kingdom--16.6%
Argyll Group 170,000 898
Barratt Development 269,000 1,032
British Airways 109,000 789
British Telecommunications 138,000 759
BTR Warrants* 265,000 270
Cable & Wireless 80,000 571
Dixons Group 82,000 568
East Midlands Electricity 67,532 699
Glaxo Wellcome 93,000 1,321
Granada Group 96,000 962
GKN 86,000 1,040
Ladbroke 353,000 803
Lex Service 101,833 484
McKenchie 84,000 520
NFC 362,000 798
Reckitt & Coleman 100,000 1,107
Shell Transportation & Trading 55,000 728
Tomkins 323,000 1,415
TSB Lloyds Group 188,000 968
Unilever 64,000 1,315
- --------------------------------------------------------------------------------
Description Shares/Par (000) Value (000)
- --------------------------------------------------------------------------------
United Kingdom (continued)
Wassall 168,750 705
Wolseley 171,000 1,198
---------
18,950
---------
Total Foreign Stocks
(Cost $100,960,524) $ 111,050
---------
Convertible Bond--1.1%
Japan--1.1%
Mitsubishi Bank
3.000%, 11/30/02 $ 1,100 1,297
---------
Total Convertible Bond
(Cost $1,131,625) 1,297
---------
Time Deposit--3.4%
Chase Manhattan Bank
5.375%, 01/02/96 $ 3,820 3,820
---------
Total Time Deposit
(Cost $3,820,000) 3,820
---------
Total Investments-102.0%
(Cost $105,912,149) 116,167
---------
Total Other Assets and Liabilities,
Net--(2.0%) (2,269)
---------
Net Assets:
Portfolio Shares - Series A ($0.001 par
value-25 million authorized) based
on 8,600,047 outstanding shares 99,406
Portfolio Shares - Series B ($0.001 par
value - 25 million authorized) based
on 151,846 outstanding shares 1,955
Accumulated Net Realized Gain on
Investments 1,885
Accumulated Net Realized Loss on Foreign Currency
Transactions (5)
Net Unrealized Appreciation on Foreign Currency
Translation of Other Assets and Liabilities Denominated
in Foreign Currency 551
Net Unrealized Appreciation on Investments 10,255
Distributions in Excess of Net Investment Income (149)
---------
Total Net Assets--100.0% $113,898
=========
Net Asset Value & Redemption
Price Per Share
Series A $ 13.01
=========
Series B $ 13.01
=========
* Non-income producing security
ADR - American Depository Receipts
ADS - American Depository Shares
GDR - Global Depository Receipts
GDS - Global Depository Shares
IDR - International Depository Receipts
See accompanying notes to financial statements.
39
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
Balanced Fund
[Graphic 24]
[See Appendix A for Description]
% of Total Portfolio Investments
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks--61.6%
Aerospace & Defense--1.2%
Loral 24,000 $ 849
------
Automotive-1.6%
General Motors, Class E 12,000 624
General Motors, Class H 10,000 491
------
1,115
------
Banks-5.8%
Amsouth Bancorp 25,000 1,009
Barnett Banks of Florida 11,000 649
CCB Financial 15,000 832
First Virginia 10,000 417
J.P. Morgan 10,000 803
Wells Fargo 2,000 432
------
4,142
------
Beauty Products-0.6%
Procter & Gamble 5,275 438
------
Chemicals-0.7%
Monsanto 4,000 490
------
Communications-1.6%
Cisco Systems* 9,100 679
Qualcomm 10,000 430
------
1,109
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Communications Equipment-2.0%
Glenayre Technologies 10,000 $ 623
U.S. Robotics 9,200 807
------
1,430
------
Computers & Services-2.0%
Hewlett Packard 7,400 620
Intuit 10,000 780
------
1,400
------
Drugs-11.5%
American Home Products 10,000 970
Amgen* 13,600 807
Bristol-Myers Squibb 5,000 429
Chiron* 3,767 416
Glaxo PLC (ADR) 30,400 859
Johnson & Johnson 6,600 565
Mallinckrodt Group 15,000 546
Merck 11,600 763
Schering Plough 17,000 931
SmithKline Beecham (ADR) 16,000 888
Warner Lambert 10,000 971
------
8,145
------
Electrical Equipment-1.7%
Emerson Electric 5,750 470
General Electric 10,000 720
------
1,190
------
Electrical Utilities-1.2%
Public Service Enterprise Group 26,900 824
------
Financial Services-2.4%
American Express 20,000 827
Federal National Mortgage
Association 7,200 894
------
1,721
------
Food, Beverage & Tobacco-3.5%
Coca Cola 7,600 564
ConAgra 12,000 495
General Mills 10,000 578
PepsiCo 8,000 447
Sara Lee 13,300 424
------
2,508
------
Household Products-2.2%
Gillette 10,600 553
Hubbell, Class B 15,000 986
------
1,539
------
See accompanying notes to financial statements.
40
<PAGE>
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Shares Value (000)
- --------------------------------------------------------------------------------
Insurance--3.2%
American International Group 6,000 $ 555
Chubb 10,000 967
General Re 5,000 775
-------
2,297
-------
Measuring Devices-1.2%
Honeywell 17,000 827
-------
Paper & Paper Products-1.1%
Kimberly Clark 9,204 762
-------
Petroleum Refining-5.1%
Amoco 7,500 539
Atlantic Richfield 5,875 651
Burlington Resources 12,500 491
Chevron 10,000 525
Exxon 10,300 825
Mobil 5,100 571
-------
3,602
-------
Professional Services-1.8%
Health Management Associates,
Class A* 19,575 511
Paychex 15,000 748
-------
1,259
-------
Railroads--0.8%
Conrail 8,300 581
-------
Semi-Conductors/
Instruments-2.1%
Amphenal Class* 30,000 728
Linear Technology 20,000 785
-------
1,513
-------
Technology, Services--2.6%
First Data 10,000 669
Oracle Systems 15,300 648
Peoplesoft 10,000 430
UUnet Technologies 2,000 126
-------
1,873
-------
Telephones &
Telecommunication-5.8%
Alltel 15,000 442
Bellsouth 20,000 870
Frontier 30,000 900
- --------------------------------------------------------------------------------
Description Shares/Par (000) Value (000)
- --------------------------------------------------------------------------------
Telephones &
Telecommunication (continued)
LCI International 40,000 $ 820
SBC Telecommunications 10,000 575
Worldcom 15,000 529
-------
4,136
-------
Total Common Stocks
(Cost $33,663,628) 43,750
-------
Convertible Preferred Stock-0.7%
Automotive-0.7%
General Motors to 1,408 shares,
Series C, convertible $ 6,500 476
-------
Total Convertible Preferred Stock
(Cost $365,278) 476
-------
U.S. Treasury Obligations-16.3%
U.S. Treasury Bonds
7.250%, 05/15/16 500 571
7.130%, 02/15/23 500 572
U.S. Treasury Notes
4.000%, 01/31/96 1,000 999
5.880%, 05/31/96 2,000 2,005
7.250%, 08/31/96 500 506
6.500%, 09/30/96 2,500 2,522
6.000%, 12/31/97 500 508
5.130%, 03/31/98 500 499
6.000%, 10/15/99 500 512
6.380%, 01/15/00 500 518
6.500%, 08/15/05 500 533
5.880%, 11/15/05 500 511
6.250%, 08/15/23 1,300 1,337
------
Total U.S. Treasury Obligations
(Cost $11,386,507) 11,593
------
U.S. Government Agency
Obligations-1.4%
FHLMC
6.440%, 01/28/00 500 516
FNMA
5.940%, 12/12/05 500 503
------
Total U.S. Government Agency
Obligations
(Cost $1,000,000) 1,019
------
See accompanying notes to financial statements.
41
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
Balanced Fund (continued) / / CoreFund Equity Funds
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
U.S. Government Mortgage--Backed
Bonds-4.4%
FHLMC
5.500%, 11/01/08 $ 35 $ 35
6.000%, 05/01/08 752 745
5.500%, 11/01/08 844 823
GNMA
7.000%, 08/15/25 499 505
9.000%, 10/15/19 221 234
7.500%, 12/15/22 749 771
-------
Total U.S. Government Mortgage-
Backed Bonds
(Cost $3,095,750) 3,113
-------
Corporate Obligations-8.4%
Bell Atlantic
5.470%, 04/27/98 500 498
Bellsouth
7.000%, 02/01/05 500 534
Coca Cola
6.000%, 07/15/03 1,000 1,001
Dayton Hudson
8.500%, 12/01/22 500 541
First Bank System
6.880%, 09/15/07 500 521
Ford Motor Credit
6.380%, 04/15/00 500 507
6.250%, 11/08/00 500 505
7.500%, 01/15/03 1,000 1,071
Merrill Lynch
7.000%, 04/27/08 250 262
U.S. Bancorp
6.750%, 10/15/05 500 513
-------
Total Corporate Obligations
(Cost $5,739,927) 5,953
-------
Repurchase Agreements-9.3%
Aubrey Lanston 5.875%, dated
12/29/95, matures 01/02/96,
repurchase price $1,660,082
(collateralized by U.S. Treasury
Note, par value $1,570,000, 8.75%,
matures 10/15/97: market
value $1,722,931) 1,659 1,659
Nations 5.92%, dated 12/29/95,
matures 01/02/96, repurchase
price $1,660,911 (collateralized
by U.S. Treasury Note, par
value $1,650,000, 6.125%,
matures 05/15/98: market
value $1,708,972) 1,659 1,659
Repurchase Agreements (continued)
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Sanwa Bank 5.85%, dated 12/29/95,
matures 01/02/96, repurchase price
$1,659,078 (collateralized by U.S.
Treasury Note, par value $1,655,000,
5.75%, matures 10/31/00: market
value $1,707,854) $1,658 $ 1,658
Swiss Bank 5.85%,
dated 12/29/95, matures 01/02/96,
repurchase price $1,660,078
(collateralized by U.S. Treasury
Note, par value $1,600,000, 6.00%,
matures 08/31/97: market value $1,685,456) 1,659 1,659
-------
Total Repurchase Agreements
(Cost $6,635,000) 6,635
-------
Total Investments-102.2%
(Cost $61,886,263) 72,539
-------
Other Assets, Less Liabilities, Net-(2.2)% (1,569)
-------
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 100 million
authorized) based on 5,623,742
outstanding shares 57,622
Portfolio Shares - Series B ($0.001
par value - 100 million authorized)
based on 221,305 outstanding shares 2,271
Accumulated Net Realized Gain on
Investments 413
Net Unrealized Appreciation on
Investments 10,653
Undistributed in Excess of Net
Investment Income 11
-------
Total Net Assets-100% $70,970
=======
Net Asset Value & Redemption Price
Per Share
Series A $12.14
=======
Series B $12.14
=======
* Non-income producing security
ADR - American Depository Receipts
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Assocation
See accompanying notes to financial statement.
42
<PAGE>
For the six-month period ended December 31, 1995 (unaudited)
Statement of Operations (000) / / CoreFund Equity Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------- ------- ------- ------- -------
Growth Value Equity International Balanced
Equity Fund Equity Fund Index Fund Growth Fund Fund
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Investment income
Dividends $ 596 $ 296 $ 1,455 $ 1,189 $ 464
Interest 143 10 16 45 771
Less: Foreign taxes withheld - - - (138) -
------- ------- ------- ------- -------
Total investment income 739 306 1,471 1,096 1,235
------- ------- ------- ------- -------
Expenses:
Investment advisory fees 381 44 245 462 236
Waiver of investment advisory fees (89) (16) (180) (19) (59)
Administrative fees 127 132 153 144 85
Waiver of administrative fees (46) (17) (55) (52) (30)
Transfer agent fees & expenses 15 5 16 22 9
Custodian fees -- -- -- 82 --
Professional fees 9 3 10 5 6
Registration & filing fees 14 2 24 9 4
Organizational costs -- -- -- -- 3
12b-1 fees 3 5 -- 2 3
Taxes--other than income 1 2 1 3 5
Printing fees 2 1 1 6 1
Miscellaneous 16 2 16 14 9
------- ------- ------- ------- -------
Total expenses 433 163 231 678 272
------- ------- ------- ------- -------
Net investment income 306 143 1,240 418 963
------- ------- ------- ------- -------
Net realized and unrealized gain (loss)
on investments, forward foreign
currency contracts and foreign
currency:
Net realized gain from
security transactions 5,934 3,168 3,673 3,261 1,643
Net realized gain on forward foreign
currency contracts and foreign
currency transactions -- -- -- 904 --
Net unrealized depreciation on
forward foreign currency
contracts and translation of assets
and liabilities in foreign currency -- -- -- (108) --
Net unrealized appreciation
(depreciation) on investments 6,808 (1,624) 11,211 5,150 5,417
------- ------- ------- ------- -------
Net realized and unrealized gain
on investments, forward foreign
currency contracts and
foreign currency 12,742 1,544 14,884 9,207 7,060
------- ------- ------- ------- -------
Net increase in net assets
resulting from operations $13,048 $ 1,687 $16,124 $ 9,625 $ 8,023
======= ======= ======= ======= =======
Computation of net asset value and offering price--December 31, 1995:
Series A
(1) Net asset value, offering and
redemption price $ 12.37 $ 12.91 $ 26.12 $ 13.01 $ 12.14
==== ==== ==== ==== ====
Series B
(1) Net asset value, redemption price 12.35 12.92 13.01 12.14
(2) Maximum sales charge of 3.25% 0.41 0.43 .44 0.41
---- ---- ---- ----
Offering price $ 12.76 $ 13.35 $ 13.45 $ 12.55
==== ==== ==== ====
</TABLE>
1 Net asset value per share, as illustrated, is the amount which would be paid
upon the redemption or repurchase of shares.
2 The offer price is calculated by dividing the net asset value of Series B
by 1 minus the maximum sales charge of 3.25%.
See accompanying notes to financial statements.
43
<PAGE>
For the six-month period ended December 31, 1995 (unaudited)
and for the year-ended June 30, 1995
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
Growth
Equity Fund
----------------
7/1/95 7/1/94
to to
12/31/95 6/30/95
-------- -------
<S> <C> <C>
OPERATIONS:
Net Investment income $ 306 $ 645
Net realized gain from
security transactions 5,934 308
Net realized gain on
forward foreign
currency contracts and
foreign currency
transactions -- --
Net unrealized apprecia-
tion on forward foreign
currency contracts and
translation of assets
and liabilities in
foreign currencies -- --
Net unrealized apprecia-
tion (depreciation)
on investments 6,808 16,243
------- --------
Net increase(decrease)
in net assets result-
ing from operations 13,048 17,196
-------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Series A (310) (632)
Series B (4) (10)
Net realized gains:
Series A (2,809) --
Series B (62) --
-------- -------
Total dividends
distributed (3,185) (642)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Series A
Proceeds from shares
issued 10,066 28,885
Reinvestment of cash
distributions 2,922 528
Cost of shares redeemed (11,693) (19,116)
-------- --------
Increase in net assets
from Series A
transactions 1,295 10,297
-------- --------
Series B:
Proceeds from shares
issued 391 280
Reinvestment of cash
distributions 69 9
Cost of shares redeemed (421) (359)
-------- -------
Increase(decrease) in
net assets from
Series B transactions 39 (70)
-------- -------
Increase(decrease) in net
assets derived from
capital share transaction 1,334 10,227
-------- -------
Net increase in
net assets 11,197 26,781
-------- -------
NET ASSETS:
Beginning of period 93,388 66,607
-------- -------
End of period $104,585 $93,388
======== =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding
at beginning of period 8,354 7,309
-------- -------
Series A:
Shares issued 824 2,945
Shares issued in lieu
of cash distributions 241 54
Shares redeemed (965) (1,947)
-------- --------
Total Series A
transactions 100 1,052
-------- --------
Series B:
Shares issued 32 29
Shares issued in lieu
of cash distributions 6 1
Shares redeemed (35) (37)
-------- -------
Total Series B
transactions 3 (7)
-------- -------
Increase(decrease) in capital
share transactions 103 1,045
-------- -------
Capital shares outstanding
at end of period 8,457 8,354
======== =======
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
/ / CoreFund Equity Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE EQUITY INTERNATIONAL BALANCED
EQUITY FUND INDEX FUND GROWTH FUND FUND
------------------- ------------------- ------------------ -----------------
7/1/95 7/1/94 7/1/95 7/1/94 7/1/95 7/1/94 7/1/95 7/1/94
to to to to to to to to
12/31/95 6/30/95 12/31/95 6/30/95 12/31/95 6/30/95 12/31/95 6/30/95
-------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment income $ 143 $ 364 $ 1,240 $ 3,527 $ 418 $ 1,115 $ 963 $ (155)
Net realized gain from
security transactions 3,168 2,110 3,673 2,147 3,261 1,400 1,643 1,872
Net realized gain on
forward foreign
currency contracts and
foreign currency
transactions. -- -- -- -- 904 (351) -- --
Net unrealized apprecia-
tion on forward foreign
currency contracts and
translation of assets
and liabilities in
foreign currencies -- -- -- -- (108) 1,178 -- --
Net unrealized apprecia-
tion (depreciation)
on investments (1,624) 2,869 11,211 14,303 5,150 (3,861) 5,417 6,794
-------- -------- --------- ------- ------- ------- ------- -------
Net increase(decrease)
in net assets result-
ing from operations 1,687 5,343 16,124 19,977 9,625 (519) 8,023 8,511
--------- --------- -------- ------- ------- -------- ------- ------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Series A (135) (321) (1,241) (2,147) (2,440) (373) (921) (1,799)
Series B (8) (39) -- -- (38) (3) (33) (71)
Net realized gains:
Series A (4,156) (611) (3,835) (3,652) (548) (7,009) (840) (171)
Series B (361) (104) -- -- (10) (129) (33) (8)
-------- -------- ------- ------- -------- ------- ------ --------
Total dividends
distributed (4,660) (1,075) (5,076) (5,799) (3,036) (7,514) (1,827) (2,049)
---------- --------- ------- ------- -------- -------- --------- -------
CAPITAL SHARE TRANSACTIONS:
Series A
Proceeds from shares
issued 797 5,102 20,295 31,601 3,041 16,395 6,819 19,859
Reinvestment of cash
distributions 4,201 889 5,438 5,180 503 6,850 2,077 1,818
Cost of shares redeemed (2,182) (4,118) (11,984) (10,958) (8,932) (13,444) (7,671) (9,222)
---------- ---------- -------- ------- -------- -------- ------- -------
Increase in net assets
from Series A
transactions 2,816 1,873 13,749 25,823 (5,388) 9,801 1,225 12,455
--------- ----------- ------- ------- --------- ------- ------- -------
Series B:
Proceeds from shares
issued 81 345 -- -- 193 440 176 216
Reinvestment of cash
distributions 376 139 -- -- 9 129 80 79
Cost of shares redeemed (1,234) (2,099) -- -- (286) (486) (143) (427)
---------- ---------- ------- ------- ------- ------- ------- -------
Increase(decrease) in
net assets from
Series B transactions (777) (1,615) -- -- (84) 83 113 (132)
---------- --------- -------- ------ -------- ------- ------ ------
Increase(decrease) in net
assets derived from
capital share transaction 2,039 258 13,749 25,823 (5,472) 9,884 1,338 12,323
----------- --------- ------- ------- --------- ------ ----- -------
Net increase in
net assets (934) 4,526 24,797 40,001 1,117 1,851 7,534 18,785
---------- --------- ------- ------ --------- ------- ------- ------
NET ASSETS:
Beginning of period 34,711 30,185 112,553 72,552 112,781 110,930 63,436 44,651
---------- ---------- ------- ------- ------- ------- ------ -------
End of period $33,777 $34,711 $137,350 $112,553 $113,898 $112,781 $70,970 $63,436
========= ========= ======== ======== ======== ======== ======== =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding
at beginning of period 2,433 2,399 4,732 3,532 9,180 8,414 6,737 4,520
--------- --------- ------ ------- ------- -------- ------- ------
Series A:
Shares issued 55 390 794 1,461 236 1,282 579 1,956
Shares issued in lieu
of cash distributions 322 71 211 254 38 567 177 182
Shares redeemed (143) (311) (478) (515) (696) (1,088) (657) (908)
--------- --------- ------ ------ ------ ------- ------ -------
Total Series A
transactions 234 150 527 1,200 (422) 761 99 1,230
--------- --------- ------ ------ ------ ------ ------ ------
Series B:
Shares issued 6 27 -- -- 15 34 15 21
Shares issued in lieu
of cash distributions 29 11 -- -- 1 11 6 8
Shares redeemed (84) (154) -- -- (22) (40) (12) (42)
---------- -------- ------- ------ ------ ------ ----- -----
Total Series B
transactions (49) (116) -- -- (6) 5 9 (13)
----------- -------- -------- ----- ------ ------ ----- -----
Increase(decrease) in capital
share transactions 185 34 527 1,200 (428) 766 108 1,217
--------- -------- ------- ------ ------- ------ ------ ------
Capital shares outstanding
at end of period 2,617 2,433 5,259 4,732 8,752 9,180 5,845 5,737
======== ========= ======= ====== ====== ======= ===== =======
</TABLE>
45
<PAGE>
For the six-month period ended December 31, 1995 (unaudited) and the
periods ended June 30,
Financial Highlights / / CoreFund Equity Funds
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distri- Distri-
Value Gains or butions butions Net Asset
Beginning Net (Losses) from Net from Value
Growth of Investment on Investment Capital End of Total
Equity Period Income Securities Income Gains Period Return (6)
- --------- ------ ------ -------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Series A
1995** $11.18 $0.04 $1.54 $(0.04) $(0.35) $12.37 14.14%+
1995 9.11 0.08 2.07 (0.08) - 11.18 23.71
1994 9.95 0.05 (0.84) (0.05) - 9.11 (8.01)
1993 8.74 0.08 1.21 (0.08) - 9.95 14.76
1992(1) 10.00 0.05 (1.26) (0.05) - 8.74 (12.05)+
Series B
1995** $11.17 $0.02 $1.53 $(0.02) $(0.35) $12.35 13.93%+
1995 9.10 0.06 2.07 (0.06) - 11.17 23.44
1994 9.95 0.04 (0.85) (0.04) - 9.10 (8.13)
1993* 9.80 0.03 0.15 (0.03) - 9.95 1.80+
Value Equity
Series A
1995** $14.27 $0.06 $0.63 $(0.06) $(1.99) $12.91 5.02%+
1995 12.58 0.15 1.97 (0.15) (0.28) 14.27 17.29
1994 13.11 0.09 (0.27) (0.09) (0.26) 12.58 (1.51)
1993 11.22 0.16 1.89 (0.16) - 13.11 18.31
1992 10.33 0.15 0.89 (0.15) - 11.22 9.98
1991 10.31 0.15 0.18 (0.15) (0.16) 10.33 3.37
1990(2) 10.00 0.10 0.31 (0.10) - 10.31 4.10+
Series B
1995** $14.29 $0.05 $0.60 $(0.04) $(1.99) $12.92 4.80%+
1995 12.60 0.13 1.96 (0.12) (0.28) 14.29 16.96
1994 13.12 0.06 (0.26) (0.06) (0.26) 12.60 (1.69)
1993* 12.49 0.05 0.67 (0.09) - 13.12 5.77
Equity Index
Series A
1995** $23.79 $0.26 $3.12 $(0.26) $(0.79) $26.12 14.27%+
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45
1994 20.97 0.55 (0.43) (0.55) - 20.54 0.55
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59
1991(3) 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+
International Growth
Series A
1995** $12.29 $0.05 $1.02 $(0.29) $(0.06) $13.01 8.69%+
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21)
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28
1993 10.52 0.10 1.16 (0.07) - 11.71 12.06
1992 10.10 0.17 0.31 - (0.06) 10.52 4.90
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71)
1990(4) 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+
Series B
1995** $12.27 $0.03 $1.02 $(0.25) $(0.06) $13.01 8.61%
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48)
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08
1993* 10.07 0.05 1.59 - - 11.71 16.29
Balanced
Series A
1995** $11.06 $0.17 $1.23 $(0.17) $(0.15) $12.14 12.66%+
1995 9.88 0.35 1.21 (0.35) (0.03) 11.06 16.21
1994 10.39 0.35 (0.51) (0.35) - 9.88 (1.62)
1993(5) 10.00 0.16 0.39 (0.16) - 10.39 5.52+
Series B
1995** $11.06 $0.15 $1.23 $(0.15) $(0.15) $12.14 12.53%
1995 9.89 0.34 1.19 (0.33) (0.03) 11.06 15.84
1994 10.38 0.31 (0.49) (0.31) - 9.89 (1.86)
1993* 10.00 0.16 0.38 (0.16) - 10.38 2.50+
</TABLE>
<TABLE>
<CAPTION>
Ratio
Ratio of Net
Ratio of of Net Ratio of Income
Net Expenses Income Expenses (Loss) Port-
Assets to to to Average to Average folio
End Average Average Net Assets Net Assets Turn-
Growth of Period Net Net (Excluding (Excluding over
Equity (000) Assets Assets Waivers) Waivers) Rate
- --------- -------- ------ ------ --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Series A
1995** $102,288 0.84% 0.61% 1.11% 0.34% 43%
1995 91,345 0.76 0.84 1.10 0.50 113
1994 64,877 0.69 0.48 1.11 0.06 127
1993 63,777 0.43 0.85 1.11 0.17 103
1992(1) 33,418 0.14 1.38 1.12 0.40 66
Series B
1995** $ 2,297 1.09% 0.36% 1.36% 0.09% 43%
1995 2,043 1.01 0.59 1.35 0.25 113
1994 1,730 0.94 0.23 1.36 (0.19) 127
1993* 5,224 0.80 0.39 1.48 (0.29) 103
Value Equity
Series A
1995** $ 31,055 0.90% 0.84% 1.09% 0.65% 105%
1995 31,003 0.86 1.12 1.10 0.88 108
1994 25,448 0.80 0.73 1.09 0.44 78
1993 15,397 0.71 1.29 1.18 0.82 97
1992 10,882 0.99 1.36 1.63 0.72 117
1991 5,182 1.74 1.53 2.39 0.88 96
1990(2) 5,154 1.76 2.35 2.43 1.68 20
Series B
1995** $ 2,722 1.15% 0.59% 1.34% 0.40% 105%
1995 3,708 1.11 0.89 1.35 0.65 108
1994 4,737 1.05 0.48 1.34 0.19 78
1993* 714 0.85 0.97 1.32 0.50 97
Equity Index
Series A
1995** $137,350 0.37% 2.02% 0.76% 1.63% 11%
1995 112,533 0.37 2.48 0.76 2.09 27
1994 72,552 0.35 2.63 0.75 2.23 13
1993 50,551 0.49 2.82 0.88 2.43 4
1992 20,166 0.57 2.66 1.06 2.17 27
1991(3) 12,117 0.97 1.79 1.20 1.56 -
International
Series A
1995** $111,921 1.17% 0.73% 1.29% 0.61% 15%
1995 110,838 1.05 0.98 1.19 0.84 59
1994 108,911 0.99 0.23 1.18 0.04 67
1993 61,655 0.99 1.22 1.28 0.93 59
1992 42,594 0.96 1.67 1.40 1.23 87
1991 20,582 0.99 1.80 1.56 1.23 49
1990(4) 13,513 1.22 2.57 1.99 1.80 20
Series B
1995** $ 1,977 1.42% 0.48% 1.54% 0.36% 15%
1995 1,943 1.30 0.73 1.44 0.59 59
1994 2,019 1.24 0.05 1.43 (0.14) 67
1993* 344 1.15 1.51 1.44 1.22 59
Balanced
Series A
1995** $ 68,283 0.80% 2.85% 1.06% 2.59% 32%
1995 61,092 0.73 3.51 1.07 3.17 46
1994 42,429 0.62 3.46 1.08 3.00 56
19935 29,434 0.45 3.38 1.39 2.45 21
Series B
1995** $ 2,687 1.05% 2.60% 1.31% 2.34% 32%
1995 2,344 0.98% 3.27 1.32 2.93 46
1994 2,222 0.87 3.21 1.33 2.75 56
1993* 701 0.55 5.76 1.48 4.83 21
</TABLE>
+ Returns are for the period indicated and have not been annualized.
* Series B has been offered since January 4, 1993. Balanced has offered
Series B since March 16, 1993.
** Ratios for the six-month period ended December 31, 1995, have been
annualized.
(1) Growth Equity commenced operations on February 3, 1992. All ratios for
the period have been annualized.
(2) Value Equity commenced operations on Februar 6, 1990. All ratios for
the period have been annualized.
(3) Equity Index commenced operations on June 1, 1991. All ratios for the
period have been annualized.
(4) International Growth commenced operations on February 12, 1990. All
ratios for the period have been annualized.
(5) Balanced commenced operations on January 4, 1993. All ratios for the
period have been annualized.
(6) Total return does not reflect the sales loads charged on the Series B
shares.
See accompanying notes to financial statements.
46
<PAGE>
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets / / CoreFund Fixed Income Funds
- --------------------------------------------------------------------------------
Government Income Fund
[GRAPHIC 25]
[SEE APPENDIX A FOR DESCRIPTION]
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
U.S. Government Mortgage-Backed
Bonds -- 65.8%
GNMA
8.000%, 09/15/09 $ 920 $ 960
8.000%, 02/15/22 413 431
8.000%, 09/15/22 60 63
8.000%, 10/15/22 298 311
8.000%, 11/15/22 505 526
7.000%, 04/15/23 409 414
7.500%, 08/15/23 1,48 1,526
6.500%, 11/15/23 491 487
6.500%, 12/15/23 1,976 1,961
7.000%, 01/15/24 976 987
8.000%, 05/15/25 1,007 1,049
6.500%, 12/15/25 1,010 1,003
-----
Total U.S. Government Mortgage-
Backed Bonds
(Cost $9,497,381) 9,718
-----
U.S. Agency Mortgage-Backed
Bonds -- 8.3%
FHLMC
6.000%, 05/01/08 397 393
FNMA
7.000%, 10/01/22 825 832
-----
Total U.S. Agency Mortgage-
Backed Bonds
(Cost $1,228,338) 1,225
-----
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
U.S. Treasury Obligations -- 22.8%
U.S. Treasury Bonds
5.500%, 12/31/00 $ 500 $ 502
6.880%, 08/15/25 1,150 1,297
U.S. Treasury Notes
6.250%, 05/31/00 500 517
6.250%, 08/31/00 500 517
6.500%, 08/15/05 500 533
-----
Total U.S. Treasury Obligations
(Cost $3,255,978) 3,366
-----
Repurchase Agreements -- 4.2%
Sanwa Bank, 5.85%, dated
12/29/95, matures 01/02/96,
repurchase price $627,408
(collateralized by U.S. Treasury
Note, par value $625,000,
5.75%, matures 10/31/00:
market value $644,960) 627 627
-----
Total Repurchase Agreements
(Cost $627,000) 627
-----
Total Investments -- 101.1%
(Cost $14,608,698) 14,936
-----
Total Other Assets and Liabilities,
Net -- (1.1)% (166)
-----
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 100 million
authorized) based on
1,329,745 outstanding shares 13,276
Portfolio Shares - Series B
($0.001 par value - 100 million
authorized) based on 133,082
outstanding shares 1,362
Accumulated Net Realized Loss on
Investments (195)
Net Unrealized Appreciation on
Investments 327
-----
Total Net Assets -- 100% $14,770
------
------
Net Asset Value & Redemption Price
Per Share
Series A $10.10
------
------
Series B $10.10
------
------
FHLMA - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
See accompanying notes to financial statements.
47
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- --------------------------------------------------------------------------------
Intermediate Bond Fund
[GRAPHIC 26]
[SEE APPENDIX A FOR DESCRIPTION]
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
U.S. Treasury Obligations -- 41.4%
U.S. Treasury Bond
5.500%, 12/31/00 $4,450 $ 4,468
U.S. Treasury Notes
6.000%, 08/31/97 3,500 3,543
7.380%, 11/15/97 4,000 4,150
5.500%, 11/15/98 3,000 3,020
6.000%, 10/15/99 2,200 2,252
6.250%, 05/31/00 1,000 1,034
6.130%, 09/30/00 2,000 2,060
6.500%, 08/15/05 3,000 3,197
-----
Total U.S. Treasury Obligations
(Cost $23,302,597) 23,724
-----
U.S. Government Mortgage-Backed
Bonds -- 3.3%
GNMA
9.500%, 09/15/16 856 92
9.500%, 12/15/16 56 60
9.500%, 06/15/20 74 80
8.000%, 07/15/22 605 630
8.000%, 05/15/25 967 1,008
-----
Total U.S. Government Mortgage-
Backed Bonds
(Cost $1,808,681) 1,870
-----
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed
Bonds -- 4.6%
FHLMC
5.500%, 11/01/08 $2,196 $ 2,141
FNMA
8.000%, 04/01/07 493 510
-----
Total U.S. Agency Mortgage-Backed
Bonds
(Cost $2,675,722) 2,651
-----
Non-Agency Mortgage-Backed
Bond -- 2.6%
Advanta, Ser 93-3, CMO
4.900%, 10/25/09 1,593 1,518
-----
Total Non-Agency Mortgage-Backed
Bond
(Cost $1,592,299) 1,518
-----
Corporate Obligations -- 15.5%
Associates Corporation of
North America
4.730%, 05/06/96 1,000 997
6.380%, 08/15/98 1,500 1,528
Dean Witter Discover
6.000%, 03/01/98 1,250 1,258
Ford Motor Credit
6.800%, 08/15/97 1,000 1,019
John Deere Capital
4.630%, 09/02/96 1,500 1,491
Norwest Financial
6.250%, 02/15/97 1,500 1,513
Province of Ontario
7.000%, 08/04/05 1,000 1,065
-----
Total Corporate Obligations
(Cost $8,704,578) 8,871
-----
Asset-Backed Securities -- 25.2%
American Express Master Trust
7.150%, 08/15/99 1,000 1,040
Case Equipment Loan Trust,
Ser 95-B A2
5.950%, 09/15/00 1,000 1,012
Daimler-Benz Grantor Trust,
Ser 93-A A
3.900%, 10/15/98 517 509
48
See accompanying notes to financial statements.
<PAGE>
/ / CoreFund Fixed Income Funds
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Asset-Backed Securities, (continued)
Discover Card Master Trust I,
Ser 94-3 A (A)
6.130%, 04/16/02 $2,000 $ 2,002
Ford Credit Grantor Trust,
Ser 94-A A
6.350%, 05/15/99 1,133 1,142
Nationsbank Credit Card Master
Trust, Ser 93-1A
4.750%, 09/15/98 1,500 1,490
Premier Auto Trust, Ser 95-1
A4 7.850%, 02/04/98 2,000 2,067
Sears Credit Account Master
Trust, Ser 95-3 A
7.000%, 10/15/04 3,000 3,149
Standard Credit Card Master
Trust, Ser 95-6 A
6.750%, 06/07/00 2,000 2,059
-----
Total Asset-Backed Securities
(Cost $14,115,562) 14,470
-----
Repurchase Agreements -- 16.0%
Aubrey Lanston 5.875%,
dated 12/29/95, matures
1/02/96, repurchase price
$3,051,991 (collateralized
by U.S. Treasury Note, par
value $2,890,000, 8.75%
matures 10/15/97:
market value $3,171,510) 3,050 3,050
Goldman Sachs 5.83%, dated
12/29/95, matures 1/02/96,
repurchase price $3,051,976
(collateralized by U.S.
Treasury Note, par value
$2,725,000, 7.875%,
matures 8/15/01:
market value $3,200,325) 3,050 3,050
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreements (continued)
Sanwa Bank 5.85%, dated
12/29/95, matures
1/02/96, repurchase
price $3,051,983
(collateralized by U.S.
Treasury Note, par value
$3,250,000, 5.75%,
matures 10/31/00:
market value $3,142,245) $3,050 $ 3,050
-----
Total Repurchase Agreements
(Cost $9,150,000) 9,150
-----
Total Investments -- 108.6%
(Cost $61,388,439) 62,254
-----
Total Other Assets and Liabilities,
Net -- (8.6)% (4,912)
-----
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 100 million
authorized) based on 5,544,433
outstanding shares 55,359
Portfolio Shares - Series B
($0.001 par value - 100 million
authorized) based on
205,809 outstanding shares 2,593
Accumulated Net Realized Loss on
Investments (1,474)
Net Unrealized Appreciation on
Investments 866
Distributions in Excess of Net
Investment Income (2)
-----
Total Net Assets -- 100% $57,342
-----
-----
Net Asset Value & Redemption Price
Per Share
Series A $9.97
----
----
Series B $9.97
----
----
(A) Variable Rate Security - The rate reported on the Statement of Net Assets
is the rate in effect on December 31, 1995.
CMO - Collateralized Mortgage Obligation
FHLMA - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
See accompanying notes to financial statements.
49
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- --------------------------------------------------------------------------------
Intermediate Municipal Bond Fund
[GRAPHIC 27]
[SEE APPENDIX A FOR DESCRIPTION]
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Municipal Bonds -- 96.8%
Florida -- 4.1%
Jacksonville, Florida Electric
Authority Revenue Bond,
Series 3-A
5.200%, 10/01/02 $ 50 $ 52
-----
Georgia -- 4.2%
De Kalb County, Georgia Health
Facilities Bond, GO
5.300%, 01/01/03 50 53
-----
Hawaii -- 4.1%
Hawaii State, GO
5.200%, 06/01/04 50 52
-----
Maryland -- 4.1%
Maryland State Health & Higher
Education Facilities Authority for
Johns Hopkins Project
5.125%, 07/01/03 50 52
-----
Massachusetts -- 4.1%
Massachusetts Bay Transportation
Authority Revenue Bond, Series A
5.300%, 03/01/05 $ 50 $ 52
-----
Michigan -- 8.0%
Grand Haven, Michigan Electric
Revenue Bond (MBIA)
5.000%, 07/01/04 100 102
-----
New Jersey -- 4.1%
Burlington County, New Jersey
Community Bridge Systems
Revenue Bond, Callable
10/01/03 at 101 (CG)
5.050%, 10/01/04 50 52
-----
Pennsylvania -- 56.4%
Allegheny County, Pennsylvania,
Series C-33, GO
7.450%, 02/15/98 50 53
Allegheny County, Pennsylvania
Community College Project,
Series A
4.380%, 07/15/02 100 95
Bethlehem, Pennsylvania School
District GO (FGIC)
4.800%, 09/01/01 50 51
Governor Mifflin, Pennsylvania
School District, GO (AMBAC)
4.850%, 11/15/01 50 51
Luzerne County, Pennsylvania,
Series A, GO, Callable 09/15/00
at 100 (FGIC)
5.850%, 09/15/02 50 53
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 93
50
See accompanying notes to financial statements.
<PAGE>
/ / CoreFund Fixed Income Funds
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Pennsylvania (continued)
Pennsylvania State Turnpike
Commission Revenue Bond,
Pre-Refunded 12/01/99 at
102 (AMBAC)
7.250%, 12/01/17 $ 50 $ 56
Pennsylvania State Turnpike
Commission Revenue Bond,
Series 1, Pre-Refunded 12/01/01
at 102 (FGIC)
7.150%, 12/01/11 50 58
Pittsburgh, Pennsylvania School
District, Series A, GO (FGIC)
4.850%, 09/01/03 100 101
Reading, Pennsylvania Parking
Authority (MBIA)
4.950%, 11/15/02 50 51
Wallenpaupack, Pennsylvania Area
School District, Series C, GO,
Callable 09/01/00 at 100 (FGIC)
6.000%, 09/01/03 50 53
-----
715
-----
Tennesse -- 4.1%
Tennessee State, Series B, GO
5.900%, 06/01/98 50 52
-----
Wisconsin -- 3.6%
Wisconsin State Transportation,
Series A
5.000%, 07/01/01 45 46
-----
Total Municipal Bonds
(Cost $1,208,562) 1,228
-----
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Total Investments -- 96.8%
(Cost $1,208,562) $1,228
-----
Total Other Assets and Liabilities,
Net -- 3.2% 40
-----
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 100 million
authorized) based on
23,329 outstanding shares 270
Portfolio Shares - Series B
($0.001 par value - 100 million
authorized) based on 102,135
outstanding shares 1,056
Accumulated Net Realized Loss on
Investments (78)
Net Unrealized Appreciation on
Investments 20
-----
Total Net Assets -- 100% $1,268
-----
-----
Net Asset Value & Redemption Price
Per Share
Series A $10.11
-----
-----
Series B $10.10
-----
-----
GO -- General Obligation
(AMBAC) American Municipal Bond Assurance Company
(CG) County Guaranty
(FGIC) Financial Guaranty Insurance Company
(MBIA) Municipal Bond Investors Assurance
See accompanying notes to financial statements.
51
<PAGE>
<PAGE>
As of December 31, 1995 (Unaudited)
Schedule of Investments / / CoreFund Fixed Income Funds
- -------------------------------------------------------------------------------
Global Bond Fund
[GRAPHIC 28]
{See Appendix A for Description]
- -------------------------------------------------------------------------------
Description Par (000)(1) Value (000)
- -------------------------------------------------------------------------------
Foreign Bonds -- 68.3%
Australia -- 5.0%
Australian Government
9.000%, 09/15/04 2,150 $ 1,682
-------
Denmark -- 9.8%
Kingdom of Denmark
8.000%, 05/15/03 10,958 2,100
8.000%, 03/15/06 6,100 1,159
-------
3,259
-------
France -- 15.0%
Electric de France
7.500%, 05/11/12 5,950 1,259
Government of France OAT
7.500%, 04/25/05 8,028 1,739
Kansai Electric Power
7.000%, 08/04/03 2,700 565
Republic of Portugal
7.700%, 06/07/05 6,910 1,490
-------
5,053
-------
Germany -- 15.8%
Bundesrepublic
7.375%, 01/03/05 5,765 4,381
Deutschland Republic
6.250%, 01/04/24 450 293
- -------------------------------------------------------------------------------
Description Par (000)(1) Value (000)
- -------------------------------------------------------------------------------
Germany continued
World Bank
7.125%, 04/12/05 800 $ 593
-------
5,267
-------
Ireland -- 1.9%
Government of Ireland
9.250%, 07/11/03 356 635
-------
Netherlands -- 5.0%
Kingdom of Netherlands
8.250%, 09/15/07 2,096 1,519
7.500%, 01/15/23 215 147
-------
1,666
-------
New Zealand -- 4.7%
Government of New Zealand
10.000%, 07/15/97 2,329 1,564
-------
Sweden -- 2.1%
Government of Sweden Treasury Note
11.000%, 01/21/99 4,300 698
-------
United Kingdom -- 9.0%
European Investment Bank
10.375%, 11/22/04 860 1,527
United Kingdom Conversion
9.500%, 04/18/05 835 1,471
-------
2,998
-------
Total Foreign Bonds
(Cost $21,272,511) 22,822
-------
U.S. Treasury Obligations -- 26.6%
U.S. Treasury Bill
3.770%, 01/25/96 4,200 4,189
U.S. Treasury Notes
6.125%, 05/31/97 1,790 1,812
6.875%, 07/31/99 1,180 1,239
7.750%, 11/30/99 1,510 1,637
-------
Total U.S. Treasury Obligations
(Cost $8,672,193) 8,877
-------
U.S Treasury Option 0.1%
U.S. Treasury Call
01/30/96 4,200 30
-------
Total U.S Treasury Option
(Cost $70,875) 30
-------
Total Investments -- 95.0%
(Cost $30,015,579) $31,729
=======
(1) In local currency unless otherwise indicated.
See accompanying notes to financial statements.
52
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets / / CoreFund Fixed Income Funds
- ---------------------------------
Pennsylvania Municipal Bond Fund
- ---------------------------------
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Municipal Bonds -- 97.4%
Pennsylvania -- 97.4%
Abington, Pennsylvania School
District GO (FGIC)
5.630%, 05/15/20 $100 $ 101
Allegheny County, Pennsylvania
Sanitation Authority Sewer
Revenue Bond, Series C - 43
09/15/04 at 100 (MBIA)
5.880%, 09/15/13 100 104
Allegheny County, Pennsylvania
Redevelopment Authority Home
Improvement Loan-Impac XIV-A,
Callable 02/01/04 at 102 (FHA)
5.700%, 02/01/07 15 15
Allegheny County, Pennsylvania
Sanitation Authority Sewer
Revenue Bond, Series B, Callable
06/01/99 at 100 (FGIC)
7.450%, 12/01/09 130 143
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond, Callable 11/01/02
at 102 (MBIA)
6.000%, 11/01/12 25 26
Allegheny County, Pennsylvania
Series C-43, GO, Callable 09/15/04
at 100 (MBIA)
5.880%, 09/15/10 60 63
Bedford, Pennsylvania, Bedford
Area School District, Series A, GO,
Callable 04/15/04 at 100 (MBIA)
6.200%, 04/15/24 25 26
Berks County, Pennsylvania Reading
Hospital & Medical Center Project
Revenue Bond, Series B, Callable
10/01/04 at 102 (MBIA)
5.600%, 10/01/06 65 68
Center City District, Pennsylvania
Business Improvement Assessment,
Callable 12/01/07 at 100 (AMBAC)
5.600%, 12/01/08 60 63
Chester County, Pennsylvania GO
5.630%, 11/15/16 100 101
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Pennsylvania (continued)
Crawford, Pennsylvania Central
School District, GO (FGIC)
7.000%, 02/15/05 $100 $ 117
Delaware County, Pennsylvania, GO
5.500%, 10/01/15 75 76
Dover Township, Pennsylvania
Sewer Authority Revenue Bond
6.250%, 05/01/12 20 22
Lehigh County, Pennsylvania
Industrial Development Authority
Pollution Control Revenue Bond
for Pennsylvania Power and Light
Project, Series A, Callable 11/01/02
at 102 (MBIA)
6.400%, 11/01/21 25 27
Lower Merion Township,
Pennsylvania, GO, Callable
08/01/02 at 100
5.630%, 08/01/05 100 106
Lower Salford Township,
Pennsylvania (MBIA)
5.500%, 11/15/20 100 100
Manheim, Pennsylvania, Manheim
Central School District, GO,
Callable 05/15/04 at 100 (FGIC)
6.100%, 05/15/14 100 105
North Penn, Pennsylvania Water
Authority Revenue Bond,
Callable 11/01/02 at 101 (FGIC)
6.200%, 11/01/22 25 26
North Wales, Pennsylvania Water
Authority Revenue Bond Callable
11/01/05 at 100 (FGIC)
5.600%, 11/01/20 20 20
North Wales, Pennsylvania (FGIC)
6.750%, 11/01/10 100 116
Pennsylvania State GO
6.000%, 07/01/05 25 27
Pennsylvania State Ser 2, GO
6.250%, 07/01/11 60 67
Pennsylvania State Industrial
Development Authority, (AMBAC)
6.000%, 01/01/12 100 105
See accompanying notes to financial statements.
53
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets / / CoreFund Fixed Income Funds
- -------------------------------------------------------------------------------
Pennsylvania Municipal Bond Fund (cont.)
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Pennsylvania, (continued)
Pennsylvania State Convention
Center Authority Revenue Bond,
Series A (FGIC)
6.700%, 09/01/16 $ 75 $ 89
Pennsylvania State Higher Education
Facilities Authority for Health
Services, Series A, Callable
01/01/04 at 102
6.000%, 01/01/10 100 107
Pennsylvania State Higher Education
Pennsylvania State University,
Callable 03/01/04 at 100
6.150%, 03/01/05 40 44
Pennsylvania State Higher Education
Thomas Jefferson University,
Series A, Callable 07/01/99 at 102
6.000%, 07/01/19 150 154
Pennsylvania State Housing Finance
Agency Finance Agency Revenue
Bond, Callable 07/01/02 at
102 (FNMA)
6.400%, 07/01/12 300 311
Pennsylvania State Industrial
Development Authority, (AMBAC)
6.000%, 01/01/05 25 27
Pennsylvania State Penn State
Higher Education Facilities
Authority for University of
Pennsylvania, Series B
5.850%, 09/01/13 100 105
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 RB, Series P
5.800%, 12/01/06 75 81
Pittsburgh, Pennsylvania, GO,
Series D, Callable 09/01/04
at 100 (AMBAC)
6.125%, 09/01/17 25 26
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Pennsylvania (continued)
Pittsburgh, Pennsylvania University
of Pittsburg Higher Education
University Capital Improvements,
Series A, Callable 06/01/02 at
102 (MBIA)
6.125%, 06/01/21 $115 $ 121
Seneca Valley, Pennsylvania GO (FGIC)
5.850%, 02/15/15 105 108
York, Pennsylvania, York City
School District, GO, Callable
03/01/03 at 100 (FGIC)
5.600%, 03/01/07 75 77
------
3,006
------
Total Municipal Bonds
(cost $2,825,538) 3,006
------
Total Investments -- 97.4%
(cost $2,825,538) 3,006
------
Total Other Assets and Liabilities,
Net -- 2.6% O1 81
------
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 100
million authorized) based on
270,617 outstanding shares 2,712
Portfolio Shares - Series B
($0.001 par value - 100
million authorized) based on
20,473 outstanding shares 200
Accumulated Net Realized Loss on
Investments (5)
Net Unrealized Appreciation on
Investments 180
------
Total Net Assets -- 100% $3,087
======
Net Asset Value & Redemption Price
Per Share
Series A $10.61
======
Series B $10.61
======
GO--General Obligation
RB--Revenue Bond
(AMBAC) American Municipal Bond Assurance Company
(FGIC) Federal Guaranty Insurance Company
(FHA) Federal Housing Authority
(MBIA) Municipal Bond Investors Assurance
See accompanying notes to financial statements.
54
<PAGE>
<PAGE>
Schedule of Investments / / CoreFund Fixed Income Funds
- ---------------------------------------
New Jersey Municipal Bond Fund
- ------------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------------
Municipal Bonds -- 98.3%
New Jersey -- 98.3%
Atlantic County, New Jersey, GO,
(MBIA)
6.000%, 01/01/11 $ 55 $ 58
Bayonne, New Jersey, GO, (FGIC)
5.900%, 05/01/08 150 159
Cherry Hill Township, New Jersey,
GO, 5.900%, 06/01/05 50 54
Cinnaminson Township, New Jersey
Cinnaminson Township School
District GO, (MBIA)
5.800%, 07/15/05 55 59
Flemington-Raritan, New Jersey
Regional School District GO,
5.700%, 05/01/06 50 53
Gloucester County, New Jersey
Improvement Authority RB,
5.800%, 04/01/06 20 21
Marlboro Township, New Jersey GO
5.500%, 07/15/09 40 41
Mercer County, New Jersey
Improvement Authority RB
5.400%, 12/01/05 50 53
Millburn Township, New Jersey GO
5.350%, 07/15/12 100 103
Monmouth County, New Jersey
Improvement Authority RB
6.630%, 12/01/05 40 44
New Jersey Health Care Facilities,
Finance Authority RB
for Burlington County
6.000%, 07/01/12 50 54
New Jersey Health Care Facilities,
Finance Authority RB for
Bridgeton County
6.000%, 07/01/13 50 54
- ------------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------------
New Jersey State, GO
5.500%, 02/15/04 $100 $106
New Jersey State Economic
Development Authority, Revenue
Bond for Rutgers State University
6.130%, 07/01/24 55 59
New Jersey State Economic
Development Authority for
Peddie School Project, Series A
5.400%, 02/01/06 50 52
New York & New Jersey States Port
Authority, Revenue Bond,
Eighty-First Series
5.700%, 08/01/07 50 53
New Jersey State Educational
Facilities Authority, Revenue Bond
for University of Medicine and
Dentistry, Ser B.
5.250%, 12/01/13 60 60
North Brunswick Township,
New Jersey
6.130%, 05/15/04 45 49
6.300%, 02/01/12 150 163
North Jersey District Water Supply
6.000%, 07/01/21 50 53
Secaucus, New Jersey
6.100%, 12/01/10 60 66
South Monmouth, New Jersey
Sewer Authority
5.550%, 01/15/06 50 53
Teaneck Township, New Jersey
5.750%, 07/01/13 55 57
West Windsor Township, New Jersey
6.100%, 12/01/12 50 54
Winslow Township, New Jersey
5.950%, 12/01/16 55 57
-------
1,635
-------
Total Municipal Bonds
(Cost $1,542,751) 1,635
-------
Total Investments -- 98.3%
(Cost $1,542,751) 1,635
=======
GO--General Obligation
RB--Revenue Bond
(AMBAC) American Municipal Bond Assurance Company
See accompanying notes to financial statements.
(CG) County Guaranty
(FGIC) Financial Guaranty Insurance Company
(MBIA) Municipal Bond Investors Assurance
55
<PAGE>
<TABLE>
As of December 31, 1995 (unaudited)
Statement of Assets and Liabilities (000)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------
Global
Bond Fund
------------
<S> <C>
Assets:
Investments at Market Value (Cost $30,015,579) $31,729
Cash 1,301
Foreign Currency (Cost $195,337) 195
Receivable for Accrued Interest 1,076
Other Assets 12
--------
Total Assets 34,313
--------
Liabilities:
Income Distribution Payable 845
Other Liabilities 59
--------
Total Liabilities 904
--------
Net Assets:
Portfolio Shares--Series A ($.001 Par Value--25 million authorized) based on
3,356,865 outstanding shares 33,379
Portfolio Shares--Series B ($.001 Par Value--25 million authorized) based on
17,360 outstanding shares 173
Accumulated Net Realized Loss on Investments (1,252)
Accumulated Net Realized Loss on Foreign Currency Transactions (1,775)
Net Unrealized Depreciation on Foreign Currency and Translation of Other Assets and Liabilities
Denominated in Foreign Currencies (15)
Net Unrealized Appreciation on Investments 1,713
Undistributed Net Investment Income 1,186
--------
Total Net Assets $33,409
========
Net Asset Value and Redemption Price Per Share
Series A $ 9.90
========
Series B $ 9.89
========
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
/ / CoreFund Fixed Income Funds
- --------------------------------------------------------------------------------------------------------------------
------------
New Jersey
Municipal
Bond Fund
------------
<S> <C>
Assets:
Investments at Market Value (Cost $1,542,751) $ 1,635
Cash 63
Receivable for Accrued Interest 28
Other Assets 11
--------
Total Assets 1,737
--------
Liabilities:
Payable for investment securities purchased 59
Other Liabilities 14
--------
Total Liabilities 73
--------
Net Assets:
Portfolio Shares--Series A ($0.001 Par Value -- 100 million authorized) based on 149,033
outstanding shares 1,474
Portfolio Shares--Series B ($0.001 Par Value -- 100 million authorized) based on 9,502
outstanding shares 98
Net Unrealized Appreciation on Investments 92
--------
Total Net Assets $ 1,664
========
Net Asset Value and Redemption Price Per Share
Series A $ 10.50
--------
Series B $ 10.49
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
</TABLE>
<PAGE>
<TABLE>
For the six-month period ended December 31, 1995 (unaudited)
Statement of Operations (000)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------- ------------
Government Intermediate
Income Fund Bond Fund
----------- ------------
<S> <C> <C>
Investment income
Interest $ 462 $1,861
------ ------
Expenses
Investment advisory fees 34 145
Waiver of investment advisory fees (16) (41)
Administrative fees 17 72
Waiver of administrative fees (6) (26)
Transfer agent fees & expenses 2 8
Custodian fees -- --
Professional fees 1 5
Registration & filing fees 10 --
Organizational costs 3 --
12b-1 fees 2 3
Taxes--other than income -- 5
Miscellaneous (7) 10
------ ------
Total expenses 40 181
------ ------
Net investment income 422 1,680
------ ------
Net realized and unrealized gain (loss) on investments, forward foreign
currency contracts and foreign currency:
Net realized gain (loss) from security transactions 65 455
Net realized gain on forward foreign currency contracts and foreign
currency transactions -- --
Net unrealized appreciation on forward foreign currency contracts, foreign
currencies and translation of other assets and liabilities in foreign currencies -- --
Net unrealized appreciation on investments 297 305
------ ------
Net realized and unrealized gain on investments, forward foreign currency contracts
and foreign currencies 362 760
------ ------
Net increase in net assets resulting from operations $ 784 $2,440
====== ======
Computation of net asset value and
offering price--December 31, 1995:
Series A:
Net asset value, offering and redemption price $10.10 $ 9.97
====== ======
Series B:
/1/Net asset value, redemption price 10.10 9.97
/2/Maximum sales charge 3.25% 0.34 0.33
------ ------
Offering Price $10.44 $10.30
====== ======
</TABLE>
/1/ Net asset value per share, as illustrated, is the amount which would be
paid upon the redemption or repurchase of shares.
/2/ The offer price is calculated by the net asset value of Series B by 1
minus the maximum sales charge of 3.25%.
See accompanying notes to financial statements.
58
<PAGE>
<TABLE>
<CAPTION>
/ / CoreFund Fixed Income Funds
- -------------------------------------------------------------------------------------------------------------------------------
------------ ---------- ------------- -------------
Intermediate Pennsylvania New Jersey
Municipal Global Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund
------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
$ 29 $ 996 $ 83 $ 44
------ ------ ------ ------
3 90 7 4
(2) (32) (7) (4)
2 37 4 2
(1) (13) (4) (2)
-- 8 1 1
-- 6 -- --
-- 7 1 --
2 1 2 1
3 -- -- 1
1 -- 1 --
-- 1 -- --
(1) -- 1 --
------ ------ ------ ------
7 105 6 3
------ ------ ------ ------
22 891 77 41
------ ------ ------ ------
(2) (49) 7 6
-- 277 -- --
-- 79 -- --
37 858 120 62
------ ------ ------ ------
35 1,165 127 68
------ ------ ------ ------
$ 57 2,056 $ 204 $ 109
====== ====== ====== ======
$10.11 $ 9.90 $10.61 $10.50
====== ====== ====== ======
10.10 9.89 10.61 10.49
0.34 .33 0.36 0.35
------ ------ ------ ------
$10.44 $10.22 $10.97 $10.84
====== ====== ====== ======
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
For the six-month period ended December 31, 1995 (unaudited) and the year-ended June 30, 1995
Statement of Changes in Net Assets (000)
- ----------------------------------------------------------------------------------------------------------------------------
-----------------
Government
Income Fund
-----------------
7/1/95 7/1/94
to to
12/31/95 6/30/95
-------- -------
<S> <C> <C>
Investment activities:
Net investment income $ 422 $ 732
Net realized gain (loss) from security transactions 65 (213)
Net realized gain (loss) from forward foreign currency contracts and foreign currency transactions -- --
Net unrealized appreciation on forward foreign currency contracts, foreign currencies
and translation of assets and liabilities in foreign currencies -- --
Net unrealized appreciation on investments 297 611
------- -------
Net increase in net assets resulting from operations 784 1,130
------- -------
Distributions to shareholders:
Net investment income:
Series A (379) (648)
Series B (41) (86)
Realized capital gains:
Series A -- (1)
Series B -- --
------- -------
Total distributions (420) (735)
------- -------
Share transactions
Series A:
Proceeds from shares issued 1,590 3,952
Reinvestment of cash distributions 217 268
Cost of shares redeemed (16) (2,353)
------- -------
Increase (decrease) in net assets from Series A transactions 1,791 1,867
------- -------
Series B:
Proceeds from shares issued 75 170
Reinvestment of cash distributions 43 72
Cost of shares redeemed (182) (450)
------- -------
Increase (decrease) in net assets from Series B transactions (64) (208)
Increase (decrease) in net assets derived from capital share transaction 1,727 1,659
------- -------
Net increase (decrease) in net assets 2,091 2,054
------- -------
Net Assets:
Beginning of period 12,679 10,625
------- -------
End of period $14,770 $12,679
======= =======
Capital share transactions:
Capital shares outstanding at beginning of period 1,289 1,116
------- -------
Series A:
Shares issued 160 415
Shares issued in lieu of cash distributions 22 28
Shares redeemed (2) (248)
------- -------
Net increase in capital share transactions 180 195
------- -------
Series B:
Shares issued 8 18
Shares issued in lieu of cash distributions 4 8
Shares redeemed (18) (47)
------- -------
Net increase (decrease) in capital share transactions (6) (22)
------- -------
Increase (decrease) derived from capital share transaction 174 173
------- -------
Capital shares outstanding at end of period 1,463 1,289
======= =======
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
<TABLE>
<CAPTION>
/ / CoreFund Fixed Income Funds
- ---------------------------------------------------------------------------------------------------------------------------------
- ----------------- ----------------- ----------------- ----------------- -----------------
Intermediate Pennsylvania New Jersey
Intermediate Municipal Global Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
- ----------------- ----------------- ----------------- ----------------- -----------------
7/1/95 7/1/94 7/1/95 7/1/94 7/1/95 7/1/94 7/1/95 7/1/94 7/1/95 7/1/94
to to to to to to to to to to
12/31/95 6/30/95 12/31/95 6/30/95 12/31/95 6/30/95 12/31/95 6/30/95 12/31/95 6/30/95
- -------- ------- -------- ------- -------- ------- -------- ------- -------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,680 $ 3,311 $ 22 $ 69 $ 891 $ 1,772 $ 77 $ 115 $ 41 $ 84
455 (738) (2) (57) (49) 1,044 7 (12) 6 4
-- -- -- -- 277 (1,224) -- -- -- --
-- -- -- -- 79 344 -- -- -- --
305 1,857 37 70 858 503 120 64 62 40
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
2,440 4,430 57 82 2,056 2,439 204 167 109 128
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(1,626) (2,981) (5) (27) (1,213) (845) (70) (105) (39) (84)
(56) (331) (17) (42) (6) (5) (7) (10) (2) --
-- (9) -- -- -- -- -- -- (9) --
-- (2) -- -- -- -- -- -- (1) --
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(1,682) (3,323) (22) (69) (1,219) (850) (77) (115) (51) (84)
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
5,458 17,116 -- -- 5,010 327 480 1,718 155 520
1,790 2,752 5 10 497 564 64 73 30 54
(7,817) (14,254) (141) (732) -- (529) (60) -- (227) (499)
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(569) 5,614 (136) (722) 5,507 362 484 1,791 (42) 75
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
106 62 71 76 1 76 3 154 76 21
47 325 18 33 4 4 9 9 1 --
(89) (7,763) (112) (407) (8) (87) (125) (14) (3) --
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
64 (7,376) (23) (298) (3) (7) (113) 149 74 21
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(505) (1,762) (159) (1,020) 5,504 355 371 1,940 32 96
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
253 (655) (124) (1,007) 6,341 1,944 498 1,992 90 140
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
57,089 57,744 1,392 2,399 27,068 25,124 2,589 597 1,574 1,434
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
$57,342 $57,089 $ 1,268 $ 1,392 $33,409 $27,068 $ 3,087 $2,589 $ 1,664 $ 1,574
======= ======= ======= ======= ======= ======= ======= ====== ======= =======
5,801 5,992 142 248 2,814 2,774 255 60 155 144
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
554 1,777 -- -- 509 36 47 173 15 54
181 286 -- 1 52 62 6 7 3 5
(792) (1,484) (14) (76) -- (58) (6) -- (22) (50)
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(57) 579 (14) (75) 561 40 47 180 (4) 9
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
11 6 7 8 -- 8 -- 15 7 2
5 34 2 3 -- 1 1 1 -- --
(9) (813) (11) (42) (1) (9) (12) (1) -- --
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
7 (773) (2) (31) (1) -- (11) 15 7 2
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(50) (194) (16) (106) 560 40 36 195 3 11
- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
5,751 5,801 126 142 3,374 2,814 291 255 158 155
======= ======= ======= ======= ======= ======= ======= ====== ======= =======
61
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the six-month period ended December 31, 1995 (unaudited) and the periods ended June 30,
Financial Highlights
- ---------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
Net Realized and Net Net Ratio
Asset Unrealized Distributions Distributions Asset Assets Ratio of Net
Value Net Gains or from Net from Value End of Expenses Income
Beginning Investment (Losses) on Investment Capital End of Total of Period to Average to Average
of Period Income Securities Income Gains Period Return/6/ (000) Net Assets Net Assets
---------- ---------- ------------ ------------- ------------- ------- --------- --------- ----------- ----------
- ------------------
Government Income
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series A
1995** $ 9.83 $0.31 $0.27 $(0.31) $-- $10.10 6.02%+ $13,426 0.57% 6.28%
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
1993/1/ 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323 0.44 5.41
Series B
1995** $ 9.84 $0.30 $0.26 $(0.30) $-- $10.10 5.78%+ $ 1,344 0.82% 6.03%
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
1993* 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201 0.63 5.35
- -------------------
Intermediate Bond
- -------------------
Series A
1995** $ 9.84 $0.29 $0.13 $(0.29) $-- $ 9.97 4.33%+ $55,290 0.62% 5.81%
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
1992/2/ 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623 0.11 5.73
Series B
1995** $ 9.84 $0.28 $0.13 $(0.28) $-- $ 9.97 4.20%+ $ 2,052 0.87% 5.56%
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
1993* 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752 0.75 3.78
- ----------------------------
Intermediate Municipal Bond
- ----------------------------
Series A
1995** $ 9.83 $0.18 $0.28 $(0.18) $-- $10.11 4.71%+ $ 236 0.97% 3.57%
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
1993/3/ 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009 0.58 2.74
Series B
1995** $ 9.83 $0.17 $0.27 $(0.17) $-- $10.10 4.47%+ $ 1,032 1.22% 3.32%
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
1993* 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166 0.81 2.51
- -------------
Global Bond
- -------------
Series A
1995** $ 9.62 $0.24 $0.42 $(0.38) $-- $ 9.90 6.96%+ $33,237 0.70% 5.96%
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898 0.64 6.84
1994/4/ 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73 5.04
Series B
1995** $ 9.61 $0.29 $0.36 $(0.37) $-- $ 9.89 6.83%+ $ 172 0.95% 5.71%
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170 0.89 6.59
1994/4/ 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98 4.79
</TABLE>
<TABLE>
<CAPTION>
Ratio Ratio of
of Expenses Net Income
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
---------- ---------- ------------
- ------------------
Government Income
- ------------------
<S> <C> <C> <C>
Series A
1995** 0.90% 5.95% 77%
1995 0.98 6.14 368
1994 1.00 4.43 157
1993/1/ 1.10 4.75 93
Series B
1995** 1.15% 5.70% 77%
1995 1.24 5.86 368
1994 1.25 4.18 157
1993* 1.29 4.69 93
- -------------------
Intermediate Bond
- -------------------
Series A
1995** 0.85% 5.58% 109%
1995 0.84 5.52 405
1994 0.86 4.02 299
1993 0.86 4.18 188
1992/2/ 0.84 5.00 51
Series B
1995** 1.10% 5.33% 109%
1995 1.09 5.03 405
1994 1.11 3.77 299
1993* 1.19 3.34 188
- ----------------------------
Intermediate Municipal Bond
- ----------------------------
Series A
1995** 1.34% 3.20% 0%
1995 1.26 3.47 9
1994 1.17 3.37 43
1993/3/ 1.45 1.87 10
Series B
1995** 1.59% 2.95% 0%
1995 1.52 3.21 9
1994 1.42 3.12 43
1993* 1.68 1.64 10
- -------------
Global Bond
- -------------
Series A
1995** 1.00% 5.66% 24%
1995 1.03 6.45 133
1994/4/ 1.12 4.65 161
Series B
1995** 1.25% 5.41% 24%
1995 1.28 6.20 133
1994/4/ 1.37 4.40 161
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
/ / CoreFund Fixed Income Funds
- -----------------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
Net Realized and Net Net Ratio
Asset Unrealized Distributions Distributions Asset Assets Ratio of Net
Value Net Gains or from Net from Value End of Expenses Income
Beginning Investment (Losses) on Investment Capital End of Total of Period to Average to Average
of Period Income Securities Income Gains Period Return/6/ (000) Net Assets Net Assets
---------- ---------- ------------ ------------- ------------- ------ --------- --------- ----------- ----------
- ----------------------------
Pennsylvania Municipal Bond
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series A
1995** $10.16 $0.27 $0.45 $(0.27) $-- $10.61 7.22%+ $ 2,870 0.35% 5.26%
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272 0.39 5.26
1994/5/ 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434 0.42 5.09
Series B
1995** $10.16 $0.26 $0.45 $(0.26) $-- $10.61 7.08%+ $ 217 0.60% 5.01%
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317 0.64 4.95
1994* 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163 0.67 4.84
- ---------------------------
New Jersey Municipal Bond
- ---------------------------
Series A
1995** $10.12 $0.26 $0.44 $(0.26) $(0.06) $10.50 7.02%+ $ 1,564 0.40% 4.96%
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550 0.42 5.21
1994/5/ 10.00 0.06 (0.06 (0.06) -- 9.94 0.01+ 1,432 0.43 5.07
Series B
1995** $10.12 $0.25 $0.43 $(0.25) $(0.06) $10.49 6.79%+ $ 100 0.65% 4.71%
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24 0.68 4.97
1994* 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2 0.68 4.82
</TABLE>
<TABLE>
<CAPTION>
Ratio Ratio of
of Expenses Net Income
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
---------- ---------- ------------
- -----------------------------
Pennsylvania Municipal Bond
- -----------------------------
<S> <C> <C> <C>
Series A
1995** 1.10% 4.51% 5%
1995 1.14 4.51 18
1994/5/ 1.17 4.34 3
Series B
1995** 1.35% 4.26% 5%
1995 1.39 4.20 18
1994* 1.42 4.09 3
- ---------------------------
New Jersey Municipal Bond
- ---------------------------
<S> <C> <C> <C>
Series A
1995** 1.16% 4.20% 13%
1995 1.17 4.46 32
1994/5/ 1.35 4.15 13
Series B
1995** 1.41% 3.95% 13%
1995 1.44 4.21 32
1994* 1.60 3.90 13
</TABLE>
<TABLE>
<S> <C>
+ Returns are for the period indicated and have not been annualized.
* Series B has been offered since January 4, 1993. Government Income and Intermediate Term Municipal Funds have offered
Series B since May 3, 1993. Pennsylvania Municipal Bond and New Jersey Municipal Bond Funds have offered Series B
Since May 16, 1994. Ratios for these periods have been annualized.
** Ratios for the six-month period ended December 31, 1995, have been annualized.
/1/ Government Income commenced operations on April 1, 1993. Ratios for this period have been annualized.
/2/ Intermediate Bond commenced operations on February 3, 1992. Ratios for this period have been annualized.
/3/ Intermediate Municipal Bond commenced operations on May 3, 1993. Ratios for this period have been annualized.
/4/ Global Bond commenced operations on December 15, 1993. Ratios for this period have been annualized.
/5/ Pennsylvania Municipal Bond and New Jersey Municipal Bond Funds commenced operations on May 16, 1994. Ratios for this
period have been annualized.
/6/ Total return does not reflect the sales loads charged on the Series B shares.
See accompanying notes to financial statements.
</TABLE>
63
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- -------------------------------------------------------------------------------
Cash Reserve
- -------------------------------------------------------------------------------
[GRAPHIC 29]
[See Appendix A for Description]
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Commercial Paper -- 78.2%
AT&T
5.670%, 01/31/96 $10,000 $ 9,953
5.470%, 04/18/96 10,000 9,836
Alcatel-Alsthom
5.640%, 02/21/96 10,000 9,920
Ameritech Capital
5.630%, 03/05/96 16,000 15,840
Arco Coal Australia
5.650%, 02/29/96 10,694 10,595
Asset Securitization
5.700%, 02/07/96 15,000 14,912
Baltimore Gas & Electric
5.680%, 01/19/96 10,000 9,972
Banc One Funding
5.580%, 03/01/96 8,500 8,421
British Gas
5.670%, 01/24/96 10,000 9,964
CIT Group Holdings
5.650%, 01/17/96 10,000 9,975
Coca Cola
5.520%, 03/13/96 10,000 9,890
Corporate Asset Funding
5.625%, 02/15/96 10,000 9,930
Deutsche Bank Financial
5.720%, 01/05/96 5,000 4,997
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Commercial Paper (continued)
E.I. DuPont de Nemours
5.650%, 02/08/96 $10,000 $ 9,940
5.510%, 03/07/96 10,000 9,899
Ford Motor Credit
5.620%, 02/09/96 10,000 9,939
5.660%, 02/14/96 10,000 9,931
General Electric Capital
5.650%, 02/16/96 11,954 11,868
Goldman Sachs
5.570%, 03/04/96 10,000 9,903
5.620%, 03/18/96 10,000 9,880
H.J. Heinz
5.700%, 02/16/96 5,000 4,964
Hewlett-Packard
5.530%, 03/12/96 15,000 14,836
J.C. Penney Funding
5.650%, 02/13/96 10,000 9,932
Merrill Lynch
5.660%, 02/20/96 20,000 19,843
Metropolitan Life Funding
5.660%, 01/25/96 10,350 10,311
5.630%, 02/02/96 10,000 9,950
Mitsubishi International
5.680%, 02/13/96 10,000 9,932
5.580%, 03/08/96 10,000 9,896
5.600%, 03/08/96 5,000 4,948
National Australia Funding
5.720%, 01/18/96 10,300 10,272
National Rural Utility
5.650%, 02/09/96 9,250 9,193
5.650%, 02/12/96 10,000 9,934
5.600%, 03/15/96 10,000 9,885
New Center Asset Trust
6.000%, 01/02/96 10,000 9,998
Province of Alberta
5.670%, 01/25/96 5,000 4,981
5.420%, 05/08/96 10,000 9,807
Province of British Columbia
5.560%, 02/12/96 6,000 5,961
5.430%, 05/13/96 7,500 7,349
Province of Quebec
5.620%, 01/09/96 10,000 9,987
5.580%, 03/06/96 10,000 9,899
Republic National Bank of
New York
5.510%, 03/14/96 10,000 9,888
Schering-Plough
5.550%, 01/16/96 10,000 9,977
Southwestern Bell Capital
5.470%, 05/03/96 2,650 2,600
5.650%, 02/06/96 10,000 9,944
See accompanying notes to financial statements.
64
<PAGE>
/ / CoreFund Money Market Funds
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Commercial Paper (continued)
Toyota Motor Credit
5.670%, 01/12/96 $ 5,184 $ 5,175
5.720%, 02/05/96 10,000 9,945
---------
Total Commercial Paper
(Cost $444,972,264) 444,972
---------
U.S. Government Agency
Obligations -- 6.1%
FNMA
5.150%, 01/03/96(A) 10,000 10,000
5.250%, 03/25/96 10,000 9,873
5.310%, 12/11/96 10,000 9,988
SLMA
5.250%, 01/03/96(A) 5,000 5,000
---------
Total U.S.Government Agency
Obligations
(Cost $34,861,284) 34,861
---------
Corporate Obligation -- 1.8%
American Express Centurian Bank
5.940%, 06/07/96 10,000 10,000
---------
Total Corporate Obligation
(Cost $10,000,000) 10,000
---------
Master Notes -- 2.0%
Associates Corporation of
North America
5.440%, 01/07/96(A) 10,637 10,637
SLMA
5.460%, 01/07/96(A) 517 517
---------
Total Master Notes
(Cost $11,154,009) 11,154
---------
Certificates Of Deposit -- 1.8%
Harris Trust & Savings Bank
5.790%, 01/17/96 10,000 10,000
---------
Total Certificates Of Deposit
(Cost $10,000,028) 10,000
---------
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Mortgage Related -- 0.2%
Case Equipment Loan Trust
1995-B Class A1
5.825%, 09/15/96 $1,240 $ 1,240
---------
Total Mortgage Related
(Cost $1,239,912) 1,240
---------
Repurchase Agreements -- 10.5%
Morgan Stanley 5.87%, dated
12/29/95, matures 1/02/96,
repurchase price $17,011,088
(collateralized by U.S. Treasury
Note, par value $16,635,000,
6.125%, matures 9/30/00:
market value $17,600,853) 17,000 17,000
Nations Bank 5.92%, dated
12/29/95, matures 1/02/96,
repurchase price $43,028,284
(collateralized by U.S. Treasury
Note, par value $42,830,000,
6.125%, matures 5/15/98:
market value $44,360,761) 43,000 43,000
---------
Total Repurchase Agreements
(Cost $60,000,000) 60,000
---------
Total Investments -- 100.5%
(Cost $572,227,497) 572,227
---------
Total Other Assets and Liabilities,
Net -- (0.5)% (2,735)
---------
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 1
billion authorized) based on
551,434,273 outstanding shares 551,434
Portfolio Shares - Series B
($0.001 par value - 1
billion authorized) based on
18,064,197 outstanding shares 18,064
Accumulated Net Realized Loss on
Investments (6)
---------
Total Net Assets -- 100% $569,492
=========
Net Asset Value & Redemption Price
Per Share
Series A $1.00
=========
Series B $1.00
=========
(A) Variable Rate Securities - The rate reflected on the Statement of Net
Assets is the rate in effect on December 31, 1995.
FNMA - Federal National Mortgage Association
SLMA - Student Loan Marketing Association
See accompanying notes to financial statements.
65
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- -------------------------------------------------------------------------------
Treasury Reserve
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
U.S. Treasury Obligations -- 40.1%
U.S. Treasury Bills
5.370%+, 01/18/96 $ 5,000 $ 4,987
5.390%+, 01/25/96 1,000 9,964
5.470%+, 02/01/96 5,000 4,977
5.330%+, 02/08/96 10,000 9,944
5.360%+, 02/15/96 5,000 4,967
5.290%+, 02/22/96 7,000 6,947
5.330%+, 03/07/96 11,000 10,893
5.310%+, 03/14/96 8,700 8,606
5.310%+, 03/21/96 10,000 9,882
5.330%+, 03/28/96 10,000 9,871
5.400%+, 04/04/96 10,000 9,859
5.320%+, 04/11/96 5,500 5,418
5.300%+, 04/18/96 10,000 9,841
5.290%+, 04/25/96 10,000 9,831
5.480%+, 05/02/96 5,000 4,907
5.310%+, 05/09/96 10,000 9,810
5.230%+, 05/16/96 10,000 9,803
5.250%+, 05/23/96 10,000 9,792
5.250%+, 05/30/96 10,000 9,781
5.190%+, 06/06/96 10,000 9,774
5.070%+, 06/13/96 10,000 9,769
4.980%+, 06/20/96 10,000 9,763
5.120%+, 06/27/96 5,000 4,873
5.160%+, 07/25/96 5,000 4,852
U.S. Treasury Note
5.500%, 04/30/96 10,000 9,987
U.S. Treasury STRIPS
5.660%+, 05/15/96 5,000 4,899
6.195%+, 05/15/96 6,000 5,869
-----
Total U.S. Treasury Obligations
(Cost $219,865,534) 219,866
-------
- ------------------------------------------------------------------------------
Description Par (000) Value (000)
- ------------------------------------------------------------------------------
Repurchase Agreements -- 60.3%
Aubrey Lanston 5.85%, dated
12/29/95, matures 01/02/96,
repurchase price $120,078,333
(collateralized by various
U.S. Treasury Notes, total par
value $120,540,000, 5.125% - 5.750%,
matures 03/31/97 - 04/30/98,
U.S. Treasury Bill, par value
21,095,000 matures 08/22/96;
total market value $124,151,564) $120,000 $ 120,000
First National Bank of Chicago
5.85%, dated 12/29/95, matures
01/02/96, repurchase price
$20,013,000 (collateralized by
U.S. Treasury Note, par value
$21,095,000, 6.125%, matures
08/22/96: market value
$20,443,165) 20,000 20,000
Goldman Sachs 5.83%, dated
12/29/95, matures 01/02/96,
repurchase price $13,008,421
(collateralized by U.S. Treasury
Note, par value $11,595,000,
7.875%, matures 08/15/01:
market value $13,617,530) 13,000 13,000
Morgan Stanley 5.87%, dated
12/29/95, matures 01/02/96,
repurchase price $20,013,044
(collateralized by U.S. Treasury
Note, par value $19,570,000,
6.125%, matures 09/30/00:
market value $20,706,263) 20,000 20,000
Nations Bank 5.92%, dated
12/29/95, matures 01/02/96,
repurchase price $12,007,893
(collateralized by U.S. Treasury
Note, par value $11,950,000,
6.125%, matures 05/15/98:
market value $12,377,098) 12,000 12,000
Sanwa Bank 5.85%, dated
12/29/95, matures 01/02/96,
repurchase price $125,081,250
(collateralized by U.S. Treasury
Note, par value $124,766,000,
5.75%, matures 10/31/00:
market value $128,750,526) 125,000 125,000
STRIPS - Separately Registered Interest and Principal of Securities
+ Effective yield
See accompanying notes to financial statements.
66
<PAGE>
/ / CoreFund Money Market Funds
- --------------------------------------------------------------------------------
Description Par (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreements (continued)
Swiss Bank 5.65%, dated
12/29/95, matures 01/02/96,
repurchase price $8,670,440
(collateralized by U.S. Treasury
Note, par value $8,665,000,
6%, matures 08/31/97: market
value $9,113,933) $ 8,665 $ 8,665
Swiss Bank 5.85%, dated
12/29/95, matures 01/02/96,
repurchase price $12,007,800
(collateralized
by U.S. Treasury Note, par
value $11,865,000, 6.00%,
matures 08/31/97:
market value $12,498,708) 12,000 12,000
-------
Total Repurchase Agreements
(Cost $330,665,000) 330,665
-------
Total Investments -- 100.4%
(Cost $550,530,534) 550,531
-------
Total Other Assets and Liabilities,
Net -- (0.4)% (2,427)
-------
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 1
billion authorized) based on
526,058,688 outstanding shares 526,059
Portfolio Shares - Series B
($0.001 par value - 1
billion authorized)
based on 22,022,049
outstanding shares 22,022
Accumulated Net Realized Gain on
Investments 23
------
Total Net Assets -- 100% $548,104
-------
-------
Net Asset Value & Redemption Price
Per Share
Series A $1.00
-----
-----
Series B $1.00
-----
-----
Tax-Free Reserve
- -------------------------------------------------------------------------------
[GRAPHIC 30]
[SEE APPENDIX A FOR DESCRIPTION]
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Municipal Bonds -- 104.4%
Alabama -- 11.7%
Alabama State Housing Finance
Authority Revenue Bond
5.250%, 01/07/96(A)(B)(C) $ 900 $ 900
Montgomery, Alabama TECP
3.750%, 01/11/96(C) 2,000 2,000
Winfield, Alabama Industrial
Development Authority
Revenue Bond for Union
Underwear Project
5.250%, 01/07/96(A)(B)(C) 1,800 1,800
Alabama State Housing TECP
3.600%, 02/22/96(C) 2,500 2,500
-----
7,200
-----
Alaska -- 5.4%
Valdez, Alaska TECP
3.800%, 01/16/96(C) 2,000 2,000
3.750%, 01/31/96(C) 1,200 1,200
Valdez, Alaska Industrial
Development Authority
Revenue Bond for Exxon
Pipeline Company Project
5.950%, 01/03/96(A)(B)(C) 100 100
-----
3,300
-----
See accompanying notes to financial statements.
<PAGE>
67
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- -------------------------------------------------------------------------------
Tax-Free Reserve (continued)
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
California -- 0.6%
Santa Clara, California Electric
Revenue Bond, Series A
4.900%, 01/07/96(A)(B)(C) $ 370 $ 370
-------
Delaware -- 0.2%
Wilmington, Delaware Hospital
Revenue Bond for Franciscan
Health Systems Project, Series A
6.000%, 01/03/96(A)(B)(C) 100 100
-----
Florida -- 3.6%
Dade County, Florida Capital
Asset Revenue Bond, Ser 1990
5.650%, 01/07/96(A)(B)(C) 1,200 1,200
West Orange, Florida TECP
3.400%, 02/08/96(C) 1,000 1,000
-----
2,200
-----
Hawaii -- 1.2%
Hawaii State, Series CD GO
3.850%, 02/01/96 750 750
-----
Illinois -- 2.8%
Illinois State Housing and Finance
Authority Revenue Bond for
Franciscan Village Project, Series A
5.200%, 01/07/96(A)(B)(C) 700 700
Illinois State Toll Highway
Authority Revenue Bond
7.380%, 01/01/06 1,000 1,020
-----
1,720
-----
Indiana -- 11.6%
Gary, Indiana Industrial
Development Authority
Revenue Bond for U.S.
Steel Project
4.250%, 01/31/96(A)(B)(C) 1,600 1,600
Jasper County, Indiana TECP
3.800%, 01/10/96(C) 690 690
3.800%, 01/12/96(C) 700 700
Sullivan, Indiana TECP
3.850%, 02/01/96(C) 1,000 1,000
3.900%, 02/09/96(C) 600 600
3.650%, 04/01/96(C) 1,500 1,500
3.550%, 04/10/96(C) 300 300
Jasper County, Indiana TECP
3.800%, 01/09/96(C) 500 500
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Indiana (continued)
Hammond, Indiana Pollution
Control Revenue Bond for
Amoco Oil Company Project
5.950%, 01/03/96(A)(B)(C) $ 220 $ 220
-----
7,110
-----
Iowa -- 0.7%
Des Moines, Iowa Commercial
Development Revenue Bond for
Capital Center III Project
5.150%, 01/07/96(A)(B)(C) 400 400
-----
Kansas -- 6.9%
City of Burlington, Kansas TECP
3.900%, 02/09/96(C) 400 400
3.450%, 02/15/96(C) 2,000 2,000
3.650%, 03/12/96(C) 700 700
3.650%, 04/08/96(C) 1,020 1,020
Wichita, Kansas Health Facilities
Revenue Bond for Wichita
Health Systems Project, Series XXV
5.300%, 01/07/96(A)(B)(C) 100 100
-----
4,220
-----
Louisiana -- 2.4%
Jefferson Parish, Louisiana
Industrial Development
Authority Revenue Bond for
George J. Ackel, Sr. Project
5.200%, 01/07/96(A)(B)(C) 800 800
Parish of Desota, Louisiana
Pollution Control Revenue
Bond for Central Louisiana
Electric Company Project
5.050%, 01/07/96(A)(B)(C) 700 700
-----
1,500
-----
Michigan -- 0.2%
Michigan State Industrial
Development Authority Revenue
Bond for Consumer Power Project
5.950%, 01/03/96(A)(B)(C) 100 100
-----
Minnesota -- 2.6%
Robinsdale, Minnesota Industrial
Development Authority
Revenue Bond
5.200%, 01/03/96(A)(B)(C) 1,200 1,200
See accompanying notes to financial statements.
68
<PAGE>
/ / CoreFund Money Market Funds
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Minnesota (continued)
Saint Louis Park, Minnesota
Industrial Development Authority
Revenue Bond for Unicare
Home Project
3.900%, 01/31/96(A)(B)(C) $ 400 $ 400
-----
1,600
-----
Mississippi -- 1.6%
Clairborne County, Mississippi
TECP
3.450%, 02/16/96(C) 1,000 1,000
-----
Missouri -- 3.7%
Missouri State Environmental
Improvement and Energy
Resources Authority Revenue
Bond for Union Electric
Company Project, Series B
4.000%, 06/01/96(B)(C) 750 750
Missouri State Environment
Authority TECP
3.450%, 03/16/96(C) 1,500 1,500
-----
2,250
-----
Montana -- 4.7%
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Series B
5.000%, 01/07/96(A)(B)(C) 100 100
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Series A
4.900%, 01/07/96(A)(B)(C) 1,000 1,000
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Series C
4.900%, 01/07/96(A)(B)(C) 1,000 1,000
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric
Project, Series D
4.900%, 01/07/96(A)(B)(C) 600 600
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Montana (continued)
Forsyth, Montana Pollution
Control Revenue Bond for
Portland General Electric Project
4.900%, 01/07/96(A)(B)(C) $ 200 $ 200
-----
2,900
-----
Nevada -- 2.4%
Nevada State Housing Facilities
Revenue Bond for Multi-Unit
Park Project, Series A
5.500%, 01/07/96(A)(B)(C) 1,500 1,500
-----
New Hampshire -- 3.2%
Manchester, New Hampshire GO
5.500%, 11/01/96 1,945 1,971
-----
New York -- 0.5%
New York City, New York GO,
Series B
5.000%, 01/03/96(A)(B)(C) 300 300
-----
North Carolina -- 0.7%
Wake County, North Carolina
Industrial Development
Authority Revenue Bond for
Carolina Power & Light
Company Project
5.000%, 01/07/96(A)(B)(C) 400 400
-----
Ohio -- 0.2%
Ohio State Water Development
Authority Revenue Bond for
Environmental Mead
Company, Series B
5.900%, 01/07/96(A)(B)(C) 100 100
-----
Oregon -- 0.8%
Oregon State GO, Series 73G
5.250%, 01/07/96(A)(B)(C) 500 500
-----
Pennsylvania -- 9.9%
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project, Series B1
5.000%, 01/07/96(A)(B)(C) 100 100
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project
5.000%, 01/07/96(A)(B)(C) 850 $850
See accompanying notes to financial statements.
69
<PAGE>
As of December 31, 1995 (Unaudited)
Statement of Net Assets
- -------------------------------------------------------------------------------
Tax-Free Reserve (concluded)
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Pennsylvania (continued)
Beaver County, Pennsylvania TECP
3.750%, 01/24/96(C) $2,000 $ 2,000
Beaver County, Pennsylvania
Industrial Development
Authority Revenue Bond for
Duquesne Light Company
Project, Series B
4.950%, 01/07/96(A)(B)(C) 100 100
Lehigh County, Pennsylvania
Industrial Development
Authority Revenue Bond
3.750%, 01/07/96(A)(B)(C) 300 300
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond Carnegie Project
4.250%, 11/01/96 1,560 1,566
Washington County, Pennsylvania
Lease Revenue Bond
5.350%, 01/07/96(A)(B)(C) 1,155 1,155
-----
6,071
-----
Rhode Island -- 6.5%
Rhode Island State TAN
4.500%, 06/28/96(C) 3,000 3,013
Rhode Island State Port Authority &
Economic Development Authority
Revenue for Newport Electric
Corporation Project
5.000%, 01/07/96(A)(B)(C) 1,000 1,000
-----
4,013
-----
South Carolina -- 2.2%
Piedmont, South Carolina
Municipal Power Agency
Revenue Bond
9.700%, 01/01/96 500 515
Richland County, South Carolina
Hospital Facilities Revenue
Bond for Sunhealth-Orangeburg
Project, Series C2
5.650%, 01/07/96(A)(B)(C) 450 450
York County, South Carolina
Pollution Control Revenue
Bond, Series NRU-84N-2
4.650%, 01/07/96(A)(B)(C) 400 400
-----
1,365
-----
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
South Dakota -- 1.2%
Rapid City, South Dakota Industrial
Development Authority Revenue
Bond for Corporate Property
Association Project
5.150%, 01/07/96(A)(B)(C) $ 765 $ 765
-----
Texas -- 11.2%
Camp County, Texas Industrial
Development Authority
Revenue Bond, Texas Oil &
Gas Project
5.350%, 01/07/96(A)(B)(C) 500 500
Grapevine, Texas Industrial
Development Authority
Revenue Bond for American
Airlines Project, Series A1
6.000%, 01/03/96(A)(B)(C) 200 200
Montgomery County, Texas
Industrial Development
Authority Revenue Bond for
Dallas Tile Corporation
Project, Series A
5.200%, 01/07/96(A)(B)(C) 100 100
Nueces County, Texas Health
Facilities Authority Revenue
Bond for Driscoll Children's
Foundation Project
5.200%, 01/07/96(A)(B)(C) 1,675 1,675
Texas State Higher Education
Authority Revenue Bond for
Southern Methodist University
Project
5.950%, 01/03/96(A)(B)(C) 1,800 1,800
Texas State TAN
4.750%, 08/30/96 2,600 2,618
-----
6,893
-----
Vermont -- 2.3%
Vermont State Student Loan
Revenue Bond for Student
Loan Assistance Corporation
Project
3.750%, 01/31/96(A)(B)(C) 1,400 1,400
-----
See accompanying notes to financial statements.
70
<PAGE>
/ / CoreFund Money Market Funds
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Virginia -- 0.3%
Virginia State Peninsula Port
Authority Revenue Bond,
Dominion Terminal Project,
Series 1987 C
5.900%, 01/03/96(A)(B)(C) $ 150 $ 150
-----
West Virginia -- 0.7%
West Virginia State Hospital
Finance Authority Revenue
Bond for St. Mary's Hospital
Project
5.200%, 01/07/96(A)(B)(C) 400 400
-----
Wisconsin -- 1.3%
Lac Du Flambeau, Wisconsin Lake
Superior Chippewa Indians
Special Obligation for Simpson
Electric Project
5.250%, 01/07/96(A)(B)(C) 800 800
-----
Wyoming -- 1.1%
Lincoln County, Wyoming Resource
Recovery Revenue Bond for
Exxon Project, Series C
5.900%, 01/03/96(A)(B)(C) 200 200
Lincoln County, Wyoming
Pollution Control Revenue
Bond, Series 1984 B
5.900%, 01/03/96(A)(B)(C) 300 300
Sublette County, Wyoming
Pollution Control Revenue
Bond for Exxon Project, Series 84
5.950%, 01/03/96(A)(B)(C) 200 200
-----
700
-----
Total Municipal Bonds
(Cost $64,047,701) 64,048
------
- -------------------------------------------------------------------------------
Description Par (000) Value (000)
- -------------------------------------------------------------------------------
Total Investments -- 104.4%
(Cost $64,047,701) $64,048
-------
Other Assets, Less Liabilities, Net -- (4.4)% (2,675)
-------
Net Assets:
Portfolio Shares - Series A
($0.001 par value - 250 million
authorized) based on
59,156,845 outstanding shares 59,157
Portfolio Shares - Series B
($0.001 par value - 250 million
authorized) based on
2,265,192 outstanding shares 2,265
Accumulated net realized
loss on investments (49)
-----
Total Net Assets -- 100% $61,373
-------
-------
Net Asset Value & Redemption Price
Per Share
Series A $1.00
-----
-----
Series B $1.00
-----
-----
GO--General Obligation
TAN--Tax Anticipation Note
TECP--Tax Exempt Commercial Paper
(A) Variable Rate Securities--The rate reflected on the Statement of Net
Assets is the rate in effect on December 31, 1995.
(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.
See accompanying notes to financial statements.
71
<PAGE>
For the six-month period ended December 31, 1995 (unaudited)
Statement of Operations (000) / / CoreFund Money Market Funds
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------- ------------- ----------
Tax-
Cash Treasury Free
Reserve Reserve Reserve
--------- ------------- ----------
<S> <C> <C> <C>
Investment income:
Interest $ 17,241 $ 14,484 $ 1,222
-------- -------- --------
Expenses:
Investment Advisory fees 1,478 1,254 162
Less Investment Advisory fees waived (757) (642) (83)
Administrative fees 739 627 81
Less Administrative fees waived (266) (226) (29)
Transfer Agent fees & expenses 92 75 9
Insurance 17 8 2
Professional fees 56 43 6
Registration & Filing fees 38 33 4
12b-1 fees 23 25 2
Taxes--other than income 4 20 3
Printing 41 33 4
Miscellaneous 43 34 3
-------- -------- --------
Total expenses 1,508 1,284 164
-------- -------- --------
Net investment income 15,733 13,200 1,058
Net realized gain (loss) on securities transactions (2) 20 --
-------- -------- --------
Net increase in net assets resulting from operations $ 15,731 $ 13,220 $ 1,058
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to financial statements.
72
<PAGE>
For the six-month period ended December 31, 1995 (unaudited) and the
year-ended June 30, 1995
Statement of Changes in Net Assets (000) / / CoreFund Money Market Funds
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------ ---------------------- ------------------------
Cash Treasury Tax-Free
Reserve Reserve Reserve
------------------------ ---------------------- ------------------------
7/1/95 7/1/94 7/1/95 7/1/94 7/1/95 7/1/94
to to to to to to
12/31/95 6/30/95 12/31/95 6/30/95 12/31/95 6/30/95
------------ ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 15,733 $ 27,369 $ 13,200 $ 23,160 $ 1,058 $ 2,418
Net realized gain (loss) on
securities transactions (2) (30) 20 4 -- (27)
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations 15,731 27,339 13,220 23,164 1,058 2,391
----------- ----------- ----------- ----------- ----------- -----------
Dividends distributed from:
Net investment income:
Series A (15,262) (26,626) (12,692) (22,642) (1,033) (2,359)
Series B (471) (743) (508) (518) (25) (59)
Net realized gain:
Series A -- -- -- -- -- --
Series B -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total dividends distributed (15,733) (27,369) (13,200) (23,160) (1,058) (2,418)
----------- ----------- ----------- ----------- ----------- -----------
Capital share transactions:
Series A:
Proceeds from shares issued 542,259 1,153,765 970,768 1,884,529 74,765 196,955
Shares issued in lieu of
cash distributions 1,920 3,226 2,670 5,268 106 228
Cost of shares redeemed (503,089) (1,151,894) (926,583) (1,895,568) (78,518) (213,785)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net
assets from Series A transactions 41,090 5,097 46,855 (5,771) (3,647) (16,602)
----------- ----------- ----------- ----------- ----------- -----------
Series B:
Proceeds from shares issued 18,669 42,775 24,877 31,754 1,575 3,788
Reinvestment of cash distributions 458 690 179 257 24 55
Cost of shares redeemed (18,647) (37,332) (24,645) (17,973) (859) (5,026)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from Series B transactions 480 6,133 411 14,038 740 (1,183)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
derived from capital share transactions 41,570 11,230 47,266 8,267 (2,907) (17,785)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets 41,568 11,200 47,286 8,271 (2,907) (17,812)
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of year 527,924 516,724 500,818 492,547 64,280 82,092
----------- ----------- ----------- ----------- ----------- -----------
End of year $ 569,492 $ 527,924 $ 548,104 $ 500,818 $ 61,373 $ 64,280
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Capital share transactions
Capital shares outstanding at beginning
of period 527,928 516,698 500,815 492,548 64,328 82,113
Series A:
Shares issued 542,259 1,153,765 970,768 1,884,530 74,765 196,955
Shares issued in lieu of cash distributions 1,920 3,226 2,670 5,268 106 228
Shares redeemed (503,089) (1,151,894) (926,583) (1,895,567) (78,518) (213,785)
----------- ----------- ----------- ----------- ----------- -----------
Total Series A transactions 41,090 5,097 46,855 (5,771) (3,647) (16,602)
----------- ----------- ----------- ----------- ----------- -----------
Series B:
Shares issued 18,669 42,775 24,877 31,754 1,575 3,788
Shares issued in lieu of cash
distributions 458 690 179 257 24 55
Shares redeemed (18,647) (37,332) (24,645) (17,973) (859) (5,026)
----------- ----------- ----------- ----------- ----------- -----------
Total Series B transactions 480 6,133 411 14,038 740 (1,183)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) derived from
capital share transactions 41,570 11,230 47,266 8,267 (2,907) (17,785)
----------- ----------- ----------- ----------- ----------- -----------
Capital shares outstanding at
end of period 569,498 527,928 548,081 500,815 61,421 64,328
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
73
<PAGE>
For the six-month period ended December 31, 1995 (unaudited) and the
periods ended June 30,
Financial Highlights / / CoreFund Money Market Funds
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Ratio Ratio of
Net Net Ratio of Expenses Net Income
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
Cash Reserve 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>
Series A
1995** $1.00 $0.03 $(0.03) $1.00 2.72%+ $551,429 0.50% 5.33% 0.85% 4.98%
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
1986/1/ 1.00 0.06 (0.06) 1.00 3.36+ 56,416 0.59 6.93 1.21 6.31
Series B
1995** $1.00 $0.03 $(0.03) $1.00 2.59%+ $ 18,064 0.75% 5.08% 1.10% 4.73%
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
1993* 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52 1.15 2.13
- ----------------
Treasury Reserve
- ----------------
Series A
1995** $1.00 $0.03 $(0.03) $1.00 2.69%+ $526,081 0.50% 5.28% 0.85% 4.93%
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
1989/2/ 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26 0.84 8.62
Series B
1995** $1.00 $0.03 $(0.03) $1.00 2.56%+ $ 22,023 0.75% 5.03% 1.10% 4.68%
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
1993* 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46 1.14 2.07
- ----------------
Tax-Free Reserve
- ----------------
Series A
1995** $1.00 $0.02 $(0.02) $1.00 1.66%+ $ 59,109 0.50% 3.27% 0.85% 2.92%
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
1991/3/ 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20 0.81 3.45
Series B
1995** $1.00 $0.02 $(0.02) $1.00 1.53%+ $ 2,264 0.75% 3.02% 1.10% 2.67%
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
1993* 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71 1.14 1.33
</TABLE>
<TABLE>
<S> <C>
+ Returns are for the period indicated and have not been annualized.
* Series B has been offered since January 4, 1993. Ratios for this period have been annualized.
** Ratios for this six-month period ended December 31, 1995, have been annualized.
1 Cash Reserve commenced operations on August 16, 1985. Ratios for this period have been annualized.
2 Treasury Reserve commenced operations on November 21, 1988. Ratios for this period have been annualized.
3 Tax-Free Reserve commenced operations on April 16, 1991. Ratios for this period have been annualized.
See accompanying notes to financial statements.
</TABLE>
74
<PAGE>
As of December 31, 1995 (unaudited)
Notes to Financial Statements / / CoreFund
- --------------------------------------------------------------------------------
1. Organization
The CoreFund Growth Equity Fund, Value Equity Fund, Equity Index Fund,
International Growth Fund, Balanced Fund (the Equity Funds), Government Income
Fund, Intermediate Bond Fund, Intermediate Municipal Bond Fund, Global Bond
Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund (the
Fixed Income Funds), Cash Reserve, Treasury 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 offer 17 separate portfolios
(the Portfolios):
Equity Portfolios: Money Market Portfolios:
Growth Equity Fund Cash Reserve
Value Equity Fund Treasury Reserve
Equity Index Fund Tax-Free Reserve
International Growth Fund Fiduciary Reserve
Balanced Fund Fiduciary Treasury Reserve
Fiduciary Tax-Free Reserve
Fixed Income Portfolios:
Government Income Fund
Intermediate Bond Fund
Intermediate Municipal Bond Fund
Global Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
The financial statements of the Equity Funds are included on pages 26 to
46, the financial statements of the Fixed Income Funds are included on pages 47
to 62 and the financial statements of the Money Market Funds are included on
pages 63 to 74. The financial statements of the Fiduciary Reserve, Fiduciary
Treasury Reserve and Fiduciary 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 which 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 basis:
(I) market value of investment securities, asset and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
75
<PAGE>
Notes to Financial Statements (continued)
The International Growth Fund does not isolate that portion of gains and
losses in investments in equity securities which is due to changes in the
foreign exchange rates from that which is due to changes in market prices of
equity securities.
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 as 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 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-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 Advisor 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 Portfolios
are charged directly to that Portfolio. Other operating expenses of the Company
are prorated to the Portfolios on the basis of relative net assets. Series
specific expenses, such as the 12B-1 fees, are borne by that series. Income,
other expenses and accumulated realized and unrealized gains and losses of a
Portfolio are allocated to the respective series on the basis of the relative
net asset value each day.
Distribution to Shareholders--The Growth Equity, Value Equity, Equity
Index, Balanced Funds and Global Bond Fund declare and pay dividends on a
quarterly basis. The International Growth Fund declares and pays dividends on a
semi-annual basis. Such dividends are reinvested in additional shares unless
otherwise requested. The Government Income Fund, Intermediate Bond Fund,
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund, Cash Reserve, Treasury 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 Portfolio are distributed to its
shareholders at least annually.
Federal Income Taxes--It is each Portfolio'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--All organizational costs incurred with the start up of the
Balanced Fund, Government 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 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.
76
<PAGE>
/ / CoreFund
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. Investment Advisory and Custodial Services
Pursuant to investment advisory agreements dated June 23, 1987 (Treasury
Reserve and Cash Reserve), December 5, 1989 (International Growth, Value Equity
and Equity Index), March 25, 1991 (Growth Equity, Balanced, Government Income
Bond Fund, Intermediate Bond Fund, Intermediate Municipal Bond Fund, Global Bond
Fund and Tax-Free Reserve), and May 15, 1994 (Pennsylvania Municipal Bond Fund
and New Jersey Municipal Bond Fund), investment advisory services are provided
to the Funds 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 Management Corporation.
CoreStates Advisers is entitled to receive an annual fee of 0.75% on the average
net assets of the Growth Equity and Value Equity Funds, 0.40% on the average net
assets of the Equity Index Fund, 0.80% on the average net assets of the
International Growth Fund, 0.70% on the average net assets of the Balanced Fund,
0.60% on the average net assets of the Global Bond Fund and 0.50% on the average
net assets of the Government Income Fund, Intermediate Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund and each of the Money Market Funds. Such fee is computed daily and paid
monthly. During the six-month period ended December 31, 1995, CoreStates
Advisers voluntarily waived a portion of their fees in order to assist the Funds
in maintainingy competitive expense ratios.
CoreStates Bank serves as Custodian to the Company. No fees are being
paid to CoreStates Bank for such Services. Sub-Advisory services are provided to
the CoreStates Adviser for Value Equity Fund by Cashman, Farrell and Associates
and for the International Growth Fund by Martin Currie, Inc. (The
"Sub-Advisers") pursuant to a sub-advisory agreement dated December 5, 1989.
Sub-Advisory services are provided for the Global Bond Fund by Alpha Global
Corporation pursuant to a sub-advisory agreement dated June 30, 1994. Under the
terms of such agreements, the Sub-Advisers are entitled to receive a fee from
CoreStates Advisers. Such a fee is computed daily and paid monthly. CoreStates
Advisers is responsible for the supervision, and payment of fees to the
Sub-Adviser 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 Financial Management Company (SEI) acts as the
Portfolio's Administrator. Under the terms of such agreement, SEI is entitled to
receive an annual fee of 0.25% on the average net assets of the Portfolios. Such
fee is computed daily and paid monthly. SEI voluntarily waives a portion of
their fees in order to assist the Funds in maintaining competitive expense
ratios.
Effective for the period July 1, 1995 to November 16, 1995, SEI
Financial Management Corporation acted as the Transfer Agent of the Trust.
Pursuant to a Transfer Agency agreement dated November 16, 1995, State Street
Bank and Trust Company acts as the Portfolio's Transfer Agent. As such, State
Street Bank and Trust Company provides transfer agency, dividend disbursing and
shareholder servicing for the Portfolios.
On November 2, 1992, SEI Financial Services (SFS), a wholly owned
subsidiary of SEI, became the "Portfolios" exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the Plan) for those
Portfolios offering Series 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 Series
B 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 which
enter into shareholder servicing agreements or broker agreements with the
Distributor. The Portfolios paid approximately $404,000 to affiliated brokers
for commissions earned on the sales of the Funds.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Portfolios.
The Portfolios have paid legal fees to a law firm in which the Secretary
of the Company is partner.
77
<PAGE>
Notes to Financial Statements (continued)
5. Investment Transactions
During the six-month period ended December 31, 1995, 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>
Growth Equity Fund -- 41,531 41,531 -- 38,321 38,321
Value Equity Fund -- 31,169 31,169 -- 39,138 39,138
Equity Index -- 17,216 17,216 -- 13,192 13,192
International Growth Fund -- 17,037 17,037 -- 21,332 21,332
Balanced 2,304 17,924 20,228 2,500 18,805 21,305
Government Income 6,236 3,868 10,104 5,025 3,389 8,414
Intermediate Bond Fund 49,057 4,990 54,046 41,571 11,592 53,163
Intermediate Municipal Fund -- -- -- -- 149 149
Global Bond -- 10,031 10,031 -- 5,557 5,557
Pennsylvania Municipal Bond Fund -- 465 465 -- 133 133
New Jersey Municipal Bond Fund -- 197 197 -- 161 161
</TABLE>
- --------------------------------------------------------------------------------
At June 30, 1995, the Growth Equity Fund, Balanced Fund, Government
Income Fund, Intermediate Bond Fund, Intermediate Municipal Bond Fund, Global
Bond Fund, Cash Reserve and Tax-Free Reserve had capital loss carryforwards for
federal tax purposes of approximately $1,520,000, $3,000, $240,000, $1,509,000,
$38,000, $1,203,000, $23,000 and $48,000, respectively, resulting from security
sales. 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. The Income
Fund, Intermediate Bond Fund, Intermediate Municipal Bond Fund, Global Bond
Fund, Cash Reserve and Tax-Free Reserve Funds expires in 2003.
On December 31, 1995 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, 1995 for each
portfolio 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>
Growth Equity Fund $104,646 $ (83,234) $21,412
Value Equity Fund 33,213 (30,159) 3,054
Equity Index 131,904 (100,800) 31,104
International Growth Fund 15,298 (5,043) 10,255
Balanced 72,539 (61,886) 10,653
Government Income 14,936 (14,609) 327
Intermediate Bond Fund 62,255 (61,389) 866
Intermediate Municipal Fund 1,228 (1,208) 20
Global Bond 1,754 (41) 1,713
Pennsylvania Municipal Bond Fund 3,006 (2,826) 180
New Jersey Municipal Bond Fund 1,635 (1,543) 92
</TABLE>
- --------------------------------------------------------------------------------
78
<PAGE>
/ / 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
December 31, 1995:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------- ----------- --------------
Unrealized
Contracts to In Exchange Appreciation
Maturity Date Deliver/Receive For (Depreciation)
------------- --------------- ----------- --------------
<S> <C> <C> <C>
International Growth Fund:
Foreign Currency Sales:
02/14/96 JY 1,781,246,580 $17,904,000 $ 537,720
=========
Global Bond Fund:
Foreign Currency Sales:
02/13/96-02/22/96 DM 7,936,000 $ 5,511,563 $ (40,774)
01/22/96-03/18/96 DK 17,840,000 3,239,801 21,525
01/22/96-02/22/96 FF 24,470,000 4,986,142 (22,338)
01/22/96-02/22/96 NL 2,681,000 1,695,100 18,795
01/22/96-03/18/96 UK 1,910,000 2,955,863 1,678
---------
$ (21,114)
=========
</TABLE>
- -------------------------------------------------------------------------------
Currency Legend
DM German Marks
DK Danish Kroner
FF French Francs
JY Japanese Yen
NL Netherlands Guilder
UK British Pounds Sterling
At December 31, 1995, the Global Bond Fund had unrealized gains on
closed but unsettled forward foreign currency contracts of $11,408 scheduled
to settle on January 31, 1996.
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 which
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At December 31, 1995, the percentage of
portfolio investments by each revenue source was as follows:
79
<PAGE>
Notes to Financial Statements (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------ ------------ ---------- --------
Intermediate Pennsylvania New Jersey
Municipal Municipal Municipal
Bond Bond Bond Tax-Free
Fund Fund Fund Reserve
------------ ------------ ---------- --------
<S> <C> <C> <C> <C>
Revenue Bonds:
Education Bonds 20% 14% 19% 10%
Health Care Bonds -- 7 7 8
Transportation Bonds 21 7 3 4
Utility Bonds 13 14 14 4
Housing Bonds -- 11 -- 10
Pollution Control Bonds -- -- -- 11
Industrial Bonds -- 10 5 3
Other 4 -- 7 --
General Obligations 42 37 45 6
Tax Exempt Commercial Paper -- -- -- 34
Tax and Revenue Anticipation Notes -- -- -- 5
Tax Anticipation Notes -- -- -- 5
--- --- --- ---
100% 100% 100% 100%
</TABLE>
- -------------------------------------------------------------------------------
The rating of long-term debt as a percentage of total value of
investments at December 31, 1995 is as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------ ------------ ---------- ------ ----------- -----------
Pennsylvania New Jersey
Intermediate Intermediate Government Global Intermediate Intermediate
Bond Municipal Income Bond Municipal Municipal
Fund Fund Fund Fund Fund Fund
------------ ------------ ---------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Standard & Poors Ratings:
AAA 71 66 96 71 74 40
AA -- 17 -- 12 10 23
AA+ -- 5 -- 11 -- 7
AA- 8 8 -- 2 8 12
A+ 2 -- -- 4 5 --
A 4 4 -- -- 3 --
NR 15 -- 4 -- -- 18
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
</TABLE>
- -------------------------------------------------------------------------------
80
<PAGE>
/ / 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 and insurance reduces the risk of loss due to default by 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, 1995, the percentage of securities with credit enhancements are as
follows:
---------------------------------------------------------------
-------- ---------
Letters
of Bond
Credit Insurance
------ ---------
Intermediate Municipal Fund -- 59.82
Pennsylvania Municipal Bond Fund -- 60.77
New Jersey Municipal Bond Fund -- 40.21
Tax-Free Reserve Fund 89.89 10.11
---------------------------------------------------------------
81
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Equity Fund
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 98.5%
AEROSPACE & DEFENSE -- 0.9%
Lockheed Martin 25,401 $ 1,730
McDonnell Douglas 21,717 1,776
------
Total Aerospace & Defense 3,506
------
AIRCRAFT -- 2.3%
Allied Signal 84,775 3,603
Boeing 27,310 1,792
Textron 30,000 2,063
United Technologies 16,500 1,464
------
Total Aircraft 8,922
------
APPAREL/TEXTILES -- 0.5%
Burlington Industries* 49,771 554
Fruit Of The Loom* 75,000 1,303
------
Total Apparel/Textiles 1,857
------
AUTOMOTIVE -- 1.8%
Ford Motor 205,000 5,894
Magna International, Class A 27,500 1,189
------
Total Automotive 7,083
------
BANKS -- 10.0%
Bank Of Boston 74,000 3,293
BankAmerica 196,900 11,322
Chase Manhattan 206,600 11,774
Chemical Banking 103,000 5,858
Citicorp 99,000 6,423
------
Total Banks 38,670
------
BUILDING & CONSTRUCTION -- 0.6%
Webb (Dell E.) 105,000 2,179
------
Total Building & Construction 2,179
------
CHEMICALS -- 3.2%
Dow Chemical 25,525 1,752
Hercules 5,100 272
IMC Global 36,600 2,562
Monsanto 32,500 3,404
Praxair 155,000 4,185
------
Total Chemicals 12,175
------
COMMUNICATIONS EQUIPMENT -- 1.4%
First Alert* 33,800 524
Motorola 32,175 2,111
Qualcomm* 65,000 2,503
------
Total Communications Equipment 5,138
------
COMPUTER SOFTWARE -- 1.4%
Autotote -- Class A* 90,230 271
Computer Associates
International 52,500 2,887
International Game Technology 146,358 1,701
Pyxis* 24,839 314
------
Total Computer Software 5,173
------
COMPUTER AND OFFICE EQUIPMENT -- 3.1%
Hewlett Packard 14,330 1,327
IBM 98,000 9,531
Novell* 56,435 931
------
Total Computer and Office Equipment 11,789
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
COMPUTERS & SERVICES -- 2.9%
Apple Computer 94,000 $ 3,413
Compaq Computer* 57,500 3,206
Digital Equipment* 84,750 4,587
------
Total Computers & Services 11,206
------
CONCRETE & MINERAL PRODUCTS -- 0.5%
Owens Corning Fiberglass* 46,910 1,988
------
Total Concrete & Mineral Products 1,988
------
CONTAINERS & PACKAGING -- 0.4%
Owens-Illinois* 119,455 1,508
------
Total Containers & Packaging 1,508
------
ELECTRICAL SERVICES -- 6.3%
Central & South West 124,200 3,322
Consolidated Edison New York 142,000 4,313
Pacific Gas & Electric 120,800 3,549
Peco Energy 200,000 5,850
SCE 425,000 7,225
------
Total Electrical Services 24,259
------
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT -- 3.9%
General Electric 180,000 11,385
Philips Electronics ADR 75,000 2,897
Texas Instruments 13,100 894
------
Total Electronic and Other
Electrical Equipment 15,176
------
ENTERTAINMENT -- 0.3%
MGM Grand* 43,870 1,047
President Casinos* 31,325 96
------
Total Entertainment 1,143
------
ENVIRONMENTAL SERVICES -- 1.0%
Browning Ferris Industries 125,000 3,641
------
Total Environmental Services 3,641
------
FINANCIAL SERVICES -- 4.1%
Dean Witter Discover 89,013 4,428
Fleet Financial Group 55,000 2,131
Household International 38,000 2,138
ITT 40,000 4,901
MBNA 62,900 2,319
------
Total Financial Services 15,917
------
FOOD, BEVERAGE & TOBACCO -- 7.9%
Buenos Aires Embotellado-ADR 27,355 626
IBP 38,200 2,287
Nabisco Holdings -- Class A 179,500 4,824
Philip Morris Companies 173,860 14,691
RJR Nabisco Holdings 256,160 7,877
------
Total Food, Beverage & Tobacco 30,305
------
</TABLE>
11
<PAGE>
- -------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
HOUSEHOLD PRODUCTS -- 0.4%
Maytag 85,800 $ 1,630
------
Total Household Products 1,630
------
INSURANCE -- 4.0%
Aetna Life & Casualty 30,000 2,111
Cigna 30,000 2,974
Equitable Companies 195,500 4,154
The Travelers Group 125,000 6,312
Transport Holdings -- Class A* 625 25
------
Total Insurance 15,576
------
MACHINERY -- 3.0%
Baker Hughes 90,000 1,766
Brunswick 80,800 1,576
Case Equipment 55,000 2,097
Caterpillar 33,700 1,891
Deere 40,000 3,575
McDermott International 30,635 486
------
Total Machinery 11,391
------
MEDICAL PRODUCTS & SERVICES -- 2.6%
Beverly Enterprises* 136,600 1,605
Community Psychiatric* 48,400 526
Coram Healthcare* 100,000 400
FHP International* 45,000 1,091
Foundation Health* 53,704 2,276
Humana* 122,300 2,585
Novacare* 25,964 162
United Healthcare 9,850 523
United States Surgical 37,557 920
------
Total Medical Products & Services 10,088
------
METALS & MINING -- 0.9%
Potash of Saskatchewan 49,400 3,439
------
Total Metals & Mining 3,439
------
OIL AND GAS FIELD EXPLORATION SERVICES -- 9.7%
Ashland 100,000 3,163
British Petroleum Plc ADR 92,000 8,118
Diamond Shamrock 31,750 818
Enron 85,000 2,922
Mobil 78,600 7,919
Repsol S.A. ADR 161,500 4,784
Royal Dutch Petroleum 53,550 6,580
Tosco 57,700 1,991
YPF Sociedad Anonima ADR 72,385 1,240
------
Total Oil and Gas Field
Exploration Services 37,535
------
PAPER & PAPER PRODUCTS -- 0.5%
International Paper 50,000 1,850
------
Total Paper & Paper Products 1,850
------
PHARMACEUTICALS -- 2.6%
Caremark International 23,200 479
Elan Public* 111,100 4,457
Merck 45,805 2,634
Mylan Laboratories 63,100 1,199
Teva Pharmaceutical Industries
ADR 32,672 1,282
------
Total Pharmaceuticals 10,051
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.4%
Xerox 13,000 $ 1,687
------
Total Photographic Equipment & Supplies 1,687
------
RAILROADS -- 1.3%
Burlington Northern Santa Fe 30,000 2,517
CSX 28,600 2,395
------
Total Railroads 4,912
------
RESTAURANTS -- 2.0%
Darden Restaurants* 619,000 7,041
Rally's Hamburgers* 18,426 35
Vicorp Restaurants* 61,534 677
------
Total Restaurants 7,753
------
RETAIL -- 4.6%
Bed, Bath & Beyond* 7,600 238
Borders Group* 187,000 3,202
CML Group 275,000 1,581
Kroger* 169,505 5,657
Lowe's 159,200 4,298
Pep Boys 100,000 2,188
Vons* 23,000 584
------
Total Retail 17,748
------
RUBBER & PLASTIC -- 2.4%
Goodyear Tire & Rubber 245,000 9,310
------
Total Rubber & Plastic 9,310
------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.5%
Intel 73,400 5,129
Micron Technology 24,500 1,730
National Semiconductor* 76,000 1,853
VLSI Technology 40,000 940
------
Total Semi-Conductors/Instruments 9,652
------
SERVICES-EMPLOYMENT AGENCIES -- 0.8%
Manpower 116,000 3,147
------
Total Services-Employment Agencies 3,147
------
SPECIALTY MACHINERY -- 0.9%
Westinghouse Electric 235,000 3,319
------
Total Specialty Machinery 3,319
------
STEEL & STEEL WORKS -- 1.6%
Birmingham Steel 8,070 123
Phelps Dodge 46,600 2,953
USX -- U.S. Steel Group 100,100 2,991
------
Total Steel & Steel Works 6,067
------
</TABLE>
12
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Equity Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
TELEPHONES & TELECOMMUNICATION -- 5.6%
Cellular Communications -- Class
A* 24,773 $ 1,328
MCI Communications 178,475 4,451
SBC Communications 80,000 4,470
Worldcom* 350,100 11,422
------
Total Telephones & Telecommunication 21,671
------
WHOLESALE -- 0.2%
Jan Bell Marketing* 80,480 272
Michael Foods 3,726 45
Universal -- Va 21,770 457
------
Total Wholesale 774
------
Total Common Stock
(Cost $362,939,414) 379,235
------
PREFERRED STOCKS -- 0.7%
PRINTING & PUBLISHING -- 0.4%
News -- Preferred Shares ADR 72,915 1,331
------
Total Printing & Publishing 1,331
------
TELEPHONES & TELECOMMUNICATION -- 0.3%
Cellular Communications
Preferred* 23,866 1,280
------
Total Telephones & Telecommunication 1,280
------
Total Preferred Stocks
(Cost $2,565,048) 2,611
------
COMMERCIAL PAPER -- 0.9%
American Express
5.750%, 11/01/95 $ 3,336 3,336
------
Total Commercial Paper
(Cost $3,336,000) 3,336
------
Total Investments -- 100.1%
(Cost $368,840,462) 385,182
------
OTHER ASSETS AND LIABILITIES -- (0.1%)
Other Assets and Liabilities,
Net (239)
------
Total Other Assets and Liabilities (239)
------
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 22,159,807
outstanding shares of
beneficial interest 334,512
Portfolio shares of the Retail
Class (unlimited
authorization -- $0.001 par
value) based on 385,955
outstanding shares of
beneficial interest 5,056
Undistributed net investment
income 101
Undistributed net realized gain
on investments 28,932
Unrealized appreciation on
investments 16,342
------
Total Net Assets -- 100.0% $ 384,943
======
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
Net Asset Value, Offering Price
and Redemption Price Per
Share -- Institutional Class $ 17.07
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 17.08
======
Maximum Offering Price Per
Share -- Retail Class
($17.08 / 98.0%) $ 17.43
======
* Non-income producing security
ADR American Depository Receipt
SPECIAL EQUITY FUND
COMMON STOCK -- 96.1%
AEROSPACE & DEFENSE -- 1.0%
McDonnell Douglas 7,500 $ 613
------
Total Aerospace & Defense 613
------
AGRICULTURE PRODUCTS -- 0.8%
Terra Industries 35,000 442
------
Total Agriculture Products 442
------
APPAREL/TEXTILES -- 3.7%
Burlington Industries* 5,117 57
Cyrk International* 20,100 221
Fieldcrest Cannon* 17,400 335
Gadzooks* 1,000 19
Gucci Group* 2,700 81
Haggar 20,000 330
Oneita Industries* 55,000 371
Oxford Industries 20,000 325
Quaker Fabric* 11,900 107
Supreme International* 18,400 294
------
Total Apparel/Textiles 2,140
------
AUTOMOTIVE -- 1.2%
Ford 13,000 373
Magna International -- Class A 6,500 281
Walbro 3,000 59
------
Total Automotive 713
------
BANKS -- 5.4%
Bank of Boston 14,500 645
BankAmerica 13,900 799
Barnett Banks 7,000 387
Chase Manhattan 12,000 684
Chemical Banking 9,100 518
MBNA 2,200 81
------
Total Banks 3,114
------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 0.1%
Argyle Television* 2,000 34
------
Total Broadcasting, Newspapers & Advertising 34
------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
BUILDING & CONSTRUCTION -- 1.4%
Empresas ICA S.A.-ADS 7,500 $ 71
Webb (Del. E.) 35,000 727
------
Total Building & Construction 798
------
CHEMICALS -- 0.4%
Kinark* 65,000 195
------
Total Chemicals 195
------
COMMUNICATIONS EQUIPMENT -- 1.0%
ECI Telecommunications* 9,000 171
First Alert* 22,000 341
Qualcomm* 1,500 58
------
Total Communications Equipment 570
------
COMPUTER SOFTWARE -- 4.7%
Autotote -- Class A* 35,000 105
Checkfree* 3,600 76
Computer Associates
International 8,500 468
Computervision* 72,500 850
Control Data Systems* 60,000 795
Gametek* 10,000 18
Pyxis* 16,947 214
Simware* 18,400 173
------
Total Computer Software 2,699
------
COMPUTERS & SERVICES -- 2.4%
IBM 8,500 826
International Game Technology 21,514 250
Landmark Graphics* 7,200 157
Mizar* 18,200 155
------
Total Computers & Services 1,388
------
CONCRETE & MINERAL PRODUCTS -- 1.3%
Owens Corning Fiberglass* 17,500 742
------
Total Concrete & Mineral Products 742
------
CONTAINERS & PACKAGING -- 0.6%
Owens-Illinois* 25,700 324
------
Total Containers & Packaging 324
------
ELECTRICAL SERVICES -- 1.0%
SCE 35,000 595
------
Total Electrical Services 595
------
ELECTRONIC GAMING DEVICES -- 1.1%
Mikohn Gaming* 110,000 495
Video Lottery Technologies* 34,200 162
------
Total Electronic Gaming Devices 657
------
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT -- 1.9%
Cincinnati Microwave* 27,300 157
Philips Electronics ADR* 18,300 707
Rexel* 18,800 216
Smartflex Systems* 2,300 34
------
Total Electronic and Other Electrical Equipment 1,114
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
ENERGY & POWER -- 1.3%
Zurn Industries 30,000 $ 750
------
Total Energy & Power 750
------
ENGINEERING CONSULTING -- 0.1%
Corrpro Companies* 9,700 55
------
Total Engineering Consulting 55
------
ENTERTAINMENT -- 1.0%
Boomtown* 17,000 125
Cinergi Pictures Entertainment* 14,300 55
Hollywood Park* 20,000 194
President Casinos* 17,226 53
Sports Club* 38,000 162
------
Total Entertainment 589
------
ENVIRONMENTAL CONSULTING -- 0.5%
Harding Associates* 40,300 277
------
Total Environmental Consulting 277
------
ENVIRONMENTAL SERVICES -- 1.3%
Browning Ferris Industries 25,000 728
------
Total Environmental Services 728
------
FINANCIAL SERVICES -- 3.7%
Donaldson, Luftkin, & Jenrette* 4,800 143
Household International 5,600 315
ITT 5,000 613
Jayhawk Acceptance* 27,400 329
WFS Financial* 45,000 747
------
Total Financial Services 2,147
------
FOOD, BEVERAGE & TOBACCO -- 5.6%
Cott 19,000 157
Michael Foods 51,476 624
Pepsi-Cola Puerto Rico Bottling* 69,200 944
Philip Morris Companies 8,500 718
RJR Nabisco Holdings 19,200 590
Rymer Foods* 178,600 223
------
Total Food, Beverage & Tobacco 3,256
------
HOME BUILDERS -- 0.4%
Belmont Homes* 4,100 72
Cavalier Homes 10,925 185
------
Total Home Builders 257
------
HOTELS & LODGING -- 1.3%
John Q. Hammons Hotels* 9,600 113
Prime Hospitality* 64,500 637
------
Total Hotels & Lodging 750
------
HOUSEHOLD FURNITURE & FIXTURES -- 0.7%
Ameriwood Industries
International* 20,900 105
Winsleow Furniture* 44,180 287
------
Total Household Furniture & Fixtures 392
------
</TABLE>
14
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Special Equity Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
INSURANCE -- 3.5%
Allstate 740 $ 27
Gryphon Holdings* 36,700 573
Pac Rim Holding* 87,700 252
Prudential Reinsurance Holdings* 32,700 667
St. Paul Companies 3,840 195
The Travelers Group 6,500 328
Transport Holdings* 33 1
------
Total Insurance 2,043
------
LABORATORY ANALYTICAL INSTRUMENTS -- 0.4%
Molecular Dynamics* 1,400 8
Perseptive Biosystems* 21,000 224
------
Total Laboratory Analytical Instruments 232
------
MACHINERY -- 3.9%
Agco 8,950 401
Caterpillar 11,500 645
Deere 7,500 670
Kuhlman 50,000 575
------
Total Machinery 2,291
------
MEDICAL PRODUCTS & SERVICES -- 6.0%
Acme United* 129,200 388
Aequitron Medical* 9,000 71
Community Psychiatric* 12,400 135
Cooper Companies* 50,000 294
Keravision* 34,500 427
Metra Biosystems* 6,800 126
Pace Health Management Systems* 43,500 201
Possis Medical* 22,600 319
Resound* 47,400 373
Scios Nova* 218,200 789
Sterling House* 18,000 223
United Healthcare 1,366 73
Value Health* 5,400 124
------
Total Medical Products & Services 3,543
------
METALS & MINING -- 0.9%
Potash of Saskatchewan 7,800 543
------
Total Metals & Mining 543
------
OIL AND GAS FIELD EXPLORATION SERVICES -- 1.9%
Enron 10,000 344
Repsol S.A. ADR 25,000 740
------
Total Oil and Gas Field
Exploration Services 1,084
------
PAPER & PAPER PRODUCTS -- 1.1%
International Paper 17,000 629
------
Total Paper & Paper Products 629
------
PETROLEUM & FUEL PRODUCTS -- 0.1%
Kelley Oil & Gas* 15,000 38
------
Total Petroleum & Fuel Products 38
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
PHARMACEUTICALS -- 7.1%
Alpharma 18,700 $ 449
Anesta* 45,200 480
Aphton* 24,300 231
Elan* 17,000 682
Guilford Pharmaceuticals* 22,600 373
ISIP Pharmaceuticals* 27,300 276
NBTY* 26,500 133
Pharmaceutical Resources* 91,300 753
Roberts Pharmaceutical* 12,500 242
Teva Pharmaceutical Industries
ADR 14,000 550
------
Total Pharmaceuticals 4,169
------
RAILROADS -- 1.0%
CSX 7,200 603
------
Total Railroads 603
------
REAL ESTATE -- 0.2%
Agree Realty 9,400 139
------
Total Real Estate 139
------
REPAIR SERVICES -- 0.1%
Earl Scheib* 4,900 29
------
Total Repair Services 29
------
RESTAURANTS -- 4.0%
Darden Restaurants* 81,500 927
Hometown Buffet* 44,800 588
Rally's Hamburgers* 5,815 11
Uno Restaurant* 90,000 686
Vicorp Restaurants* 5,000 55
Vie De France* 21,000 66
------
Total Restaurants 2,333
------
RETAIL -- 6.4%
Bed Bath & Beyond* 3,500 109
Bon-Ton Stores* 51,000 332
Border Group* 54,000 926
Chico's Fas* 8,300 37
CML Group 92,200 530
De Rigo S.P.A. ADR* 200 4
Drug Emporium* 92,100 374
Intimate Brands* 5,400 90
Kroger* 16,000 534
Pacific Sunwear of California* 74,900 543
Sportmart Class A* 14,400 68
Sportmart* 14,400 110
Strouds* 19,000 88
------
Total Retail 3,745
------
RUBBER & PLASTIC -- 1.7%
Goodyear Tire And Rubber 13,000 494
O'Sullivan 45,000 495
------
Total Rubber & Plastic 989
------
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
SEMI-CONDUCTORS -- 3.8%
ESS Technology* 9,100 $ 273
Intel 7,400 517
Lam Research* 7,500 457
Micron Technology 7,800 550
National Semiconductor* 17,300 422
------
Total Semi-Conductors 2,219
------
SERVICES-EMPLOYMENT AGENCIES -- 0.9%
Manpower 20,000 543
------
Total Services-Employment Agencies 543
------
SPORTING AND ATHLETIC GOODS -- 1.2%
Callaway Golf 36,500 597
Meridian Sports* 17,300 104
------
Total Sporting and Athletic Goods 701
------
STEEL & STEEL WORKS -- 2.5%
Ak Steel Holding 22,000 682
Cold Metal Products* 42,800 246
USX 17,500 523
------
Total Steel & Steel Works 1,451
------
TELEPHONES & TELECOMMUNICATION -- 2.3%
Cellular Communications -- Class
A* 5,439 292
Executone Information Systems* 55,900 143
Intermedia Communications of
Florida* 40,500 511
Nextel Communications* 15,000 208
Peoples Telephone* 14,300 37
Telefonica De Espana ADR 4,000 151
------
Total Telephones & Telecommunication 1,342
------
TRUCKING -- 1.6%
Expeditors International of
Washington 25,000 656
PST Vans* 45,900 258
------
Total Trucking 914
------
VIDEO TECHNOLOGY -- 1.3%
Videonics* 55,000 770
------
Total Video Technology 770
------
WHOLESALE -- 0.3%
Government Technology Services* 33,500 188
------
Total Wholesale 188
------
Total Common Stock
(Cost $55,333,061) 55,877
------
COMMERCIAL PAPER -- 4.4%
American Express
5.750%, 11/01/95 $ 2,540 2,540
------
Total Commercial Paper
(Cost $2,540,000) 2,540
------
Total Investments -- 100.5%
(Cost $57,873,061) 58,417
------
OTHER ASSETS AND LIABILITIES -- (0.5%)
Other Assets and Liabilities,
Net (287)
------
Total Other Assets and Liabilities (287)
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 5,027,349
outstanding shares of
beneficial interest $ 48,443
Portfolio shares of the Retail
Class (unlimited
authorization -- $0.001 par
value) based on 64,279
outstanding shares of
beneficial interest 643
Undistributed net investment
income 16
Undistributed net realized gain
on investments 8,483
Unrealized appreciation on
investments 545
------
Total Net Assets: -- 100.0% $ 58,130
======
Net Asset Value, Offering Price
and Redemption Price Per
Share -- Institutional Class $ 11.42
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 11.42
======
Maximum Offering Price Per
Share -- Retail Class
($11.42 / 98.0%) $ 11.65
======
* Non-income producing security
ADR American Depository Receipt
INTERNATIONAL EQUITY FUND
FOREIGN COMMON STOCKS 90.2%
ARGENTINA 1.4%
Banco Frances Rio Plata ADR 2,200 $ 49
Cementera Argentina* 6,500 28
Commercial del Plata* 19,000 38
Irsa GDR* 1,400 29
Quilmes Industrial 2,200 39
------
Total Argentina 183
------
AUSTRALIA 0.8%
Newscorp 21,000 106
------
Total Australia 106
------
CHILE 0.2%
Santa Isabel ADR* 1,100 25
------
Total Chile 25
------
FINLAND 3.6%
Nokia, Cl A 8,400 481
------
Total Finland 481
------
</TABLE>
16
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
International Equity Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
FRANCE 1.7%
Axa 800 $ 44
Business Objects ADR* 1,300 56
Castorama 165 27
Cie Bancaire 350 36
SGS-Thomson ADR* 1,500 68
------
Total France 231
------
GERMANY 0.7%
Veba 2,250 92
------
Total Germany 92
------
HONG KONG 5.9%
Cheung Kong Holdings 11,000 62
Citic Pacific 20,800 65
First Pacific 266,000 306
HSBC Holdings 15,200 221
Hutchison Whampoa 12,000 66
Sun Hung Kai Properties 8,000 64
------
Total Hong Kong 784
------
INDIA 0.6%
East India Hotels GDR* 1,400 24
I.T.C. ADR* 4,100 36
Ranbaxy Laboratories GDR 1,000 22
------
Total India 82
------
INDONESIA 1.0%
Indonesian Satellite ADR 4,000 133
------
Total Indonesia 133
------
IRELAND 0.4%
Elan ADR* 1,300 52
------
Total Ireland 52
------
ISRAEL 0.3%
ECI Telecommunications 1,800 34
------
Total Israel 34
------
ITALY 2.7%
Assicurazioni Generali 2,200 51
Falck* 12,200 28
Fila Holdings ADR 900 39
Gucci Group ADR* 3,100 93
Mediobanca 4,000 27
Telecom Italia 71,500 120
------
Total Italy 358
------
JAPAN 27.7%
Advantest 4,000 227
Alpine Electronics 4,000 56
Best Denski 2,000 29
Bridgestone 3,000 42
Canon 6,000 103
Canon Sales 1,000 24
Daini Denden 32 259
Daiwa Securities 7,000 82
Fanuc 2,000 87
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
Hirose Electric 1,050 $ 67
Ito Yokado 3,000 164
Keyence 500 62
Koa 5,000 81
Kokusai Electric 5,000 114
Komatsu 6,000 47
Kubota 6,000 37
Kurita Water Industries 1,000 28
Kyocera 4,000 328
Makita 2,000 31
Marui 2,000 35
Matsushita Electric 3,000 43
Mitsubishi Electric 5,000 37
Mitsubishi Estate 7,000 75
Mitsubishi Trust & Banking 2,000 28
Mitsui Fudosan 5,000 57
Murata 4,000 140
NEC 20,000 264
Nikon 10,000 143
Nippon Telegraph & Telephone 4 33
Nissan Motors 7,000 47
Nomura Securities 6,000 110
NTT Data Communications 3 75
Sankyo 1,000 22
Sanwa Bank 3,000 51
Sharp 7,000 97
Sony 1,000 45
Sumitomo Bank 3,000 53
Sumitomo Trust & Banking 4,000 46
Takeda Chemical Industries 2,000 28
TDK 1,000 52
Tokyo Electronics 4,000 174
Toray 6,000 37
Toyota Motor 4,000 74
Ushio 2,000 23
Yamanouchi Pharmaceutical 3,000 67
------
Total Japan 3,724
------
LUXEMBOURG 0.1%
Millicom International* 500 17
------
Total Luxembourg 17
------
MALAYSIA 3.8%
Arab-Malaysian Merchant Bank 12,000 148
Malayan Banking 10,000 81
New Straits Times Press 20,000 63
Sime Darby Malaysia 20,000 50
Technology Resources* 44,000 112
United Engineers 9,000 56
------
Total Malaysia 510
------
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
MEXICO 2.0%
Bufete Industrial ADR* 1,600 $ 21
Cemex, Cl A 5,300 16
Cifra* 35,000 37
Grupo Carso ADR* 2,500 24
Grupo Financiero Banamex, Cl B 11,000 19
Grupo Financiero Banamex, Cl L 550 1
Grupo Financiero Inbursa, Cl C 20,000 55
Grupo Iusacell ADS* 1,400 17
Grupo Modelo, Cl C 5,000 19
Grupo Posadas, Cl A* 52,300 17
Grupo Synkro ADR, Cl B* 80,000 20
Kimberly Clark, Cl A 1,700 22
------
Total Mexico 268
------
NETHERLANDS 4.7%
Advanced Semi-Conductor ADR* 700 33
ASM Litho Holdings ADR* 2,000 97
Baan ADR* 2,300 98
Elsevier 4,500 58
Getronics 1,000 48
International Nederlanden 500 30
Madge Networks ADR* 1,900 80
Philips Electronics 1,800 70
Polygram 1,100 69
Wolters Kluwer 500 46
------
Total Netherlands 629
------
NEW ZEALAND 0.5%
Telecom New Zealand ADR 1,015 67
------
Total New Zealand 67
------
NORWAY 1.2%
Hafslund Nycomed, Cl B 1,200 34
Petroleum Geo-Services ADR* 6,200 120
------
Total Norway 154
------
PERU 0.3%
Banco Wiese ADR 6,900 46
------
Total Peru 46
------
PHILIPPINES 0.5%
San Miguel, Cl B 20,000 66
------
Total Philippines 66
------
SINGAPORE 1.9%
City Development 7,000 43
Creative Technology ADR* 1,100 13
Flextronics ADR* 1,000 23
Singapore Press, F 2,400 38
Straits Steamship Land 14,000 39
United Overseas Bank, F 10,600 93
------
Total Singapore 249
------
SOUTH KOREA 3.1%
Korea Fund 3,000 65
Korea Mobile Telecom GDR* 2,500 93
Samsung Electric Non-Voting
GDS New* 4,000 256
Samsung Electric Voting GDR* 22 2
------
Total South Korea 416
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
SWEDEN 7.4%
Allgan, Cl B 1,600 $ 24
Asea, Cl B 1,400 138
Astra, Cl B 5,200 188
Autoliv 2,200 126
Ericsson Telephone ADR 23,400 500
Pharmacia, Cl B 500 17
------
Total Sweden 993
------
SWITZERLAND 4.9%
Brown Boveri & Cie Bearer 65 75
Ciba Geigy 125 108
Roche Holdings 35 255
Sandoz Pharmaceutical 260 215
------
Total Switzerland 653
------
THAILAND 2.3%
Advanced Info Service, F 9,000 148
Land and House, F 2,000 32
Total Access Communications ADR 11,000 67
United Communications 5,000 63
------
Total Thailand 310
------
UNITED KINGDOM 10.5%
Barclays Bank 5,200 61
BAT 4,200 34
British Sky Broadcasting ADR 5,500 197
Commercial Union 5,300 51
Glaxo Wellcome 7,200 97
Logica 6,100 46
Next 12,000 78
Reuters 16,200 151
Smithkline Beecham 20,500 210
Takare 6,000 19
Tele-Communications ADR, Cl A* 7,500 170
Vodafone Group 26,200 108
WPP Group 11,600 28
Zeneca Group 8,000 149
------
Total United Kingdom 1,399
------
Total Foreign Common Stocks
(Cost $11,387,561) 12,062
------
FOREIGN PREFERRED STOCKS 1.4%
GERMANY 1.4%
SAP 1,250 191
------
Total Germany 191
------
Total Foreign Preferred Stocks
(Cost $158,684) 191
------
</TABLE>
18
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
International Equity Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT 7.7%
Bank of New York -- Cayman
Time Deposit
5.563%, 11/01/95 $ 1,029 $ 1,029
------
Total Time Deposit
(Cost $1,028,558) 1,029
------
Total Investments (99.3% of Net Assets)
(Cost $12,574,803) 13,282
------
OTHER ASSETS AND LIABILITIES 0.7%
Other Assets and Liabilities, Net 99
------
Total Other Assets and Liabilities 99
------
NET ASSETS:
Portfolio shares of
Institutional
Class (unlimited
authorization -- $0.001 par
value) -- based on
1,214,982 outstanding shares 12,425
Portfolio shares of Retail
Class (unlimited
authorization -- $0.001 par
value) -- based on
758 outstanding shares 8
Accumulated net investment loss (5)
Undistributed net realized gain
on investments and foreign
currency transactions 201
Unrealized appreciation on
forward foreign currency
contracts, foreign currency
and translation of other
assets and liabilities in
foreign currency 45
Unrealized appreciation on
investments 707
------
Total Net Assets: -- 100.0% $ 13,381
======
Net Asset Value, Offering Price
and
Redemption Price Per Share --
Institutional Class $ 11.01
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 10.99
======
Maximum Offering Price Per
Share -- Retail Class
($10.99 / 98%) $ 11.21
======
* Non-income producing security
ADR American Depository Receipts
ADS American Depository Shares
GDR Global Depository Receipts
GDS Global Depository Shares
Cl Class
F Foreign Registry Shares
BALANCED FUND
COMMON STOCK -- 38.5%
AEROSPACE & DEFENSE -- 0.2%
McDonnell Douglas 900 $ 74
------
Total Aerospace & Defense 74
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
AIRCRAFT -- 1.1%
Allied Signal 3,800 $ 162
Boeing 1,500 98
Textron 1,000 69
United Technologies 900 80
------
Total Aircraft 409
------
APPAREL/TEXTILES -- 0.2%
Burlington Industries* 1,900 21
Fruit Of The Loom* 3,000 52
------
Total Apparel/Textiles 73
------
AUTOMOTIVE -- 0.7%
Ford Motor 7,700 222
Magna International, Class A 1,000 43
------
Total Automotive 265
------
BANKS -- 3.9%
Bank of Boston 2,600 116
BankAmerica 8,300 477
Chase Manhattan 7,800 445
Chemical Banking 4,400 250
Citicorp 3,500 227
------
Total Banks 1,515
------
BOOKS -- 0.0%
Borders Group* 1,000 17
------
Total Books 17
------
BUILDING & CONSTRUCTION -- 0.3%
Webb (Del E.) 5,400 112
------
Total Building & Construction 112
------
CHEMICALS -- 1.5%
Dow Chemical 900 62
Hercules 1,900 101
IMC Global 1,700 119
Monsanto 1,200 126
Praxair 6,500 175
------
Total Chemicals 583
------
COMMUNICATIONS EQUIPMENT -- 0.5%
First Alert* 1,200 19
Motorola 1,300 85
Qualcomm* 2,500 96
------
Total Communications Equipment 200
------
COMPUTER SOFTWARE -- 0.5%
Computer Associates
International 2,400 131
International Game Technology 5,400 63
Pyxis* 1,000 13
------
Total Computer Software 207
------
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
COMPUTERS & SERVICES -- 2.4%
Apple Computer 3,600 $ 131
Compaq Computer* 2,000 112
Digital Equipment* 3,500 189
Hewlett Packard 800 74
IBM 4,000 389
Novell* 2,252 37
------
Total Computers & Services 932
------
CONCRETE & MINERAL PRODUCTS -- 0.1%
Owens Corning Fiberglass* 1,200 51
------
Total Concrete & Mineral Products 51
------
CONTAINERS & PACKAGING -- 0.2%
Owens-Illinois* 5,300 67
------
Total Containers & Packaging 67
------
ELECTRICAL SERVICES -- 2.5%
American Electric Power 1,800 69
Central And South West 4,100 110
Consolidated Edison New York 5,400 164
Pacific Gas And Electric 4,200 123
Peco Energy 8,500 248
SCE 14,300 243
------
Total Electrical Services 957
------
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT -- 1.8%
General Electric 7,200 456
Philips Electronics ADR 2,700 104
Texas Instruments 1,800 123
------
Total Electronic and Other
Electrical Equipment 683
------
ENTERTAINMENT -- 0.1%
MGM Grand* 1,800 43
------
Total Entertainment 43
------
ENVIRONMENTAL SERVICES -- 0.3%
Browning Ferris Industries 4,500 131
------
Total Environmental Services 131
------
FINANCIAL SERVICES -- 1.6%
Dean Witter Discover 3,700 183
Fleet Financial Group 2,000 78
Household International 1,400 79
ITT 1,500 184
MBNA 2,500 92
------
Total Financial Services 616
------
FOOD, BEVERAGE & TOBACCO -- 3.1%
IBP 1,900 114
Nabisco Holdings -- Class A 8,000 215
Philip Morris Companies 6,700 566
RJR Nabisco Holdings 10,300 317
------
Total Food, Beverage & Tobacco 1,212
------
HOUSEHOLD PRODUCTS -- 0.1%
Maytag 2,700 51
------
Total Household Products 51
------
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C>
INSURANCE -- 1.6%
Aetna Life And Casualty 1,200 $ 84
Allstate 462 17
Cigna 1,200 119
Equitable Companies 7,300 155
The Travelers Group 5,000 253
Transport Holdings -- Class A* 25 1
------
Total Insurance 629
------
MACHINERY -- 1.1%
Baker Hughes 3,000 59
Case Equipment 2,500 95
Caterpillar 1,200 67
Deere 1,800 161
McDermott International 1,300 21
------
Total Machinery 403
------
MEDICAL PRODUCTS & SERVICES -- 0.8%
Beverly Enterprises* 5,100 60
Community Psychiatric* 1,500 16
FHP International* 1,500 36
Foundation Health* 1,600 68
Health Systems International
Class A* 700 21
Humana* 1,500 32
Novacare* 2,300 14
United Healthcare 500 27
United States Surgical 1,700 42
------
Total Medical Products & Services 316
------
METALS & MINING -- 0.3%
Potash of Saskatchewan 1,700 118
------
Total Metals & Mining 118
------
OIL AND GAS FIELD EXPLORATION SERVICES -- 4.0%
Ashland 3,500 111
British Petroleum PLC ADR 4,000 353
Diamond Shamrock 1,400 36
Enron 3,500 120
Mobil 3,200 322
Repsol S.A. ADR 7,100 210
Royal Dutch Petroleum 2,200 270
Tosco 2,300 79
YPF Sociedad Anonima ADR 2,700 46
------
Total Oil and Gas Field Exploration Services 1,547
------
PAPER & PAPER PRODUCTS -- 0.2%
International Paper 1,800 67
------
Total Paper & Paper Products 67
------
PHARMACEUTICALS -- 1.0%
Caremark International 900 19
Elan Public* 3,900 156
Merck 1,600 92
Mylan Laboratories 2,500 48
Teva Pharmaceutical Industries
ADR 1,400 55
------
Total Pharmaceuticals 370
------
</TABLE>
20
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Balanced Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Market
Description Shares Value (000)
----------------------------------------------------------
<S> <C> <C>
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.2%
Xerox 500 $ 65
------
Total Photographic Equipment & Supplies 65
------
RAILROADS -- 0.5%
Burlington Northern Santa Fe 1,100 92
CSX 1,200 101
------
Total Railroads 193
------
RESTAURANTS -- 0.6%
Darden Restaurants* 17,300 197
Vicorp Restaurants* 2,200 24
------
Total Restaurants 221
------
RETAIL -- 1.5%
CML Group 9,000 52
Kroger* 7,200 239
Lowe's 6,500 176
Pep Boys 3,500 77
Vons* 1,500 38
------
Total Retail 582
------
RUBBER & PLASTIC -- 1.0%
Goodyear Tire And Rubber 9,700 369
------
Total Rubber & Plastic 369
------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.0%
Intel 3,100 216
Micron Technology 900 64
National Semiconductor* 3,200 78
VLSI Technology 1,500 35
------
Total Semi-Conductors/Instruments 393
------
SERVICES-EMPLOYMENT AGENCIES -- 0.3%
Manpower 4,000 109
------
Total Services-Employment Agencies 109
------
SPECIALTY MACHINERY -- 0.3%
Westinghouse Electric 7,500 106
------
Total Specialty Machinery 106
------
STEEL & STEEL WORKS -- 0.6%
Birmingham Steel 300 5
Phelps Dodge 1,900 120
USX -- U.S. Steel Group 3,900 117
------
Total Steel & Steel Works 242
------
TELEPHONES & TELECOMMUNICATION -- 2.3%
Cellular Communications -- Class
A* 2,000 107
MCI Communications 6,500 162
SBC Communications 3,000 168
Worldcom* 14,300 467
------
Total Telephones & Telecommunication 904
------
WHOLESALE -- 0.1%
Universal -- Va 900 19
------
Total Wholesale 19
------
Total Common Stock
(Cost $14,129,471) 14,851
------
PREFERRED STOCKS -- 0.1%
PRINTING & PUBLISHING -- 0.1%
News -- Preferred Shares ADR 3,200 58
------
Total Printing & Publishing 58
------
Total Preferred Stocks
(Cost $64,400) 58
------
<CAPTION>
----------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 34.8%
U.S. Treasury Bonds
8.750%, 05/15/17 $ 1,040 $ 1,320
7.625%, 02/15/25 80 93
U.S. Treasury Notes
7.375%, 05/15/96 700 707
7.500%, 01/31/97 950 971
6.500%, 05/15/97 645 653
8.500%, 05/15/97 85 89
7.375%, 11/15/97 1,645 1,699
8.125%, 02/15/98 355 373
9.000%, 05/15/98 815 878
9.250%, 08/15/98 430 469
8.875%, 11/15/98 1,105 1,201
6.750%, 05/31/99 1,215 1,253
7.125%, 09/30/99 600 627
7.500%, 10/31/99 970 1,028
7.500%, 11/15/01 1,275 1,379
9.250%, 02/15/16 510 673
------
Total U.S. Treasury Obligations
(Cost $13,321,228) 13,413
------
CORPORATE OBLIGATIONS -- 5.2%
Ahmanson H. F
7.875%, 09/01/04 185 197
Bear Stearns
6.875%, 10/01/05 175 175
Capital One Bank
8.125%, 02/27/98 90 94
Chase Manhattan Bank
6.500%, 08/01/05 100 98
Chemical Bank
6.125%, 11/01/08 230 214
First Nationwide
10.000%, 10/01/06 50 59
Lehman Brothers Holdings
7.125%, 09/15/03 175 176
Manufacturers & Traders
7.000%, 07/01/05 165 165
Niagara Mohawk Power
Callable @100 04/01/02
8.750%, 04/01/22 80 76
Provident Bank
6.375%, 01/15/04 160 156
TCI Communications
8.750%, 08/01/15 90 96
Tele-Communications
8.250%, 01/15/03 100 105
United Air Lines
10.670%, 05/01/04 320 375
------
Total Corporate Obligations
(Cost $1,968,434) 1,986
------
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.2%
FHLMC CMO Pool #E00388
7.000%, 08/01/10 $ 139 $ 140
FHLMC Pool #D63546
7.000%, 09/01/25 350 347
FNMA Pool #190203
8.000%, 02/01/23 176 180
FNMA Pool #290383
7.500%, 05/01/25 159 161
FNMA Pool #303460
6.500%, 07/01/10 288 286
FNMA Pool #317278
7.500%, 07/01/25 175 176
GNMA Pool #356688
7.000%, 07/15/23 386 384
GNMA Pool #780190
7.500%, 07/15/25 715 728
------
Total U.S. Government Agency Obligations
(Cost $2,393,321) 2,402
------
YANKEE BONDS -- 3.3%
AAB-Global
7.250%, 05/31/05 250 260
Carter Holt Harvey
8.375%, 04/15/15 85 94
CSR Finance
7.700%, 07/21/25 200 208
Laidlaw
8.750%, 04/15/25 75 86
Noranda
8.000%, 06/01/03 100 107
Quebec Province
7.500%, 07/15/23 280 281
Santander Finance
7.875%, 04/15/05 100 107
Toronto-Domnion Bank -- New York
6.150%, 10/15/08 140 131
------
Total Yankee Bonds
(Cost $1,251,897) 1,274
------
COMMERCIAL PAPER -- 10.5%
American Express
5.750%, 11/01/95 4,030 4,030
------
Total Commercial Paper
(Cost $4,030,000) 4,030
------
MORTGAGE RELATED -- 0.9%
Premier Auto Trust Series 1995-1
Class A4
7.850%, 09/04/98 110 113
Prudential Home Mortgage
Securities Pool #1994-29 Class
A5
7.000%, 10/25/24 235 230
------
Total Mortgage Related
(Cost $339,218) 343
------
Total Investments -- 99.5%
(Cost $37,497,969) 38,357
------
OTHER ASSETS AND LIABILITIES -- 0.5%
Other Assets and Liabilities, Net 206
------
Total Other Assets and Liabilities 206
------
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 3,707,254
outstanding shares of
beneficial interest $ 37,304
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value) based on
6,676 outstanding shares of
beneficial interest 68
Undistributed net investment
income 47
Undistributed net realized gain
on investments 285
Unrealized appreciation on
investments 859
------
Total Net Assets: -- 100.0% $ 38,563
======
Net Asset Value, Offering Price
and Redemption Price Per
Share -- Institutional Class $ 10.38
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 10.39
======
Maximum Offering Price Per
Share -- Retail Class
($10.39 / 98.0%) $ 10.60
======
</TABLE>
* Non-income producing security
ADR American Depository Receipt
CMO Collateralized Mortgage Obligation
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
<TABLE>
<CAPTION>
BOND FUND
U.S. TREASURY OBLIGATIONS -- 35.8%
<S> <C> <C>
U.S. Treasury Bonds
10.750%, 05/15/03 $ 200 $ 257
8.750%, 05/15/17 8,745 11,099
8.125%, 08/15/19 195 235
8.500%, 02/15/20 2,600 3,251
7.500%, 11/15/24 500 571
7.625%, 02/15/25 2,450 2,843
U.S. Treasury Notes
7.500%, 01/31/97 1,065 1,089
6.500%, 05/15/97 1,155 1,170
8.500%, 05/15/97 1,225 1,276
8.500%, 07/15/97 2,075 2,170
9.000%, 05/15/98 6,345 6,836
9.250%, 08/15/98 12,140 13,231
8.875%, 02/15/99 4,568 4,991
6.750%, 05/31/99 6,050 6,239
7.125%, 09/30/99 6,335 6,625
</TABLE>
22
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Bond Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- CONTINUED
7.500%, 10/31/99 $ 3,955 $ 4,192
7.750%, 01/31/00 3,780 4,051
------
Total U.S. Treasury Obligations
(Cost $69,349,806) 70,126
------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 30.9%
FHLMC Pool #D63546
7.000%, 09/01/25 3,542 3,517
FHLMC Pool #E00388
7.000%, 08/01/10 1,386 1,398
FHLMC Pool #E20013
7.500%, 01/01/08 3,674 3,748
FHLMC Pool #E20185
7.000%, 07/01/10 1,559 1,572
FHLMC Series 1254 Class F
7.250%, 04/15/18 2,020 2,025
FHLMC Series 1411 Class E
6.000%, 02/15/16 2,580 2,562
FHLMC Series 1519 Class F
6.750%, 03/15/07 1,925 1,953
FHLMC Series 1528 Class C
6.500%, 05/15/05 1,920 1,848
FHLMC Series 1606 Class KA
6.250%, 11/15/08 1,971 1,970
FHLMC Series 30 Class D
9.500%, 02/15/20 2,000 2,186
FNMA Pool #190203
8.000%, 02/01/23 1,836 1,883
FNMA Pool #290383
7.500%, 05/01/25 1,651 1,669
FNMA Pool #303460
6.500%, 07/01/10 3,340 3,313
FNMA Pool #317278
7.500%, 07/01/25 1,840 1,860
FNMA Pool #50726
7.000%, 05/01/23 3,534 3,505
FNMA Series 1992-124 Class PG
7.000%, 01/25/18 1,930 1,942
FNMA Series 1992-196 Class E
5.750%, 02/25/03 1,680 1,655
FNMA Series 1992-210 Class H
6.500%, 03/25/19 1,660 1,641
FNMA Series 1992-65 Class H
8.500%, 01/25/20 1,836 1,914
FNMA Series 1993-194 Class B
5.500%, 10/25/98 1,585 1,543
FNMA Series 1993-2 Class PD
6.750%, 01/25/16 1,600 1,603
FNMA Series G92-24 Class E
6.500%, 11/25/20 1,397 1,392
GNMA Pool #286395
9.000%, 04/15/20 2,611 2,744
GNMA Pool #356688
7.000%, 07/15/23 3,825 3,802
GNMA Pool #780190
7.500%, 07/15/25 7,153 7,280
------
Total U.S. Government Agency Obligations
(Cost $59,949,162) 60,525
------
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS -- 15.4%
Ahmanson H. F.
7.875%, 09/01/04 $ 2,500 $ 2,656
Bear Stearns
6.875%, 10/01/05 1,640 1,638
Capital One Bank
8.125%, 02/27/98 910 948
Chase Manhattan Bank
6.500%, 08/01/05 1,005 980
Chemical Bank
6.125%, 11/01/08 2,140 1,988
First Nationwide
10.000%, 10/01/06 485 572
Georgia Pacific
7.700%, 06/15/15 975 997
8.250%, 03/01/23 770 805
Great Lakes Power
8.900%, 12/01/99 750 798
Laidlaw
8.750%, 04/15/25 1,485 1,710
Lehman Brothers
9.875%, 10/15/00 1,050 1,188
Lehman Brothers Holdings
7.125%, 09/15/03 1,725 1,736
Manufacturers & Traders
7.000%, 07/01/05 1,605 1,605
Niagara Mohawk Power
Callable 04/01/02 @ 104
8.750%, 04/01/22 940 888
Provident Bank
6.375%, 01/15/04 1,855 1,813
Southern Cal Gas
7.500%, 06/15/23 665 687
System Energy Resources
10.500%, 09/01/96 1,020 1,057
TCI Communications
8.750%, 08/01/15 905 965
Tele-Communications
Callable 01/15/03
9.250%, 01/15/23 1,885 2,019
Texas Utilities
Callable 04/01/03 @ 103.85
7.875%, 04/01/24 720 751
United Air Lines
10.670%, 05/01/04 2,910 3,427
Virginia Electric & Power
Callable 03/01/05 @ 103.48
8.250%, 03/01/25 840 919
------
Total Corporate Obligations
(Cost $29,483,836) 30,147
------
MORTGAGE RELATED -- 3.3%
GE Capital Mortgage Services
Series 1994-2 Class A4
6.000%, 01/25/09 2,680 2,605
Prudential Home Mortgage
Securities Series 1994-29
Class A5
7.000%, 10/25/24 2,475 2,419
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
MORTGAGE RELATED -- CONTINUED
Residential Funding Mtg Sec 1
Series 1993-S7 Class A6
7.150%, 02/25/08 $ 1,500 $ 1,499
------
Total Mortgage Related
(Cost $6,450,512) 6,523
------
ASSET BACKED SECURITIES -- 2.5%
Banc One Credit Card Master
Trust Series 1994-A Class A
7.150%, 12/15/98 1,970 2,003
Premier Auto Trust Series 1995-1
Class A4
7.850%, 09/04/98 1,080 1,111
Standard Credit Card Master
Trust Series 1991-4 Class B
8.250%, 10/07/97 1,675 1,710
------
Total Asset Backed Securities
(Cost $4,788,625) 4,824
------
YANKEE BOND -- 7.0%
AAB-Global
7.250%, 05/31/05 2,070 2,150
Carter Holt Harvey
8.375%, 04/15/15 865 961
CSR Finance
7.700%, 07/21/25 1,815 1,885
Korea Electric Power
7.750%, 04/01/13 805 830
Noranda
8.000%, 06/01/03 1,330 1,423
Quebec Province
7.500%, 07/15/23 2,895 2,903
Santander Finance
7.875%, 04/15/05 2,265 2,418
Toronto-Domnion Bank-New York
6.150%, 10/15/08 1,160 1,088
------
Total Yankee Bond
(Cost $13,291,504) 13,658
------
MEDIUM TERM NOTE -- 1.2%
Paine Webber
6.730%, 01/20/04 1,300 1,267
Salomon
6.280%, 02/05/97 1,160 1,156
------
Total Medium Term Note
(Cost $2,339,420) 2,423
------
COMMERCIAL PAPER -- 2.4%
American Express
5.750%, 11/01/95 4,607 4,607
------
Total Commercial Paper
(Cost $4,607,000) 4,607
------
Total Investments -- 98.5%
(Cost $190,259,865) 192,833
------
OTHER ASSETS AND LIABILITIES -- 1.5%
Other Assets and Liabilities, Net 2,982
------
Total Other Assets and Liabilities 2,982
------
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 18,422,250
outstanding shares of
beneficial interest $ 189,788
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value) based on
130,046 outstanding shares of
beneficial interest 1,372
Undistributed net investment
income 384
Undistributed net realized gain
on investments 1,698
Unrealized appreciation on
investments 2,573
------
Total Net Assets: -- 100.0% $ 195,815
======
Net Asset Value, Offering Price
and
Redemption Price Per Share --
Institutional Class $ 10.55
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 10.56
======
Maximum Offering Price Per
Share -- Retail Class
($10.56 / 98.0%) $ 10.78
======
</TABLE>
CMO Collateralized Mortgage Obligation
FNMA Federal National Mortgage Association
FHLMC Federal Home Loan Mortgage Corporation
GNMA Government National Mortgage Association
<TABLE>
<CAPTION>
INTERMEDIATE INCOME FUND
U.S. TREASURY OBLIGATIONS -- 61.1%
<S> <C> <C>
U.S. Treasury Notes
7.500%, 01/31/97 $ 4,110 $ 4,202
6.500%, 05/15/97 7,010 7,098
8.500%, 05/15/97 700 729
8.500%, 07/15/97 8,670 9,068
6.500%, 08/15/97 6,890 6,990
7.375%, 11/15/97 2,420 2,499
8.125%, 02/15/98 145 153
9.000%, 05/15/98 4,050 4,364
9.250%, 08/15/98 10,580 11,531
6.750%, 05/31/99 2,215 2,284
7.125%, 09/30/99 7,015 7,336
7.500%, 10/31/99 6,270 6,646
7.750%, 11/30/99 230 246
7.750%, 01/31/00 3,315 3,553
7.500%, 11/15/01 14,690 15,883
7.500%, 02/15/05 2,360 2,602
------
Total U.S. Treasury Obligations
(Cost $84,374,220) 85,184
------
</TABLE>
24
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Intermediate Income Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS -- 13.3%
Bear Stearns
6.875%, 10/01/05 $ 710 $ 709
Capital One Bank
8.125%, 02/27/98 800 833
Chase Manhattan Bank
6.500%, 08/01/05 695 678
Chrysler, Callable @ 100 08/01/97
10.400%, 08/01/99 1,095 1,162
Colonial National Bank
7.000%, 08/01/03 1,595 1,609
First National Bank of Boston
8.000%, 09/15/04 2,000 2,150
Great Lakes Power
8.900%, 12/01/99 990 1,053
KN Energy
9.940%, 02/01/96 300 303
Lehman Bothers
9.875%, 10/15/00 2,000 2,263
Pennsylvania Power And Light
7.750%, 05/01/02 1,280 1,358
Philip Morris, Callable @ 100
06/11/92
6.500%, 12/12/95 250 250
Provident Bank
5.000%, 06/15/96 225 224
System Energy Resources
10.500%, 09/01/96 725 751
Tele-Communications
8.250%, 01/15/03 1,600 1,672
Transcont Gas
8.125%, 01/15/97 1,055 1,076
United Airlines
6.750%, 12/01/97 2,435 2,426
------
Total Corporate Obligations
(Cost $18,319,062) 18,517
------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 10.6%
FHLMC Remic Series 1254 Class F
7.250%, 04/15/18 205 205
FHLMC Remic Series 1411 Class E
6.000%, 02/15/16 1,725 1,713
FHLMC Remic Series 1509 Class A
6.500%, 10/15/00 1,233 1,216
FHLMC Remic Series 1519 Class F
6.750%, 03/15/07 1,755 1,780
FHLMC Remic Series 1528 Class C
6.500%, 05/15/05 1,755 1,689
FHLMC Remic Series 1606 Class KA
6.250%, 11/15/08 757 757
FNMA Pool #303460
6.500%, 07/01/10 1,809 1,795
FNMA Pool #327118
6.500%, 10/01/10 1,360 1,349
FNMA Remic Series 1992-124 Class
PG
7.000%, 01/25/18 300 302
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
FNMA Remic Series 1992-196 Class
E
5.750%, 02/25/03 1,140 $ 1,123
FNMA Remic Series 1993-194 Class
B
5.500%, 10/25/98 $1,900 1,851
FNMA Remic Series G92-24 Class E
6.500%, 11/25/20 947 943
------
Total U.S. Government Agency Obligations
(Cost $14,643,023) 14,723
------
YANKEE BONDS -- 7.0%
BHP Financial
5.625%, 11/01/00 1,730 1,661
Carter Holt Harvey
8.875%, 12/01/04 1,120 1,277
CSR America
6.875%, 07/21/05 1,670 1,693
Korea Development Bank
6.250%, 05/01/00 1,000 994
Laidlaw
7.875%, 04/15/05 1,490 1,585
Noranda
8.000%, 06/01/03 775 829
Santander Finance
7.875%, 04/15/05 1,625 1,734
------
Total Yankee Bonds
(Cost $9,551,082) 9,773
------
MEDIUM TERM NOTES -- 2.2%
First USA Bank
6.880%, 09/12/96 655 661
Fleet Financial Group
7.180%, 07/09/97 160 163
International Leases
7.830%, 11/14/96 1,345 1,370
Paine Webber
6.730%, 01/20/04 750 731
Paine Webber Group
6.630%, 09/17/97 160 161
------
Total Medium Term Notes
(Cost $3,018,165) 3,086
------
ASSET BACKED SECURITIES -- 3.1%
Banc One Credit Card
Master Trust 1994-A
7.150%, 12/15/98 1,675 1,703
Premier Auto Trust Series 1992-2
Class A
6.375%, 09/15/97 15 15
Premier Auto Trust Series 1994-4
Class A4
6.450%, 05/02/98 1,625 1,639
Premier Auto Trust Series 1995-1
Class 4
7.850%, 09/04/98 870 895
------
Total Asset Backed Securities
(Cost $4,230,806) 4,252
------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 1.1%
American Express
5.750%, 11/01/95 $1,567 $ 1,567
------
Total Commercial Paper
(Cost $1,567,000) 1,567
------
Total Investments -- 98.3%
(Cost $135,703,358) 137,102
------
OTHER ASSETS AND LIABILITIES -- 1.7%
Other Assets and Liabilities, Net 2,371
------
Total Other Assets and Liabilities 2,371
------
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 12,909,945
outstanding shares of
beneficial interest 135,805
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value) based on
114,722 outstanding shares of
beneficial interest 1,243
Undistributed net investment
income 261
Undistributed net realized gain
on investments 765
Unrealized appreciation on
investments 1,399
------
Total Net Assets: -- 100.0% $ 139,473
======
Net Asset Value, Offering Price and
Redemption Price Per Share --
Institutional Class $ 10.71
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 10.72
======
Maximum Offering Price Per
Share -- Retail Class
($10.72 / 98.0%) $ 10.94
======
</TABLE>
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
<TABLE>
<CAPTION>
SHORT-TERM INCOME FUND
U.S. TREASURY OBLIGATIONS -- 65.8%
<S> <C> <C>
U.S. Treasury Notes
7.500%, 01/31/96 $2,975 $ 2,989
5.125%, 03/31/96 4,515 4,508
7.875%, 07/31/96 1,500 1,525
6.500%, 09/30/96 555 559
7.500%, 01/31/97 5,000 5,113
6.500%, 05/15/97 2,140 2,167
8.500%, 05/15/97 190 198
5.625%, 08/31/97 2,000 2,000
7.375%, 11/15/97 2,500 2,582
7.125%, 09/30/99 2,000 2,091
------
Total U.S. Treasury Obligations
(Cost $23,674,766) 23,732
------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS -- 13.0%
Philip Morris
6.500%, 12/12/95 500 $ 500
Provident Bank
5.000%, 06/15/96 520 518
Smith Barney
6.000%, 03/15/97 600 599
Smithkline Beecham
5.250%, 01/26/96 1,000 999
Tele-Communications
5.280%, 08/20/96 560 555
Transcont Gas
8.125%, 01/15/97 525 536
W.R. Grace
6.500%, 12/01/95 1,000 1,000
------
Total Corporate Bonds
(Cost $4,698,191) 4,707
------
MEDIUM TERM NOTES -- 9.0%
First USA Bank
6.880%, 09/12/96 190 192
Ford Motor Credit
8.850%, 05/01/96 1,000 1,015
International Lease
7.830%, 11/14/96 1,000 1,018
McDonnell Douglas Finance
7.310%, 02/19/96 500 502
Salomon Brothers
9.000%, 07/23/96 500 509
------
Total Medium Term Notes
(Cost $3,224,578) 3,236
------
ASSET BACKED SECURITIES -- 6.1%
Banc One Credit Card
Master Trust 1994-A
7.150%, 12/15/98 420 427
Fical Home Equity Loans 90-1a
8.900%, 11/15/97 23 23
Premier Auto Trust 1994-4
Class A-4
6.450%, 05/02/98 600 605
</TABLE>
26
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Short-Term Income Fund -- continued
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
ASSET BACKED SECURITIES -- CONTINUED
Premier Auto Trust Series 1992-2
Class A
6.375%, 09/15/97 $ 103 $ 103
Premier Auto Trust Series 1995-1
Class 4
7.850%, 09/04/98 1,000 1,028
------
Total Asset Backed Securities
(Cost $2,176,405) 2,186
------
U.S. GOVERNMENT AGENCY OBLIGATION -- 1.6%
FNMA Remic Series G92-24 Class E
6.500%, 11/25/20 577 575
------
Total U.S. Government Agency Obligation
(Cost $569,547) 575
------
COMMERCIAL PAPER -- 2.6%
American Express
5.750%, 11/01/95 932 932
------
Total Commercial Paper
(Cost $932,000) 932
------
Total Investments -- 98.1%
(Cost $35,275,487) 35,368
------
OTHER ASSETS AND LIABILITIES -- 1.9%
Other Assets and Liabilities,
Net 702
------
Total Other Assets and Liabilities 702
------
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 3,587,673
outstanding shares of
beneficial interest 35,870
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value) based on
1,131 outstanding shares of
beneficial interest 11
Undistributed net investment
income 64
Undistributed net realized gain
on investments 33
Unrealized appreciation on
investments 92
------
Total Net Assets: -- 100.0% $ 36,070
======
Net Asset Value, Offering Price
and
Redemption Price Per Share --
Institutional Class $ 10.05
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 10.04
======
Maximum Offering Price Per
Share -- Retail Class
($10.04 / 98.0%) $ 10.24
======
FNMA Federal National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA TAX-FREE
Bond Fund
MUNICIPAL BONDS -- 100.8%
PENNSYLVANIA -- 100.8%
Allegheny County, Mercy Hospital
of Pittsburgh, RB, AMBAC
6.450%, 04/01/01 $ 200 $ 219
Allegheny County, Montefiore
Hospital Improvement, RB,
Escrowed To Maturity
5.800%, 10/01/03 140 146
Allentown, Water Authority, RB
5.650%, 07/15/96 100 101
Central Bucks, School District,
GO
6.600%, 02/01/03 175 191
Dauphin County, Correctional
Facility, GO, MBIA
5.450%, 08/01/07 200 204
Delaware County GO,
Callable @ 100 09/01/96
7.100%, 12/01/98 170 176
Delaware County, Villanova
University, RB, AMBAC
5.400%, 08/01/08 200 203
Erie County, Correctional
Facility, GO, MBIA, Escrowed
To Maturity
5.850%, 11/01/96 100 102
Gettysburg, Gettysburg College,
RB
5.300%, 02/15/97 250 254
Gettysburg, RB, VRDN
3.950%, 03/01/04 (B) 100 100
Hampden Township,
Sewer Authority, SO,
Escrowed To Maturity
5.350%, 04/01/03 140 145
Harrisburg, Resource Recovery,
RB
5.875%, 09/01/13 (A) 200 201
Hempfield, School District, GO,
FGIC
5.300%, 10/15/14 250 241
Keystone, School District, GO,
FGIC
4.750%, 09/01/06 240 231
Lehigh County, Sewer Authority,
RB, VRDN, FGIC
3.850%, 03/15/05 (B) 200 200
Lower Burrell, Sewer Authority,
RB, AMBAC
5.125%, 02/01/16 250 234
Millcreek Township, Sewer
Authority, RB, MBIA,
Pre-Refunded
6.000%, 11/01/99 (C) 150 159
Montgomery County, Hospital
Authority, Abington Hospital,
Series A, RB, AMBAC
5.125%, 06/01/14 250 232
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA -- CONTINUED
Montgomery County, Public
Improvements, GO,
Callable @ 100 10/15/03
5.750%, 10/15/11 $ 175 $ 179
Nazareth, School District, GO,
AMBAC
5.500%, 11/15/12 200 198
Northampton County, Lehigh
University, Series A, RB, MBIA
5.750%, 11/15/18 150 150
Pennsylvania State, Allegheny
General Hospital, Series A, RB
6.300%, 09/01/97 200 207
Pennsylvania State, Housing
Finance Authority, Series 37a,
RB
5.450%, 10/01/17 (A) 200 183
Pennsylvania State, Industrial
Development Authority, RB,
AMBAC
5.800%, 07/01/09 250 258
Pennsylvania State,
Miscellaneous Improvement, GO,
Callable @ 100 09/01/99
6.250%, 09/01/00 150 154
Pennsylvania State, Penn State
University, RB, Callable @ 100
03/01/04
6.150%, 03/01/05 (A) 145 157
Pennsylvania State, Turnpike
Commission, Series P, RB
5.100%, 12/01/99 250 257
5.350%, 12/01/01 250 259
Pennsylvania State, University
Improvement, Series F, RB,
AMBAC, Callable @ 100 12/15/02
6.000%, 12/15/09 225 232
Philadelphia, Pennsylvania
Hospital, Series A, RB
5.250%, 02/15/14 250 236
Philadelphia, Philadelphia Gas
Works, Series 15, RB, MBIA
4.600%, 08/01/03 250 247
Quakertown, Hospital Authority,
RB, VRDN
3.750%, 07/01/05 (A) (B) 100 100
Rose Tree Media, School
District, GO, FGIC
5.350%, 02/15/10 150 150
Scranton-Lackawanna, University
of Scranton, Series A, RB,
Callable @ 100 03/01/02
6.150%, 03/01/03 (A) 150 160
Venango, Pollution Control, RB,
VRDN
4.600%, 12/01/12 (A) (B) 200 200
<CAPTION>
----------------------------------------------------------
Face Market
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
Wayne County, Housing Authority,
RB, MBIA
5.350%, 10/01/07 $ 190 $ 186
------
Total Pennsylvania 6,852
------
Total Municipal Bonds
(Cost $6,839,773) 6,852
------
Total Investments -- 100.8%
(Cost $6,839,773) 6,852
------
OTHER ASSETS AND LIABILITIES -- (0.8)%
Other Assets and Liabilities, Net (55)
------
Total Other Assets and Liabilities (55)
------
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 584,020
outstanding shares of
beneficial interest 6,018
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value) based on
80,106 outstanding shares of
beneficial interest 825
Undistributed net investment
income 10
Accumulated net realized loss on
investments (68)
Unrealized appreciation on
investments 12
------
Total Net Assets: -- 100.0% $ 6,797
======
Net Asset Value, Offering Price
and Redemption Price Per
Share -- Institutional Class $ 10.23
======
Net Asset Value and Redemption
Price Per Share -- Retail Class $ 10.23
======
Maximum Offering Price Per
Share -- Retail Class
($10.23 / 98.0%) $ 10.44
======
</TABLE>
AMBAC American Municipal Bond Assurance Company
FGIC Federal Guaranty Insurance Corporation
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bonds
SO Special Obligation
VRDN Variable Rate Demand Note
(A) Securities are held in connection with a letter of
credit or other credit support.
(B) Floating Rate Security -- the rate reflected on the
Statement of Net Assets is the rate in effect on October
31, 1995.
(C) Pre-Refunded Security -- The Maturity Date shown is the
pre-refunded date.
28
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 36.6%
Abbey National
5.590%, 01/08/96 $ 5,000 $ 4,947
AIG Funding
6.035%, 11/01/95 3,000 3,000
American Express
5.700%, 11/01/95 5,000 5,002
5.690%, 01/12/96 5,000 4,943
Associates
5.700%, 01/23/96 5,000 4,934
Caisse Des Depots Et
Consignations
5.640%, 01/16/96 5,000 4,940
Eli Lilly
5.820%, 01/16/96 3,000 2,963
General Electric Capital
5.670%, 11/16/95 4,000 3,991
5.660%, 02/12/96 5,000 4,919
International Lease Finance
5.710%, 01/08/96 5,000 4,946
5.630%, 01/22/96 5,000 4,936
J.C. Penney
5.710%, 11/30/95 5,000 4,977
Pepsico
5.670%, 11/03/95 5,000 4,998
Province of Alberta
5.550%, 01/12/96 3,000 2,967
Sara Lee
5.800%, 11/02/95 5,000 4,999
5.710%, 11/08/95 5,000 4,994
Toronto Dominion Bank
5.660%, 01/17/96 5,000 4,939
5.490%, 03/19/96 5,000 4,894
Transamerica Finance
5.620%, 02/15/96 5,000 4,917
------
Total Commercial Paper
(Cost $87,206,251) 87,206
------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 7.5%
FHLB
5.490%, 01/17/96 3,000 2,965
FHLMC
5.560%, 11/21/95 5,000 4,985
FNMA
5.590%, 01/04/96 5,000 4,950
5.580%, 02/20/96 5,000 4,914
------
Total U.S. Government Agency Obligations
(Cost $17,813,615) 17,814
------
BANK NOTES -- 3.8%
FCC National Bank
5.900%, 08/21/96 5,000 4,996
5.650%, 11/01/96 4,000 3,997
------
Total Bank Notes
(Cost $8,993,431) 8,993
------
U.S. TREASURY OBLIGATIONS -- 3.3%
U.S. Treasury Bills
5.410%, 01/11/96 $ 3,000 2,968
5.540%, 07/25/96 5,000 4,795
------
Total U.S. Treasury Obligations
(Cost $7,762,549) 7,763
------
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF DEPOSIT -- 2.1%
National Westminster Bank
5.770%, 12/11/95 5,000 $ 5,000
------
Total Certificates of Deposit
(Cost $5,000,000) 5,000
------
REPURCHASE AGREEMENTS -- 48.8%
Hong Kong Shanghai Banking
5.850%, dated 10/31/95,
matures 11/01/95, repurchase
price $35,005,688
(collateralized by
U.S. Treasury Note, par value
$35,000,000, 6.875%, matures
03/31/97: market value
$35,803,299) 35,000 35,000
Merrill Lynch
5.850%, dated 10/31/95,
matures 11/01/95, repurchase
price $46,173,402
(collateralized by various
U.S. Treasury Notes,
total par value $44,803,000,
6.500%-6.875%, 04/30/97: total
market value $47,090,599) 46,166 46,166
Morgan Stanley
5.850%, dated 10/31/95,
matures 11/01/95, repurchase
price $35,005,688
(collateralized by
U.S. Treasury Note, par value
$26,675,000, 9.250%, matures
02/15/16: market value
$35,747,093) 35,000 35,000
------
Total Repurchase Agreements
(Cost $116,165,900) 116,166
------
Total Investments -- 102.1%
(Cost $242,941,746) 242,942
------
OTHER ASSETS AND LIABILITIES -- (2.1%)
Other Assets and Liabilities,
Net (5,064)
------
Total Other Assets and Liabilities (5,064)
------
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 234,652,830
outstanding shares of
beneficial interest 234,653
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value) based on
3,361,129 outstanding shares
of
beneficial interest 3,361
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
NET ASSETS -- CONTINUED
Accumulated net realized loss on
investments $ (136)
------
Total Net Assets: -- 100.0% $ 237,878
======
Net Asset Value, Offering Price
and Redemption Price Per
Share -- Institutional Class $ 1.00
======
Net Asset Value, Offering Price
and Redemption Price Per
Share --
Retail Class $ 1.00
======
</TABLE>
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
<TABLE>
<CAPTION>
U.S. TREASURY
SECURITIES FUND
U.S. TREASURY OBLIGATIONS -- 39.9%
<S> <C> <C>
U.S. Treasury Bills
5.720%, 11/09/95 $ 10,000 $ 9,987
5.400%, 12/21/95 20,000 19,850
5.340%, 01/04/96 25,000 24,763
5.310%, 01/11/96 10,000 9,895
5.410%, 01/11/96 10,000 9,893
5.830%, 01/11/96 10,000 9,885
5.780%, 02/08/96 10,000 9,851
5.300%, 03/07/96 15,000 14,720
5.290%, 03/14/96 10,000 9,803
5.310%, 04/04/96 15,000 14,657
6.020%, 04/04/96 5,000 4,875
5.540%, 05/02/96 10,000 9,718
5.540%, 07/25/96 5,000 4,795
U.S. Treasury Notes
7.500%, 02/29/96 10,000 10,062
7.625%, 04/30/96 10,000 10,096
U.S. Treasury Strip
05/15/96 5,000 4,854
------
Total U.S. Treasury Obligations
(Cost $177,703,757) 177,704
------
REPURCHASE AGREEMENTS -- 60.5%
Barclays De Zoete Wedd
5.850%, dated 10/31/95,
matures 11/01/95, repurchase
price $50,008,125
(collateralized by
U.S. Treasury Note, par value
$32,632,000, 11.250%, matures
02/15/15: market value
$51,069,081) 50,000 50,000
Hong Kong Shanghai Banking
5.850%, dated 10/31/95,
matures 11/01/95, repurchase
price $85,013,813
(collateralized by various
U.S. Treasury Notes,
total par value $70,220,000,
7.125%-12.500%,
08/15/14-02/15/23:
total market value
$87,257,890) $ 85,000 $ 85,000
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
Merrill Lynch
5.850%, dated 10/31/95,
matures 11/01/95, repurchase
price $49,579,455
(collateralized by various
U.S. Treasury Notes, total par
value $40,257,000, 7.250%-
9.875%, 11/15/15-05/15/17:
total market value
$50,566,595) $ 49,571 $ 49,571
Morgan Stanley
5.850%, dated 10/31/95,
matures 11/01/95, repurchase
price $85,013,813
(collateralized by
U.S. Treasury Note, par value
$66,670,000, 8.750%, matures
08/15/20: market value
$86,689,520) 85,000 85,000
------
Total Repurchase Agreements
(Cost $269,571,400) 269,571
------
Total Investments -- 100.4%
(Cost $447,275,157) 447,275
------
OTHER ASSETS AND LIABILITIES -- (0.4%)
Other Assets and Liabilities,
Net (2,016)
------
Total Other Assets and Liabilities (2,016)
------
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 444,422,563
outstanding shares of
beneficial interest 444,423
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value) based on
729,856 outstanding shares of
beneficial interest 730
Undistributed net realized gain
on investments 106
------
Total Net Assets: -- 100.0% $ 445,259
======
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $ 1.00
======
Net Asset Value, Offering and
Redemption Price Per Share --
Retail Class $ 1.00
======
</TABLE>
30
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
TAX-FREE FUND
<TABLE>
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 99.9%
ALABAMA -- 0.7%
McIntosh, Industrial Development
Board, Ciba Geigy Corporate
Project, RB, VRDN
4.000%, 07/01/04 (A) (B) $ 400 $ 400
------
Total Alabama 400
------
ARIZONA -- 0.4%
Flagstaff, TECP
3.500%, 12/05/95 (B) 250 250
------
Total Arizona 250
------
ARKANSAS -- 4.9%
Mesa, Municipal Developement,
TECP
3.800%, 12/06/95 (B) 3,000 3,000
------
Total Arkansas 3,000
------
COLORADO -- 3.2%
Colorado State, Health
Facilities Authority, RB,
VRDN, MBIA
3.900%, 10/01/14 (A) 1,955 1,955
------
Total Colorado 1,955
------
FLORIDA -- 1.1%
Hillsborough, Pollution Control,
RB, VRDN
4.000%, 09/01/25 (A) (B) 700 700
------
Total Florida 700
------
GEORGIA -- 3.9%
Burke County, TECP
3.750%, 12/07/95 (B) 2,400 2,400
------
Total Georgia 2,400
------
HAWAII -- 2.4%
St County Honolulu, TECP
3.800%, 12/05/95 (B) 1,500 1,500
------
Total Hawaii 1,500
------
ILLINOIS -- 1.9%
Chicago, O'Hare Airport, RB,
VRDN
3.900%, 01/01/18 (A) (B) 1,200 1,200
------
Total Illinois 1,200
------
KANSAS -- 4.8%
Burlington, TECP
3.750%, 11/15/95 (B) 1,450 1,450
3.850%, 12/13/95 (B) 1,500 1,500
------
Total Kansas 2,950
------
KENTUCKY -- 3.6%
Jefferson County, TECP
3.800%, 11/20/95 (B) 2,200 2,200
------
Total Kentucky 2,200
------
LOUISIANA -- 2.5%
Louisiana State, Public
Facilities, RB, VRDN, FGIC
3.900%, 09/01/10 (A) $ 1,565 1,565
------
Total Louisiana 1,565
------
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
MICHIGAN -- 4.5%
Delta County, TECP
3.750%, 11/21/95 (B) 1,300 $ 1,300
Michigan State, Storage Tank
Financial Authority, RB, VRDN
3.900%, 12/01/04 (A) (B) 1,500 1,500
------
Total Michigan 2,800
------
MINNESOTA -- 6.0%
Robbinsdale, Industrial
Development, Unicare Homes
Project,
RB, VRDN
4.000%, 10/01/14 (A) (B) 1,100 1,100
Rochester, TECP
3.150%, 11/09/95 (B) 1,100 1,100
3.800%, 01/22/96 (B) 1,500 1,500
------
Total Minnesota 3,700
------
MISSISSIPPI -- 6.2%
Independence, Waste, TECP
3.500%, 11/03/95 (B) 2,000 2,000
Jackson County, Pollution
Control, RB, VRDN
3.900%, 12/01/16 (A) 1,000 1,000
Perry County, Pollution Control,
RB, VRDN
3.950%, 03/01/02 (A) (B) 800 800
------
Total Mississippi 3,800
------
MISSOURI -- 1.1%
Kansas City, Hospital, RB, VRDN,
MBIA
4.000%, 04/15/15 (A) 700 700
------
Total Missouri 700
------
MONTANA -- 1.0%
Billings, Industrial
Development, RB, VRDN
3.950%, 12/01/14 (A) (B) 600 600
------
Total Montana 600
------
NEW YORK -- 2.1%
New York, Water Finance
Authority, RB, VRDN, FGIC
4.000%, 06/15/22 (A) 300 300
4.000%, 06/15/23 (A) 1,000 1,000
------
Total New York 1,300
------
NORTH CAROLINA -- 6.6%
Eastern Municipal Agency, Power
Systems, RB, Prerefunded
01/01/96 @ 103
7.750%, 01/01/96 (C) 2,000 2,070
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA -- CONTINUED
North Carolina, Municipal Power,
TECP
3.750%, 01/24/96 (B) $ 2,000 $ 2,000
------
Total North Carolina 4,070
------
OHIO -- 8.1%
Ohio State, Air Quality
Development Authority, RB,
VRDN
4.000%, 09/01/30 (A)(B) 2,000 2,000
Ohio State, Air Quality, TECP
3.700%, 11/06/95 (B) 3,000 3,000
------
Total Ohio 5,000
------
PENNSYLVANIA -- 2.4%
Delaware County, TECP, FGIC
3.600%, 11/02/95 1,500 1,500
------
Total Pennsylvania 1,500
------
TEXAS -- 12.3%
Harris County, RB, VRDN
4.000%, 03/01/24 (A) (B) 1,100 1,100
San Antonio, Independent School
District, GO, Prerefunded
11/01/95 @ 100
8.000%, 11/01/95 (C) 1,700 1,700
Texas A & M, TECP
3.800%, 12/08/95 (B) 1,500 1,500
Texas Port Development
Authority, Stolt Terminals
Project, RB, VRDN
3.850%, 01/15/14 (A) (B) 1,300 1,300
Texas State, TAN
4.750%, 08/30/96 2,000 2,012
------
Total Texas 7,612
------
VIRGINIA -- 3.2%
Chesapeake, Independent
Development Authority, TECP
3.600%, 11/06/95 (B) 1,000 1,000
Penninsula Ports, TECP
3.650%, 11/07/95 (B) 1,000 1,000
------
Total Virginia 2,000
------
WASHINGTON, D.C. -- 4.6%
District of Columbia, Education
Bonds, American University
Issue A, RB, VRDN
3.950%, 12/01/15 (A) (B) 2,835 2,835
------
Total Washington, D.C. 2,835
------
WYOMING -- 12.5%
Converse, TECP
3.500%, 11/06/95 (B) 1,000 1,000
Gillette County, TECP
3.700%, 11/17/95 (B) 1,000 1,000
<CAPTION>
----------------------------------------------------------
Face
Description Amount (000) Value (000)
----------------------------------------------------------
<S> <C> <C>
Lincoln County, TECP
3.700%, 11/21/95 (B) $ 1,400 $ 1,400
Sweetwater County, TECP
3.650%, 12/08/95 2,500 2,499
Uinta County, Pollution Control,
RB, VRDN
3.900%, 08/15/02 (A) (B) 1,800 1,800
------
Total Wyoming 7,699
------
Total Municipal Bonds
(Cost $61,736,077) 61,736
------
Total Investments -- 99.9%
(Cost $61,736,077) 61,736
------
OTHER ASSETS AND LIABILITIES -- 0.1%
Other Assets and Liabilites, Net 55
------
Total Other Assets and Liabilities 55
------
NET ASSETS:
Portfolio shares of the
Institutional Class (unlimited
authorization -- $0.001 par
value) based on 60,491,930
outstanding shares of
beneficial interest 60,492
Portfolio shares of the Retail
Class (unlimited
authorization --
$0.001 par value ) based on
1,281,648 outstanding shares
of
beneficial interest 1,282
Undistributed net realized gain
on investments 17
------
Total Net Assets: -- 100.0% $ 61,791
======
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $ 1.00
======
Net Asset Value, Offering and
Redemption Price Per Share --
Retail Class $ 1.00
======
</TABLE>
FGIC Financial Guaranty Insurance Corporation
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
TAN Tax Anticipation Note
TECP Tax Exempt Commercial Paper
VRDN Variable Rate Demand Note
(A) Floating Rate Security -- the rate reflected on the
Statement of Net Assets is the rate in effect on October
31, 1995.
(B) Securities are held in conjunction with a letter of
credit or other credit support.
(C) The maturity date shown is the pre-refunded date.
32
<PAGE>
STATEMENT OF OPERATIONS (000)
- --------------------------------------------------------------------------------
The Conestoga Funds--For the year ended October 31, 1995
<TABLE>
<CAPTION>
------- ------- ------------ --------
SPECIAL INTERNATIONAL
EQUITY EQUITY EQUITY BALANCED
FUND FUND FUND(1) FUND(2)
------- ------- ------------ --------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 582 $ 121 $ 50 $ 427
Dividend Income 4,507 351 48 104
Less Foreign Taxes Withheld -- -- (6) --
------- ------- -------- -------
Total Investment Income 5,089 472 92 531
------- ------- -------- -------
EXPENSES:
Investment Advisory Fees 1,503 480 51 89
Investment Advisory Fees Waived -- (466) -- (30)
Reimbursement from Advisor -- (50) -- --
Administrator Fees 352 56 9 20
Administrator Fees Waived (97) (18) -- (1)
Shareholder Servicing Fees(3) 38 8 -- --
Shareholder Servicing Fees Waived -- (8) -- --
Distribution Fees(4) 17 2 -- --
Distribution Fees Waived (10) (2) -- --
Registration Fees 114 20 5 4
Custody and Accounting Fees 71 30 17 2
Professional Fees 48 11 1 4
Transfer Agent Fees 86 25 1 4
Printing Fees 25 4 1 1
Pricing Expense 3 -- 8 --
Trustee Fees 12 2 -- 1
Insurance and Other Fees 3 2 2 1
Amortization of Deferred Organization Costs -- 8 2 2
------- ------- -------- -------
Total Expenses 2,165 104 97 97
------- ------- -------- -------
NET INVESTMENT INCOME (LOSS) 2,924 368 (5) 434
------- ------- -------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Security Transactions 28,979 8,512 (33) 285
Net Realized Gain on Foreign Currency Transactions -- -- 234 --
Net Change in Unrealized Appreciation on Investments 12,894 1,127 707 859
Net Change in Unrealized Appreciation on Foreign
Currency
and Translation of Other Assets and Liabilities in
Foreign Currencies -- -- 45 --
------- ------- -------- -------
Net Realized and Unrealized Gain (Loss) on
Investments: 41,873 9,639 953 1,144
------- ------- -------- -------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $44,797 $10,007 $ 948 $1,578
------- ------- -------- -------
------- ------- -------- -------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The International Equity Fund and the Short-Term Income Fund commenced
operations on May 15, 1995.
(2) The Balanced Fund commenced operations on June 26, 1995.
(3) Shareholder Servicing Fees relate to a Shareholder Service Plan that was in
effect through February 20, 1995.
(4) Distribution Fees relate to a Distribution Plan effective February 21, 1995
and are incurred solely by the Retail Class.
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------- ------------ ---------- ------------ ---------- ------------- --------
PENNSYLVANIA
INTERMEDIATE SHORT-TERM TAX-FREE CASH U.S. TREASURY
BOND INCOME INCOME BOND MANAGEMENT SECURITIES TAX-FREE
FUND FUND FUND(1) FUND FUND FUND FUND
------- ------------ ---------- ------------ ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6,924 $4,760 $1,095 $323 $ 11,680 $21,001 $2,484
-- -- -- -- -- -- --
-- -- -- -- -- -- --
------- --------- -------- -------- -------- ---------- -------
6,924 4,760 1,095 323 11,680 21,001 2,484
------- --------- -------- -------- -------- ---------- -------
750 552 135 46 794 1,457 259
(409) (365) (82) (39) (397) (456) (158)
-- (6) -- (24) -- -- --
176 129 31 11 366 671 120
(13) (5) -- (3) -- (35) (35)
21 14 -- 5 145 266 51
(3) (8) -- (5) (62) (106) (51)
3 4 -- 2 10 30 5
(1) (2) -- (2) (3) (13) (5)
63 47 13 1 53 63 21
46 38 3 21 64 100 27
31 26 3 4 62 116 19
39 36 5 11 43 61 23
12 9 2 2 20 44 9
2 5 1 1 -- -- --
6 4 1 -- 11 24 4
3 6 1 1 19 45 7
-- -- 1 -- -- -- --
------- --------- -------- -------- -------- ---------- -------
726 484 114 32 1,125 2,267 296
------- --------- -------- -------- -------- ---------- -------
6,198 4,276 981 291 10,555 18,734 2,188
------- --------- -------- -------- -------- ---------- -------
3,058 1,152 32 (68) 2 41 (4)
-- -- -- -- -- -- --
3,499 1,825 92 501 -- -- --
-- -- -- -- -- -- --
------- --------- -------- -------- -------- ---------- -------
6,557 2,977 124 433 2 41 (4)
------- --------- -------- -------- -------- ---------- -------
$12,755 $7,253 $1,105 $724 $ 10,557 $18,775 $2,184
------- --------- -------- -------- -------- ---------- -------
------- --------- -------- -------- -------- ---------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
<TABLE>
<CAPTION>
-------------------- -------------------- ----------- ---------- --------------------
SPECIAL INTERNATIONAL
EQUITY EQUITY EQUITY BALANCED BOND
FUND FUND FUND FUND FUND
-------------------- -------------------- ----------- ---------- --------------------
11/1/94 11/1/93 11/1/94 3/15/94** 5/15/95** 6/26/95** 11/1/94 11/1/93
to 10/31/95 to 10/31/94 to 10/31/95 to 10/31/94 to 10/31/95 to 10/31/95 to 10/31/95 to 10/31/94
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income
(Loss) $ 2,924 $ 361 $ 368 $ 62 $ (5) $ 434 $ 6,198 $ 1,302
Net Realized Gain (Loss)
on Securities and
Foreign Currency
Transactions 28,979 2,619 8,512 51 201 285 3,058 (1,359)
Net Change in Unrealized
Appreciation
(Depreciation) of
Investments and Foreign
Currencies 12,894 (1,933) 1,127 (583) 752 859 3,499 (1,239)
-------- -------- -------- -------- --------- -------- -------- --------
Increase (Decrease) in
Net Assets Resulting
from Operations 44,797 1,047 10,007 (470) 948 1,578 12,755 (1,296)
-------- -------- -------- -------- --------- -------- -------- --------
DISTRIBUTIONS TO
SHAREHOLDERS:
Net Investment Income:
Prior Class (a)* (125) (361) (35) (57) -- -- (359) (1,291)
Retail Class (b)* (53) -- (5) -- -- (1) (56) --
Institutional Class
(b)* (2,638) -- (316) -- -- (386) (5,443) --
Net Realized Gains:
Prior Class (a)* (2,660) (1,895) (80) -- -- -- -- (841)
-------- -------- -------- -------- --------- -------- -------- --------
Total Distributions (5,476) (2,256) (436) (57) -- (387) (5,858) (2,132)
CAPITAL TRANSACTIONS (C):
Prior Class (a)*:
Redesignated to Retail
Class (5,674) -- (471) -- -- -- (1,365) --
Redesignated to
Institutional Class (42,589) -- (9,970) -- -- -- (29,097) --
Proceeds from Shares
Issued 4,679 15,691 652 11,284 -- -- 9,204 5,563
Reinvestment of Cash
Distributions 2,420 1,929 115 57 -- -- 244 1,430
Cost of Shares
Repurchased (6,294) (11,959) (81) (745) -- -- (2,665) (7,534)
-------- -------- -------- -------- --------- -------- -------- --------
Increase (Decrease) in
Net Assets Derived from
Prior Class
Transactions (47,458) 5,661 (9,755) 10,596 -- -- (23,679) (541)
Retail Class (b)*:
Redesignated from Prior
Class 5,674 -- 471 -- -- -- 1,365 --
Proceeds from Shares
Issued 676 -- 186 -- 9 68 164 --
Reinvestment of Cash
Distributions 52 -- 5 -- -- -- 48 --
Cost of Shares
Repurchased (948) -- (57) -- (1) -- (291) --
-------- -------- -------- -------- --------- -------- -------- --------
Increase in Net Assets
Derived from Retail
Class Transactions 5,454 -- 605 -- 8 68 1,286 --
Institutional Class (b)*:
Redesignated from Prior
Class 42,589 -- 9,970 -- -- -- 29,097 --
Proceeds from Shares
Issued 351,837 -- 46,892 -- 13,282 39,740 192,154 --
Reinvestment of Cash
Distributions 2,568 -- 316 -- -- 386 5,109 --
Cost of Shares
Repurchased (59,497) -- (9,538) -- (857) (2,822) (38,426) --
-------- -------- -------- -------- --------- -------- -------- --------
Increase (Decrease) in
Net Assets Derived from
Institutional Class
Transactions 337,497 -- 47,640 -- 12,425 37,304 187,934 --
-------- -------- -------- -------- --------- -------- -------- --------
Increase (Decrease) in Net
Assets Derived from
Capital Transactions 295,493 5,661 38,490 10,596 12,433 37,372 165,541 (541)
-------- -------- -------- -------- --------- -------- -------- --------
Net Increase (Decrease)
in Net Assets 334,815 4,452 48,061 10,069 13,381 38,563 172,438 (3,969)
-------- -------- -------- -------- --------- -------- -------- --------
NET ASSETS:
Beginning of Period 50,128 45,676 10,069 -- -- -- 23,377 27,346
-------- -------- -------- -------- --------- -------- -------- --------
End of Period $ 384,943 $ 50,128 $58,130 $10,069 $13,381 $38,563 $ 195,815 $23,377
-------- -------- -------- -------- --------- -------- -------- --------
-------- -------- -------- -------- --------- -------- -------- --------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
* On February 21, 1995, the shareholders of each fund ratified the
classification of such fund's outstanding shares into Retail and
Institutional shares.
** Commencement of operations.
(a) For the current fiscal year Prior Class figures represent activity from
November 1, 1994 to February 21, 1995.
(b) Retail and Institutional Class figures represent activity from February 22,
1995 through October 31, 1995.
(c) See Capital Share Transactions in the Notes to the Financial Statements.
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------- ---------- -------------------- -------------------- -------------------- -----------
SHORT- PENNSYLVANIA
INTERMEDIATE TERM TAX-FREE CASH U.S. TREASURY
INCOME INCOME BOND MANAGEMENT SECURITIES TAX-FREE
FUND FUND FUND FUND FUND FUND
-------------------- ---------- -------------------- -------------------- -------------------- -----------
11/1/94 11/1/93 5/15/95** 11/1/94 11/1/93 11/1/94 11/1/93 11/1/94 11/1/93 11/1/94
to 10/31/95 to 10/31/94 to 10/31/95 to 10/31/95 to 10/31/94 to 10/31/95 to 10/31/94 to 10/31/95 to 10/31/94 to 10/31/95
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 4,276 $ 1,036 $ 981 $ 291 $ 354 $ 10,555 $ 4,692 $ 18,734 $ 9,637 $ 2,188
1,152 (387) 32 (68) 9 2 (220) 41 10 (4)
1,825 (920) 92 501 (767) -- -- -- -- --
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
7,253 (271) 1,105 724 (404) 10,557 4,472 18,775 9,647 2,184
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
(264) (1,030) -- (81) (351) (2,788) (4,692) (5,069) (9,637) (706)
(50) -- -- (25) -- (133) -- (586) -- (42)
(3,736) -- (917) (186) -- (7,634) -- (13,079) -- (1,440)
-- (294) -- (9) (42) -- -- -- -- --
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
(4,050) (1,324) (917) (301) (393) (10,555) (4,692) (18,734) (9,637) (2,188)
(1,398) -- -- (684) -- (4,185) -- (618) -- (2,456)
(15,213) -- -- (5,397) -- (206,899) -- (311,650) -- (67,736)
1,544 8,000 -- 470 6,261 229,934 588,009 304,528 797,674 113,629
179 891 -- 40 175 31 34 10 17 86
(6,352) (10,096) -- (1,662) (4,513) (159,426) (662,501) (317,660) (730,256) (98,423)
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
(21,240) (1,205) -- (7,233) 1,923 (140,545) (74,458) (325,390) 67,435 (54,900)
1,398 -- -- 684 -- 4,185 -- 618 -- 2,456
161 -- 11 168 -- 1,981 -- 130,272 -- 330
46 -- -- 23 -- 126 -- 22 -- 42
(429) -- -- (78) -- (2,934) -- (130,182) -- (1,546)
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
1,176 -- 11 797 -- 3,358 -- 730 -- 1,282
15,213 -- -- 5,397 -- 206,899 -- 311,650 -- 67,736
139,413 -- 46,933 1,858 -- 457,561 -- 1,003,030 -- 201,870
3,580 -- 917 73 -- 478 -- 683 -- 91
(23,119) -- (11,979) (1,527) -- (430,420) -- (870,864) -- (209,187)
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
[135,087] -- 35,871 5,801 -- 234,518 -- 444,499 -- 60,510
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
115,023 (1,205) 35,882 (634) 1,923 97,331 (74,458) 119,839 67,435 6,891
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
118,226 (2,800) 36,070 (211) 1,126 97,333 (74,678) 119,880 67,445 6,887
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
21,247 24,047 -- 7,008 5,882 140,545 215,223 325,379 257,934 54,904
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
$ 139,473 $ 21,247 $ 36,070 $ 6,797 $ 7,008 $ 237,878 $ 140,545 $ 445,259 $ 325,379 $ 61,791
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
<CAPTION>
TAX-FREE
FUND
-----------
11/1/93
to 10/31/94
------------
<S> <C>
$ 1,197
--
--
---------
1,197
---------
(1,197)
--
--
--
---------
(1,197)
--
--
261,151
73
(252,559)
---------
8,665
--
--
--
--
---------
--
--
--
--
--
---------
--
---------
8,665
---------
8,665
---------
46,239
---------
$ 54,904
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Conestoga Funds--For the year ended October 31, 1995
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Net
Realized and
Unrealized Net
Net Asset Gains Dividends Distributions Assets
Value Net (Losses) from Net from Net Asset End of
Beginning Investment on Investment Realized Value End Total Period
of Period Income Investments Income Capital Gains of Period Return* (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------
EQUITY FUND
- -------------
RETAIL
1995(1) $ 15.00 $ 0.18 $ 2.87 $(0.17) $ (0.80) $ 17.08 21.94% $ 6,591
INSTITUTIONAL
1995(1) 15.00 0.19 2.87 (0.19) (0.80) 17.07 22.00% 378,352
PRIOR CLASS
1994 15.39 0.11 0.22 (0.11) (0.61) 15.00 2.21% 50,128
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90% 45,677
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27% 28,103
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37% 12,830
1990(2) 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22)% 5,982
- ----------------------
SPECIAL EQUITY FUND
- ----------------------
RETAIL
1995(1) $ 9.37 $ 0.12 $ 2.12 $(0.12) $ (0.07) $ 11.42 24.44% $ 734
INSTITUTIONAL
1995(1) 9.37 0.12 2.12 (0.12) (0.07) 11.42 24.44% 57,396
PRIOR CLASS
1994(3) 10.00 0.06 (0.63) (0.06) -- 9.37 (5.72)% 10,069
- ----------------------------
INTERNATIONAL EQUITY FUND
- ----------------------------
RETAIL
1995(4) $ 10.00 $ (.01) $ 1.00 $ -- $ -- $ 10.99 9.90% $ 9
INSTITUTIONAL
1995(4) 10.00 -- 1.01 -- -- 11.01 10.10% 13,372
- ----------------
BALANCED FUND
- ----------------
RETAIL
1995(5) $ 9.97 $ 0.11 $ 0.42 $(0.11) $ -- $ 10.39 5.27% $ 69
INSTITUTIONAL
1995(6) 10.00 0.12 0.37 (0.11) -- 10.38 4.89% 38,494
- ------------
BOND FUND
- ------------
RETAIL
1995(1) $ 9.81 $ 0.60 $ 0.72 $(0.57) $ -- $ 10.56 13.83% $ 1,373
INSTITUTIONAL
1995(1) 9.81 0.61 0.71 (0.58) -- 10.55 13.87% 194,442
PRIOR CLASS
1994 11.18 0.53 (1.04) (0.52) (0.34) 9.81 (4.75)% 23,377
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63% 27,346
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82% 15,180
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16% 7,255
1990(2) 10.00 0.50 (0.04) (0.50) -- 9.96 4.64% 4,593
- -----------------------------
INTERMEDIATE INCOME FUND
- -----------------------------
RETAIL
1995(1) $ 10.27 $ 0.55 $ 0.44 $(0.54) $ -- $ 10.72 9.90% $ 1,230
INSTITUTIONAL
1995(1) 10.27 0.57 0.42 (0.55) -- 10.71 9.92% 138,243
PRIOR CLASS
1994 11.01 0.50 (0.61) (0.49) (0.14) 10.27 (0.97)% 21,247
1993 10.87 0.53 0.21 (0.53) (0.07) 11.01 6.99% 24,047
1992 10.61 0.65 0.29 (0.64) (0.04) 10.87 9.11% 16,718
1991 10.12 0.77 0.50 (0.77) (0.01) 10.61 12.94% 7,116
1990(2) 10.00 0.48 0.12 (0.48) -- 10.12 6.10% 3,986
- ----------------------------
SHORT-TERM INCOME FUND
- ----------------------------
RETAIL
1995(7) $ 10.01 $ 0.23 $ 0.02 $(0.22) $ -- $ 10.04 2.57% $ 11
INSTITUTIONAL
1995(4) 10.00 0.25 0.03 (0.23) -- 10.05 2.87% 36,059
<CAPTION>
Ratio of
Ratio of of Expenses Income
Net to Average to Average
Ratio of Investment Net Assets Net Assets
Expenses Income (Excluding (Excluding Portfolio
to Average to Average Waivers and Waivers and Turnover
Net Assets Net Assets Reimbursements) Reimbursements) Rate
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------
EQUITY FUND
- -------------
RETAIL
1995(1) 1.34% 1.23% 1.53% 1.04% 119%
INSTITUTIONAL
1995(1) 1.05% 1.44% 1.10% 1.44% 119%
PRIOR CLASS
1994 1.49% 0.75% 1.51% 0.73% 35%
1993 1.20% 0.94% 1.41% 0.73% 24%
1992 0.92% 1.47% 1.23% 1.17% 39%
1991 0.54% 2.30% 1.48% 1.36% 68%
1990(2) 0.65% 2.29% 1.59% 1.35% 43%
- ----------------------
SPECIAL EQUITY FUND
- ----------------------
RETAIL
1995(1) 0.27% 1.29% 2.24% (0.68)% 129%
INSTITUTIONAL
1995(1) 0.32% 1.14% 1.97% (0.51)% 129%
PRIOR CLASS
1994(3) 0.15% 1.06% 2.10% (0.89)% 39%
- ----------------------------
INTERNATIONAL EQUITY FUND
- ----------------------------
RETAIL
1995(4) 2.13% (.69)% 2.26% (.83)% 23%
INSTITUTIONAL
1995(4) 1.88% (0.10)% 1.88% (0.10)% 23%
- ---------------
BALANCED FUND
- ---------------
RETAIL
1995(5) 1.07% 3.37% 1.32% 3.12% 65%
INSTITUTIONAL
1995(6) 0.82% 3.66% 1.07% 3.41% 65%
- ------------
BOND FUND
- ------------
RETAIL
1995(1) 0.97% 6.02% 1.44% 5.55% 352%
INSTITUTIONAL
1995(1) 0.71% 6.09% 1.12% 5.68% 352%
PRIOR CLASS
1994 1.01% 5.07% 1.60% 4.48% 232%
1993 0.88% 5.16% 1.49% 4.55% 158%
1992 0.46% 6.78% 1.24% 6.01% 99%
1991 0.47% 7.71% 1.41% 6.78% 47%
1990(2) 0.68% 7.75% 1.62% 6.81% 23%
- -----------------------------
INTERMEDIATE INCOME FUND
- -----------------------------
RETAIL
1995(1) 0.93% 5.47% 1.51% 4.89% 260%
INSTITUTIONAL
1995(1) 0.64% 5.72% 1.15% 5.21% 260%
PRIOR CLASS
1994 0.90% 4.66% 1.64% 3.92% 170%
1993 0.78% 4.89% 1.50% 4.17% 90%
1992 0.47% 6.31% 1.24% 5.57% 53%
1991 0.40% 7.69% 1.34% 6.76% 33%
1990(2) 0.75% 7.42% 1.69% 6.48% 39%
- ----------------------------
SHORT-TERM INCOME FUND
- ----------------------------
RETAIL
1995(7) 0.88% 5.05% 1.33% 4.60% 40%
INSTITUTIONAL
1995(4) 0.63% 5.43% 1.08% 4.98% 40%
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Realized and
Unrealized Net
Net Asset Gains Dividends Distributions Assets
Value Net (Losses) from Net from Net Asset End of
Beginning Investment on Investment Realized Value End Total Period
of Period Income Investments Income Capital Gains of Period Return* (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------
PENNSYLVANIA TAX-FREE BOND FUND
- --------------------------------------
RETAIL
1995(1) $ 9.56 $ 0.47 $ 0.67 $(0.46) $ (0.01) $ 10.23 12.30% $ 820
INSTITUTIONAL
1995(1) 9.56 0.47 0.67 (0.46) (0.01) 10.23 12.30% 5,977
PRIOR CLASS
1994 10.48 0.46 (0.85) (0.46) (0.07) 9.56 (3.90)% 7,008
1993 9.77 0.45 0.70 (0.44) -- 10.48 11.94% 5,883
1992(8) 10.00 -- (0.23) -- -- 9.77 (2.28)% 3,405
- --------------------------
CASH MANAGEMENT FUND
- --------------------------
RETAIL
1995(1) $ 1.00 $ 0.05 $ -- $(0.05) $ -- $ 1.00 5.25% $ 3,358
INSTITUTIONAL
1995(1) 1.00 0.05 -- (0.05) -- 1.00 5.43% 234,520
PRIOR CLASS
1994 1.00 0.03 (0.03) -- -- 1.00 3.41% 140,545
1993 1.00 0.03 (0.03) -- -- 1.00 2.80% 215,223
1992 1.00 0.04 (0.04) -- -- 1.00 3.79% 113,096
1991 1.00 0.06 (0.06) -- -- 1.00 6.22% 151,166
1990(9) 1.00 0.07 (0.07) -- -- 1.00 7.59% 39,061
- ---------------------------------
U.S. TREASURY SECURITIES FUND
- ---------------------------------
RETAIL
1995(1) $ 1.00 $ 0.05 $ -- $(0.05) $ -- $ 1.00 5.16% $ 730
INSTITUTIONAL
1995(1) 1.00 0.05 -- (0.05) -- 1.00 5.27% 444,529
PRIOR CLASS
1994 1.00 0.03 (0.03) -- -- 1.00 3.07% 325,379
1993 1.00 0.03 (0.03) -- -- 1.00 2.57% 257,934
1992 1.00 0.04 (0.04) -- -- 1.00 3.64% 340,904
1991 1.00 0.06 (0.06) -- -- 1.00 5.96% 341,931
1990(9) 1.00 0.07 (0.07) -- -- 1.00 7.44% 106,771
- ----------------
TAX-FREE FUND
- ----------------
RETAIL
1995(1) $ 1.00 $ 0.03 $ -- $(0.03) $ -- $ 1.00 3.39% $ 1,282
INSTITUTIONAL
1995(1) 1.00 0.03 -- (0.03) -- 1.00 3.43% 60,509
PRIOR CLASS
1994 1.00 0.02 (0.02) -- -- 1.00 2.21% 54,904
1993 1.00 0.02 (0.02) -- -- 1.00 1.97% 46,239
1992 1.00 0.03 (0.03) -- -- 1.00 2.88% 46,295
1991 1.00 0.04 (0.04) -- -- 1.00 4.44% 45,647
1990(9) 1.00 0.05 (0.05) -- -- 1.00 5.31% 24,167
<CAPTION>
Ratio of
Ratio of of Expenses Income
Net to Average to Average
Ratio of Investment Net Assets Net Assets
Expenses Income (Excluding (Excluding Portfolio
to Average to Average Waivers and Waivers and Turnover
Net Assets Net Assets Reimbursements) Reimbursements) Rate
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------
PENNSYLVANIA TAX-FREE BOND FUND
- --------------------------------------
RETAIL
1995(1) 0.51% 4.64% 1.62% 3.53% 15%
INSTITUTIONAL
1995(1) 0.51% 4.64% 1.65% 3.50% 15%
PRIOR CLASS
1994 0.38% 4.61% 1.57% 3.42% 37%
1993 0.51% 4.35% 1.63% 3.23% 50%
1992(8) 2.67% 0.52% 3.41% (0.22)% 31%
- --------------------------
CASH MANAGEMENT FUND
- --------------------------
RETAIL
1995(1) 0.74% 5.16% 0.97% 4.93% N/A
INSTITUTIONAL
1995(1) 0.56% 5.32% 0.79% 5.09% N/A
PRIOR CLASS
1994 0.71% 3.32% 0.99% 3.05% N/A
1993 0.65% 2.75% 0.87% 2.53% N/A
1992 0.48% 3.76% 0.70% 3.55% N/A
1991 0.49% 5.84% 0.79% 5.54% N/A
1990(9) 0.42% 7.95% 0.75% 7.62% N/A
- ---------------------------------
U.S. TREASURY SECURITIES FUND
- ---------------------------------
RETAIL
1995(1) 0.73% 5.26% 0.79% 5.20% N/A
INSTITUTIONAL
1995(1) 0.62% 5.14% 0.78% 4.98% N/A
PRIOR CLASS
1994 0.72% 3.03% 0.97% 2.78% N/A
1993 0.66% 2.55% 0.87% 2.33% N/A
1992 0.46% 3.65% 0.69% 3.44% N/A
1991 0.51% 5.61% 0.79% 5.32% N/A
1990(9) 0.38% 7.73% 0.79% 7.32% N/A
- ----------------
TAX-FREE FUND
- ----------------
RETAIL
1995(1) 0.48% 3.35% 0.88% 2.95% N/A
INSTITUTIONAL
1995(1) 0.46% 3.37% 0.83% 3.00% N/A
PRIOR CLASS
1994 0.37% 2.22% 1.05% 1.53% N/A
1993 0.45% 1.95% 0.96% 1.44% N/A
1992 0.33% 2.83% 0.73% 2.45% N/A
1991 0.43% 4.37% 0.87% 3.93% N/A
1990(9) 0.31% 5.57% 0.91% 4.97% N/A
</TABLE>
* Total Return figures do not reflect applicable sales loads.
(1) On February 21, 1995 the shares of the Fund were redesignated as either
Retail or Institutional shares. For the year ended October 31, 1995, the
Financial Highlights' ratios of expenses, ratios of net investment income,
total return, and the per share investment activities and distributions are
presented on a basis whereby 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 based upon the relative net assets of each
class of shares as of February 21, 1995 and the results combined therewith
the results of operations and distributions for each applicable class for
the period February 21, 1995 through October 31, 1995.
(2) Commenced operations on February 28, 1990. All ratios for the period have
been annualized.
(3) Commenced operations on March 15, 1994. All ratios for the period have been
annualized.
(4) Commenced operations on May 15, 1995. All ratios for the period have been
annualized.
(5) Commenced operations on June 29, 1995. All ratios for the period have been
annualized.
(6) Commenced operations on June 26, 1995. All ratios for the period have been
annualized.
(7) Commenced operations on May 17, 1995. All ratios for the period have been
annualized.
(8) Commenced operations on September 21, 1992. All ratios for the period have
been annualized.
(9) Commenced operations on November 27, 1989. All ratios for the period have
been annualized.
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
1. Organization:
The Conestoga Family of Funds (the "Company") was organized as a Massachusetts
business trust under a Declaration of Trust dated August 1, 1989. The Company is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with eleven funds: the U.S. Treasury Securities
Fund, the Cash Management Fund, the Tax-Free Fund (collectively "the Money
Market Funds"), the Intermediate Income Fund, the Bond Fund, the Pennsylvania
Tax-Free Bond Fund, the Short-Term Income Fund (collectively "the Fixed Income
Funds"), the Equity Fund, the Special Equity Fund, the International Equity Fund
(collectively "the Equity Funds") and the Balanced Fund. The assets of each Fund
are segregated, and a shareholder's interest is limited to the Fund in which
shares are held. The Company currently offers two classes of shares in each
Fund: Institutional and Retail. Each Fund is authorized to issue an unlimited
number of shares of either class which are units of beneficial interest with a
par value of $0.001 per share. The Institutional and Retail Shares of each Fund
are subject to the same expenses except that Institutional Shares are not
subject to a distribution fee, and the Institutional Shares of the Fixed Income
and Equity Funds are not sold with a sales charge.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Company. These policies are
in conformity with generally accepted accounting principles.
Security Valuation--Investments in equity securities which are traded on a
national securities exchange (or reported on the NASDAQ national market system)
are stated at the last quoted sales price--if readily available for such equity
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 recently quoted bid price.
Debt obligations exceeding 60 days to maturity for which market quotations
are readily available are valued at the most recently quoted bid price. Debt
obligations with 60 days or less until maturity may be valued either at the most
recently quoted bid price or at their amortized cost.
Investment securities held by the Money Market Funds are stated at
amortized cost which approximates market value. Under the amortized cost method,
any discount or premium is amortized ratably to the maturity of the security and
is included in interest income.
Foreign securities in the International Equity Fund are valued based upon
quotations from the primary market in which they are traded.
Federal Income Taxes--It is each Fund's intention to qualify as a regulated
investment company by complying with the appropriate provisions of the Internal
Revenue Code of 1986, as amended. Accordingly, no provisions for Federal income
taxes are required in the accompanying financial statements.
Security Transactions and Investment Income--
Security transactions are accounted for on the trade date of the security
purchase or sale. Dividend income is recognized on ex-dividend date, and
interest income is recognized on an accrual basis and includes the pro rata
amortization of premium or accretion of discount. The 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 and premiums during the applicable holding period. Purchase
discounts and premiums on securities held by the Equity and Fixed Income Funds
are accreted and amortized to maturity using the scientific amortization method,
which approximates the effective interest method.
Repurchase Agreements--Securities pledged as collateral for repurchase
agreements are held at a custodian bank in the name of the Fund until the
repurchase agreements mature. Provisions of the repurchase agreements ensure
that the market value of the collateral, including accrued interest thereon, is
sufficient in the event of default of the counterparty. If the counterparty
defaults and the value of the collateral declines or if the counterparty enters
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
Net Asset Value Per Share--The net asset value per share of each class of
each Fund is calculated on each business day. In general, it is computed by
dividing the assets of each class of each Fund, less its liabilities, by the
number of outstanding shares of the respective class of the Fund. The maximum
offering price per share for Retail Shares of the Equity and Fixed Income Funds
is
39
<PAGE>
- --------------------------------------------------------------------------------
equal to the net asset value per share plus a sales load of 2.00%. The offering
price per share for the Institutional Shares of the Equity and Fixed Income
Funds is the net asset value per share. The offering price for Institutional and
Retail Shares of the Money Market Funds is the amortized cost per share, which
approximates net asset value per share.
Foreign Currency Translation--The books and records of the International
Equity Fund are maintained in U.S. dollars on the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) 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 Equity Fund does not isolate that portion of gains and
losses on investments in equity securities which is due to changes in the
foreign exchange rates from that which is due to changes in market prices of
equity securities.
The International Equity Fund reports certain foreign currency related
transactions as components of 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 Equity Fund enters
into forward foreign currency contracts as hedges against either specific
transactions or Fund positions. All commitments are "marked-to-market" daily at
the applicable foreign exchange rate and any resulting unrealized gains or
losses are recorded currently. The International Equity Fund realizes gains or
losses at the time the forward contracts are extinguished. Unrealized gains or
losses on outstanding positions in forward foreign currency contracts held at
the close of the year will be recognized as ordinary income or loss for Federal
income tax purposes.
Maturity Dates--Certain variable rate and floating rate securities are
subject to "maturity shortening" devices such as put or demand features. Under
Rule 2a-7 of the Investment Company Act of 1940 (the "1940 Act"), as amended,
these securities are deemed to have maturities shorter than the ultimate
maturity dates. Accordingly, the maturity dates reflected in the Statement of
Net Assets are the shorter of the effective demand/put date or the ultimate
maturity date.
Classes--Class-specific expenses are borne by that class. Other expenses,
income, and realized and unrealized gains and losses are allocated to their
respective classes on the basis of relative daily net assets.
Other--Distributions from net investment income for the Equity and Fixed
Income Funds are declared and paid to shareholders on a periodic basis.
Distributions from net investment income for the Money Market Funds are declared
daily and paid to shareholders monthly. Any net realized capital gains are
distributed to shareholders at least annually.
3. Administration and Distribution Agreements:
The Company and SEI Financial Management Corporation (the "Administrator") are
parties to an administration agreement (the "Administration Agreement") dated
May 1, 1995. Under the terms of the Administration Agreement the Administrator
is entitled to a fee calculated daily and paid monthly at an annual rate of .17%
of the average daily net assets of each Fund. Prior to May 1, 1995, The Winsbury
Company ("Winsbury") served as the Administrator to the Company and was entitled
to a fee calculated daily and paid monthly at the annual rate of .20% of the
average daily net assets of each Fund.
The Company has adopted a distribution and services plan (the "Distribution
Plan") applicable to the Retail Shares pursuant to rule 12b-1 under the 1940
Act. As provided in the Distribution Plan, each Fund is authorized to pay the
distributor a fee for distribution services in an amount not to exceed on an
annual basis .40% of the average daily net assets of the Retail Shares of the
Funds. The Company and SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI Corporation and a registered broker-dealer, are
parties to a distribution agreement (the "Distribution Agreement") dated May 1,
1995. Under the terms of the Distribution Agreement, the Distributor receives no
fees for its Institutional Shares distribution services, and is entitled to
receive fees as set forth in the Distribution Plan for services performed and
expenses assumed under the Distribution Agreement as to the Retail Shares of the
Funds. Prior to May 1, 1995 Winsbury served as Distributor to the Company and
was entitled to receive commissions earned on sales of shares of the Equity and
40
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
Fixed Income Funds. For the six months ended April 30, 1995, Winsbury received
$7,736 from commissions earned on sales of shares of the Equity and Fixed Income
Funds, of which $261 was reallowed to Meridian Securities Inc., an affiliate of
Meridian Bancorp, and an investment dealer of the Funds.
4. Investment Advisory Agreements:
Investment advisory services are provided to the Company by Meridian Investment
Company (the "Investment Advisor"), a subsidiary of Meridian Bancorp, Inc. Under
the terms of the investment advisory agreements, the Investment Advisor is
entitled to receive a fee from the Fund, computed daily and paid monthly, at an
annual rate equal to the lesser of (a) (i) .40% of the average daily net assets
of each of the Cash Management, Tax-Free and U.S. Treasury Securities Funds,
(ii) .74% of the average daily net assets of each of the Equity, Bond,
Intermediate Income, Pennsylvania Tax-Free Bond, and Short-Term Income Funds,
(iii) .75% of the average daily net assets of the Balanced Fund, (iv) 1.00% of
the average daily net assets of the International Equity Fund, and (v) 1.50% of
the average daily net assets of the Special Equity Fund, or (b) such fee as
agreed upon in writing by a Fund and the Investment Advisor in advance of the
period to which the fee relates.
Pursuant to the Company's investment advisory agreement for the
International Equity Fund, the Investment Advisor has retained Marvin & Palmer
Associates, Inc. ("Marvin & Palmer") as Sub-Advisor to such Fund pursuant to a
Sub-Investment Advisory Agreement. For its services under such Sub-Investment
Advisory Agreement, Marvin & Palmer is paid a monthly fee by Meridian calculated
on an annual basis equal to .75% of the first $100 million of the International
Equity Fund's average daily net assets, .70% of the second $100 million of the
International Equity Fund's average daily net assets, .65% of the third $100
million of the International Equity Fund's average daily net assets, and .60% of
the International Equity Fund's average daily net assets in excess of $300
million.
5. Organizational Costs and
Transactions with Affiliates:
Organizational costs have been capitalized by the Company and are being, or
were, amortized on a straight line basis over a maximum of sixty months
following commencement of operations. In the event any of the initial shares of
the Company are redeemed by any holder thereof during the period that the
Company is amortizing its organizational costs, the redemption proceeds payable
to the holder thereof by the Company will be reduced by the unamortized
organizational cost in the same ratio as the number of initial shares being
redeemed bears to the number of initial shares outstanding at the time of
redemption.
Certain officers of the Company are also officers of the Administrator
and/or SEI Financial Services Company (the "Distributor"). Such officers are
paid no fees by the Company for serving as officers of the Company.
6. Investment Transactions:
The cost of security purchases and the proceeds from security sales, excluding
short-term investments, for the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
U.S. Govt.
Purchases Sales Purchases U.S. Govt. Sales
(000) (000) (000) (000)
------- ------- ------- ----------
<S> <C> <C> <C> <C>
Equity $ 228,276 $229,329 -- --
Special Equity 38,281 39,567 -- --
International Equity 14,651 2,343 -- --
Balanced 52,677 20,147 -- --
Bond 255,196 251,397 $ 163,069 $182,327
Intermediate Income 140,542 138,144 101,752 100,103
Short-Term Income 20,442 7,585 16,637 5,479
Pennsylvania
Tax-Free Bond 897 1,865 -- --
</TABLE>
At October 31, 1995, the total cost of securities and net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Equity
41
<PAGE>
- --------------------------------------------------------------------------------
and Fixed Income Funds at October 31, 1995 were as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Appreciated Depreciated Appreciation--
Securities Securities (Depreciation)
(000) (000) (000)
------- ------- ---------
<S> <C> <C> <C>
Equity $28,816 $12,474 $16,342
Special Equity 5,315 4,771 544
International Equity 1,081 374 707
Balanced 1,218 359 859
Bond 2,765 192 2,573
Intermediate Income 1,472 73 1,399
Short-Term Income 94 2 92
Pennsylvania Tax-Free Bond 89 77 12
</TABLE>
At October 31, 1995 the following Funds had available realized capital
losses to offset future net capital gains in the amounts shown as follows:
<TABLE>
<CAPTION>
Capital Loss Carryover
Fund October 31, 1995 Expiring 2002 Expiring 2003
- --- -------------- -------- --------
<S> <C> <C> <C>
International Equity $ 21,098 $ -- $21,098
Pennsylvania
Tax-Free Bond 68,029 -- 68,029
Cash Management 217,837 217,837 --
Tax-Free 3,824 -- 3,824
</TABLE>
The Bond Fund utilized its entire capital loss carryforward balance of
$1,283,474 which was carried over from the previous year.
The Cash Management Fund utilized $2,310 of its capital loss carryforward
balance during the year.
The Intermediate Income Fund utilized its entire capital loss carryforward
balance of $383,000 which was carried over from the previous year.
7. Forward Foreign Currency Contracts:
The International Equity Fund may enter into forward foreign currency exchange
contracts as hedges against fund positions. Such contracts, which may protect
the value of the 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
in the International Equity Fund were outstanding at
October 31, 1995:
<TABLE>
<CAPTION>
Net Unrealized
Contracts to In Exchange Appreciation/
Settlement Deliver FX For $ Depreciation
Date Currency (000) (000) (000)
------- ----- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Foreign Currency 11/30/95 UK 450 $ 709 $ --
Sales 11/30/95 JY 191,660 1,930 46
11/02/95 JY 3,209 31 --
11/02/95 SK 139 21 --
----------- ---
$ 2,691 $ 46
----------- ---
Foreign Currency 11/02/95 JY 2,927 $ 29 $ --
Purchases 11/02/95 JY 2,237 22 --
----------- ---
$ 51 $ --
----------- ---
$ 46
==========
</TABLE>
Currency Legend
JY Japanese Yen
SK Swedish Krona
UK British Sterling Pound
42
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
- --------------------------------------------------------------------------------
The Conestoga Funds--October 31, 1995
8. Share Transactions:
<TABLE>
<CAPTION>
Special International Intermediate
Equity Equity Equity Balanced Bond Income
Fund Fund Fund Fund Fund Fund
---- ---- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
PERIOD FROM
NOVEMBER 1, 1994
THROUGH
FEBRUARY 21, 1995:
Exchange out to
Retail Class (401) (52) -- -- (138) (136)
Exchange out to
Institutional Class (3,007) (1,099) -- -- (2,935) (1,478)
Shares issued 331 73 -- -- 938 151
Shares issued in
lieu of cash
distributions 180 13 -- -- 25 18
Shares repurchased (446) (9) -- -- (273) (625)
------ ------ ----- ----- ------ ------
Net Decrease (3,343) (1,074) -- -- (2,383) (2,070)
====== ====== ===== ===== ====== ======
PERIOD FROM
FEBRUARY 22, 1995
THROUGH
OCTOBER 31, 1995:
RETAIL CLASS:
Exchange in from
previous class 401 52 -- -- 138 136
Shares issued 41 17 1 7 15 15
Shares issued in
lieu of cash
distributions 3 -- -- -- 5 4
Shares repurchased (59) (5) -- -- (28) (40)
------ ------ ----- ----- ------ ------
Net Increase 386 64 1 7 130 115
====== ====== ===== ===== ====== ======
INSTITUTIONAL CLASS:
Exchange in from
previous class 3,007 1,099 -- -- 2,935 1,478
Shares issued 22,654 4,786 1,291 3,945 18,682 13,274
Shares issued in
lieu of cash
distributions 151 28 -- 37 491 338
Shares repurchased (3,652) (886) (76) (275) (3,686) (2,180)
------ ------ ----- ----- ------ ------
Increase in net
assets derived from
Institutional
transactions 22,160 5,027 1,215 3,707 18,422 12,910
====== ====== ===== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania
Short-Term Tax-Free Cash U.S. Treasury
Income Bond Management Securities Tax-Free
Fund Fund Fund Fund Fund
------ -------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
PERIOD FROM
NOVEMBER 1, 1994
THROUGH
FEBRUARY 21, 1995:
Exchange out to
Retail Class -- (69) (4,188) (618) (2,456)
Exchange out to
Institutional
Class -- (543) (207,034) (311,574) (67,719)
Shares issued -- 49 229,934 304,528 113,629
Shares issued in lieu
of cash distributions -- 4 31 10 86
Shares repurchased -- (174) (159,426) (317,660) (98,423)
--
---- -------- -------- -------
Net Decrease -- (733) (140,683) (325,314) (54,883)
== ==== ======== ======== =======
PERIOD FROM
FEBRUARY 22, 1995
THROUGH OCTOBER 31,
1995:
RETAIL CLASS:
Exchange in from
previous class -- 69 4,188 618 2,456
Shares issued 1 16 1,981 130,272 332
Shares issued in lieu
of cash distributions -- 2 126 22 42
Shares repurchased -- (7) (2,934) (130,182) (1,548)
--
---- -------- -------- -------
Net Increase 1 80 3,361 730 1,282
== ==== ======== ======== =======
INSTITUTIONAL CLASS:
Exchange in from
previous class -- 543 207,034 311,574 67,719
Shares issued 4,689 185 457,561 1,003,029 201,868
Shares issued in lieu
of cash distributions 91 7 479 683 91
Shares repurchased (1,192) (151) (430,420) (870,863) (209,186)
--
---- -------- -------- -------
Net Increase 3,588 584 234,654 444,423 60,492
== ==== ======== ======== =======
</TABLE>
43
<PAGE>
- --------------------------------------------------------------------------------
9. Shareholder Voting Results:
A special meeting of shareholders was held on January 9, 1995 (reconvened
January 12, 1995, January 13, 1995 and February 10, 1995) for the Company to
vote on the following proposals (i) the election of a Board of seven (7)
trustees (Dominic S. Genuardi, Sr., Steven I. Gross, J. David Huber, Robert C.
Kingston, Dale E. Smith, Thomas J. Taylor and William J. Tomko); (ii) the
ratification of the selection of Coopers & Lybrand, L.L.P. as independent
accountants for the Company for the fiscal year ending October 31, 1995; (iii)
the approval of the adoption of a new Distribution and Services Plan with
respect to the Retail Shares of each of the Company's existing Funds (the U.S.
Treasury Securities Fund, the Cash Management Fund, the Tax-Free Fund, the
Intermediate Income Fund, the Bond Fund, the Equity Fund, the Pennsylvania
Tax-Free Bond Fund and the Special Equity Fund), pursuant to Rule 12b-1 under
the Investment Company Act of 1940; (iv) with respect to the Bond Fund only, the
approval of a change in the fundamental investment objective of the Fund; and
(v) with respect to the Intermediate Income Fund only, the approval of a change
in the fundamental investment objective of the Fund. The following were the
results of the vote (Unaudited):
MEETING OF SHAREHOLDERS
JANUARY 9, 1995
<TABLE>
<CAPTION>
Proposal 3 Cash Management Tax-Free Special Equity
- ---------------------- --------------- ---------- --------------
<S> <C> <C> <C>
For................... 81,862,297 30,681,945 934,540
Against............... 3,217,557 634,459 1,368
Abstentions........... 8,118,366 1,444,175 none
</TABLE>
RECONVENED
JANUARY 13, 1995
<TABLE>
<CAPTION>
Proposal 1 In Favor Withheld
- ------------------------ ----------- -----------
<S> <C> <C>
Dominic S. Genuardi,
Sr..................... 347,299,332 23,395,703
Steven I. Gross......... 347,159,952 23,535,083
J. David Huber.......... 347,283,622 23,411,413
Robert C. Kingston...... 346,762,700 23,932,336
Dale E. Smith........... 347,304,576 23,390,459
Thomas J. Taylor........ 347,283,622 23,411,413
William J. Tomko........ 347,283,622 23,411,413
</TABLE>
<TABLE>
<CAPTION>
Proposal 2
- -------------------------
<S> <C>
COOPERS & LYBRAND, L.L.P.
For...................... 330,010,191
Against.................. 16,943,555
Abstentions.............. 23,741,287
</TABLE>
<TABLE>
<CAPTION>
Proposal 3 Intermediate Income Bond Equity PA Tax-Free
- ---------------------- ------------------- --------- -------------- -----------
<S> <C> <C> <C> <C>
For................... 1,107,049 1,110,841 1,343,747 369,400
Against............... 5,266 54,399 366,865 10,079
Abstentions........... 9,098 39,677 102,000 47,478
</TABLE>
<TABLE>
<CAPTION>
Proposal 4 Bond
- -------------------------- ---------
<S> <C>
For....................... 1,138,236
Against................... 29,140
Abstentions............... 37,540
</TABLE>
<TABLE>
<CAPTION>
Proposal 5 Intermediate Income
- -------------------- -------------------
<S> <C>
For................. 1,107,122
Against............. 5,722
Abstentions......... 8,568
</TABLE>
RECONVENED
FEBRUARY 10, 1995
<TABLE>
<CAPTION>
U.S. Treasury
Proposal 3 Securities
- ----------------- ------------------------
<S> <C>
For.............. 178,314,048
Against.......... 3,692,885
Abstentions...... 50,897,923
</TABLE>
44
<PAGE>
NOTICE TO SHAREHOLDERS OF THE CONESTOGA FUNDS
For shareholders that do not have an October 31, 1995 taxable year end, this
notice is for informational purposes only. For shareholders with an October 31,
1995 taxable year end, please consult your tax advisor as to the pertinence of
this notice.
For the fiscal year ended October 31, 1995 the portfolios of The Conestoga Funds
are designating long term capital gains and qualifying dividend income with
regard to distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS)
- ---------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Equity 37% 63% 100%
Special Equity 0% 100% 100%
International Equity 0% 100% 100%
Balanced 0% 100% 100%
Bond 0% 100% 100%
Intermediate Income 0% 100% 100%
Short-Term Income 0% 100% 100%
Pennsylvania Tax-Free Bond 3% 97% 100%
Cash Management 0% 100% 100%
U.S. Treasury Securities 0% 100% 100%
Tax-Free 0% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
(C) (D) (E)
QUALIFYING TAX EXEMPT FOREIGN
FUND DIVIDENDS (1) INTEREST TAX CREDIT
- ---------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Equity 53% 0% 0%
Special Equity 49% 0% 0%
International Equity 0% 0% 0%
Balanced 10% 0% 0%
Bond N/A 0% 0%
Intermediate Income N/A 0% 0%
Short-Term Income N/A 0% 0%
Pennsylvania Tax-Free Bond N/A 100% 0%
Cash Management N/A 0% 0%
U.S. Treasury Securities N/A 0% 0%
Tax-Free N/A 97% 0%
</TABLE>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on the percentage of each portfolio's total
distribution.
** Items (C) and (D) are based on the percentage of gross income of each
portfolio.
45
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: See Statement of Additional
Information.
(b) Exhibits:
(1) (a) Articles of Incorporation dated
September 11, 1984 are incorporated herein
by reference to Exhibit (1) of Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on September 11, 1984.
(b) Articles of Amendment dated March 29, 1985
to Articles of Incorporation dated September
11, 1984 are incorporated herein by
reference to Exhibit (1)(b) of Pre-Effective
Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
May 22, 1985.
(c) Articles Supplementary dated March 29, 1985
to Articles of Incorporation dated September
11, 1984 are incorporated herein by
reference to Exhibit (1)(c) of Pre-Effective
Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
May 22, 1985.
(d) Articles of Amendment dated June 30, 1987 to
Articles of Incorporation dated September
11, 1984 are incorporated herein by
reference to Exhibit (1)(d) of
Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on October 30, 1987.
(e) Articles Supplementary dated March 30, 1989
to Articles of Incorporation dated September
11, 1984 are incorporated herein by
reference to Exhibit (1)(e) of
Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on April 3, 1989.
(f) Articles Supplementary dated December 18,
1990 to Registrant's Articles of
Incorporation dated September 11,
C-1
<PAGE>
1984 are incorporated herein by reference to
Exhibit (1)(f) of Post-Effective Amendment
No. 11 to the Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
January 24, 1991.
(g) Articles Supplementary dated September 3,
1991 to Registrant's Articles of
Incorporation dated September 11, 1984 are
incorporated by reference to Exhibit (1)(g)
of Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on October 31, 1991.
(h) Articles Supplementary dated December 18,
1992 to Registrant's Articles of
Incorporation dated September 11, 1984 are
incorporated by reference to Exhibit (1)(h)
of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on June 30, 1993.
(i) Articles Supplementary dated June 26, 1992
to Registrant's Articles of Incorporation
dated September 11, 1984 are incorporated by
reference to Exhibit (1)(i) of
Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on August 27, 1993.
(j) Articles Supplementary dated November 8,
1993 to Registrant's Articles of
Incorporation dated September 11, 1984 are
incorporated by reference to Exhibit (1)(j)
of Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on December 30, 1993.
(k) Articles of Transfer dated November 23, 1993
are incorporated by reference to Exhibit (1)
(k) of Post-Effective Amendment No. 17 to
the Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on December 30, 1993.
(l) Articles Supplementary dated December 15,
1993 to Registrant's Articles of
Incorporation dated September 11, 1984
are incorporated by reference to
Exhibit (1)(l) of Post-Effective
Amendment No. 17 to the Registrant's
Registration
C-2
<PAGE>
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
December 30, 1993.
(m) Articles Supplementary dated April 14, 1994
to Registrant's Articles of Incorporation
dated September 11, 1984 are incorporated by
reference to Exhibit (1)(m) of
Post-Effective Amendment No. 21 to the
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on October 28, 1994.
(2) By-Laws as amended, restated and adopted by
Registrant's Board of Directors on September 3, 1991
are incorporated by reference to Exhibit (2) of
Post-Effective Amendment No. 12 to the Registrant's
Registration Statement on Form N-1A, as filed with
the Securities and Exchange Commission on October 31,
1991.
(3) None.
(4) (a) Specimen certificate for Class A Common
Stock is incorporated herein by reference to
Exhibit (4)(a) of Post- Effective Amendment
No. 7 to Registrant's Registration
Statement on Form N-1A, as filed with
the Securities and Exchange Commission
on September 9, 1988.
(b) Specimen certificate for Class B Common
Stock is incorporated herein by reference to
Exhibit 4(b) of Post-Effective Amendment
No. 7 to Registrant's Registration
Statement on Form N-1A, as filed with
the Securities and Exchange Commission
on September 9, 1988.
(c) Specimen certificate for Class C Common
Stock is incorporated herein by reference to
Exhibit 4(c) of Post-Effective Amendment
No. 10 to Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
October 29, 1990.
(d) Specimen certificate for Class D Common
Stock is incorporated herein by reference to
Exhibit (4)(d) of Post-Effective Amendment
No. 10 to Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
October 29, 1990.
(e) Specimen certificate for Class E Common
Stock is incorporated herein by reference
to Exhibit (4)(e) of Post-
C-3
<PAGE>
Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 29, 1990.
(f) Specimen copy of share certificate for Class
F Common Stock is incorporated by reference
to Exhibit (4)(f) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 31, 1991.
(g) Specimen copy of share certificate for Class
G Common Stock is incorporated by reference
to Exhibit (4)(g) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 31, 1991.
(h) Specimen copy of share certificate for Class
H Common Stock is incorporated by reference
to Exhibit (4)(h) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 31, 1991.
(i) Specimen copy of share certificate for Class
I Common Stock is incorporated by reference
to Exhibit (4)(i) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 31, 1991.
(j) Specimen copy of share certificate for Class
J Common Stock is incorporated by reference
to Exhibit (4)(j) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 31, 1991.
(k) Specimen copy of share certificate for Class
K Common Stock is incorporated by reference
to Exhibit (4)(k) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 31, 1991.
(5) (a) Investment Advisory Agreement between
Registrant and New Jersey National Bank
dated August 2, 1985 is incorporated
herein by reference to Exhibit (5) of
Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on
C-4
<PAGE>
Form N-1A, as filed with the Securities and
Exchange Commission on May 22, 1985.
(b) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. dated June 23, 1987 is
incorporated herein by reference to
Exhibit (5)(b) of Post-Effective Amendment
No. 5 to the Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
October 30, 1987.
(c) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. dated December 5, 1989 with
respect to CoreFund International Growth
Fund is incorporated herein by reference to
Exhibit (5)(c) of Post-Effective Amendment
No. 9 to the Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
September 1, 1989.
(d) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. dated December 5, 1989 with
respect to CoreFund Equity Fund is
incorporated herein by reference to Exhibit
(5)(d) of Post-Effective Amendment No. 9 to
the Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on September 1, 1989.
(e) Sub-Investment Advisory Agreement between
Registrant and Cashman, Farrell and
Associates dated December 5, 1989 is
incorporated herein by reference to Exhibit
(5)(e) of Post-Effective Amendment No. 9
to the Registrant's Registration Statement
on Form N-1A, as filed with the Securities
and Exchange Commission on September 1,
1989.
(f) Sub-Investment Advisory Agreement between
Registrant and Martin Currie, Inc. dated
December 5, 1989 is incorporated herein by
reference to Exhibit (5)(f) of Post-
Effective Amendment No. 9 to the
Registrant's Registration Statement
on Form N-1A, as filed with the Securities
and Exchange Commission on September 1,
1989.
(g) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Equity Index Fund dated March 25, 1991 is
incorporated herein by reference to
Exhibit (5)(g) of
C-5
<PAGE>
Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on January 24, 1991.
(h) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Growth Equity Fund dated March 25, 1991 is
incorporated herein by reference to Exhibit
(5)(h) of Post-Effective Amendment No. 11
to the Registrant's Registration Statement
on Form N-1A, as filed with the Securities
and Exchange Commission on January 24, 1991.
(i) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Short Intermediate Bond Fund dated
March 25, 1991 is incorporated herein by
reference to Exhibit (5)(i) of Post-
Effective Amendment No. 11 to the
Registrant's Registration Statement on
Form N-1A, as filed with the Securities
and Exchange Commission on January 24,
1991.
(j) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Fiduciary Tax-Free Reserve dated March 25,
1991 is incorporated herein by reference to
Exhibit (5)(j) of Post-Effective Amendment
No. 11 to the Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
January 24, 1991.
(k) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Tax-Free Reserve dated March 25, 1991 is
incorporated herein by reference to Exhibit
(5)(k) of Post-Effective Amendment No. 11
to the Registrant's Registration Statement
on Form N-1A, as filed with the Securities
and Exchange Commission on January 24, 1991.
(l) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Fiduciary Treasury Reserve dated March 25,
1991 is incorporated herein by reference to
Exhibit (5)(k) of Post-Effective Amendment
No. 11 to the Registrant's Registration
Statement on Form N-1A, as filed
C-6
<PAGE>
with the Securities and Exchange Commission
on January 24, 1991.
(m) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Balanced Fund dated September 15, 1992 is
incorporated herein by reference to Exhibit
(5)(m) of Post-Effective Amendment No. 15
to the Registrant's Registration Statement
on Form N-1A, as filed with the Securities
and Exchange Commission on June 30, 1993.
(n) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Government Income Fund dated March 25, 1991
is incorporated herein by reference to
Exhibit (5)(k) of Post-Effective Amendment
No. 11 to the Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
January 24, 1991.
(o) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Intermediate-Term Municipal Fund dated
March 25, 1991 is incorporated herein by
reference to Exhibit (5)(k) of Post-
Effective Amendment No. 11 to the
Registrant's Registration Statement on
Form N-1A, as filed with the Securities
and Exchange Commission on January 24, 1991.
(p) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Global Bond Fund dated March 25, 1991 is
incorporated herein by reference to Exhibit
(5)(k) of Post-Effective Amendment No. 11
to Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on January 24, 1991.
(q) Sub-Advisory Agreement between CoreStates
Investment Advisers, Inc. and Alpha Global
Fixed Income Managers, Inc. with respect to
Global Bond Fund dated December 15, 1993
is incorporated by reference to Exhibit
(5)(q) of Post-Effective Amendment No. 17
to Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on December 30, 1993.
(r) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. with respect to
Pennsylvania Municipal Bond Fund dated
March 25, 1991 is
C-7
<PAGE>
incorporated herein by reference to Exhibit
(5)(i) of Post-Effective Amendment No. 11
to the Registrant's Registration Statement
on Form N-1A, as filed with Securities and
Exchange Commission on January 24, 1991.
(s) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. with respect to New Jersey
Municipal Bond Fund dated March 25, 1991 is
incorporated herein by reference to Exhibit
(5)(i) of Post-Effective Amendment No. 11
to the Registrant's Registration Statement
on Form N-1A, as filed with the Securities
and Exchange Commission on January 24, 1991.
(t) Investment Advisory Agreement between
Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Elite Cash Reserve, CoreFund Elite
Government Reserve and CoreFund Elite
Treasury Reserve dated June 21, 1994 is
incorporated herein by reference to Exhibit
(5)(t) of Post-Effective Amendment No. 21
to the Registrant's Registration Statement
on Form N-1A, as filed with the Securities
and Exchange Commission on October 28, 1994.
(u) Proposed Investment Advisory Agreement
between Registrant and CoreStates Investment
Advisers, Inc. with respect to CoreFund
Special Equity Fund, CoreFund Bond
Fund and CoreFund Short-Term Income Fund is
incorporated herein by reference to Exhibit
(5)(u) of Post-Effective Amendment No. 24
to Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on January 2, 1996.
(6) (a) Distribution Agreement between Registrant
and Fairfield Group, Inc. dated August 2,
1985 is incorporated herein by reference to
Exhibit (6) of Pre-Effective Amendment No. 1
to Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on May 22, 1985.
(b) Distribution Agreement between Registrant
and SEI Financial Services Company is
incorporated herein by reference to Exhibit
(6)(b) of Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form
N-1A, as filed with the Securities and
Exchange Commission on August 31, 1992.
C-8
<PAGE>
(7) None.
(8) (a) Custodian Agreement between Registrant and
First Pennsylvania Bank n.a. dated July 24,
1985 is incorporated herein by reference to
Exhibit (8) of Pre-Effective Amendment No. 2
to Registrant's Registration Statement on
Form N-1A, as filed with the Securities and
Exchange Commission on August 1, 1985.
(b) Custodian Agreement between Registrant and
Philadelphia National Bank dated May 20,
1987 is incorporated herein by reference to
Exhibit (8)(b) of Post-Effective Amendment
No. 5 to the Registrant's Registration
Statement on Form N-1A, as filed with the
Securities and Exchange Commission on
October 30, 1987.
(9) (a) Amended Administration Agreement between
Registrant and Fairfield Group, Inc. dated
March 6, 1990 is incorporated herein by
reference to Exhibit 9 (a) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, as
filed with the Securities and Exchange
Commission on October 31, 1991.
(b) Transfer Agency Agreement between Registrant
and First Pennsylvania Bank n.a. dated
July 24, 1985 is incorporated herein by
reference to Exhibit (9)(b) of Pre-
Effective Amendment No. 2, to Registrant's
Registration Statement on Form N-1A as filed
with the Securities and Exchange Commission
on August 1, 1985.
(c) Amended Transfer Agency Agreement between
First Pennsylvania Bank n.a. and Fund/Plan
Services, Inc., dated December 31, 1985 is
incorporated herein by reference to Exhibit
(9)(c) of Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form
N-1A as filed with the Securities and
Exchange Commission on February 5, 1986.
(d) Retail Transfer Agency Agreement between
Registrant and SEI Financial Management
Corporation is incorporated herein by
reference to Exhibit (9)(d) of
Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form
N-1A as filed with the Securities and
Exchange Commission on August 31, 1992.
(e) Administration Agreement between Registrant
and SEI Financial Management Corporation
dated October 30, 1992
C-9
<PAGE>
is incorporated herein by reference to
Exhibit (9)(e) of Post-Effective Amendment
No. 15 to Registrant's Registration
Statement on Form N-1A as filed with the
Securities and Exchange Commission on June
30, 1993.
(f) Transfer Agent and Shareholder Services
Agreement between Registrant and SEI
Financial Management Corporation dated March
4, 1993 is incorporated herein by reference
to Exhibit (9)(f) of Post-Effective
Amendment No. 15 to Registrant's
Registration Statement on Form N-1A as filed
with the Securities and Exchange Commission
on June 30, 1993.
(10) Opinion and consent of Morgan, Lewis & Bockius LLP,
filed under Rule 24f-2 as part of Registrant's Rule
24f-2 Notice.
(11) *(a) Consent of Ernst & Young LLP dated April 17,
1996.
*(b) Consent of Coopers & Lybrand LLP dated April 18,
1996.
(12) None.
(13) Purchase Agreement dated July 24, 1985 between
Registrant and Fairfield Group, Inc. is incorporated
herein by reference to Exhibit (13) of Pre-Effective
Amendment No. 2 to Registrant's Registration Statement
on Form N-1A, as filed with the Securities and Exchange
Commission on August 1, 1985.
(14) None.
(15) None.
(16) Schedules for computation of performance quotations
provided in response to Item 22 of the Registration
Statement are incorporated herein by reference to
Exhibit 16 of Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A, as
filed with the Securities and Exchange Commission on
October 31, 1991.
(18) Rule 18f-3 Plan is incorporated herein by reference to
Exhibit 18 of Post-Effective Amendment No. 23 to the
Registrant's Registration Statement on Form N-1A, as
filed with the Securities and Exchange Commission on
October 27, 1995.
(24) (a) Powers of Attorney for Mr. Emil J. Mikity, Mr. George
H. Strong, and Professor Erin Anderson, Directors of
Registrant, and David G. Lee, President of Registrant
is incorporated herein by reference to Exhibit (24) of
Post-Effective Amendment No. 21 to the Registrant's
Registration
C-10
<PAGE>
Statement on Form N-1A, as filed with the Securities
and Exchange Commission on October 28, 1994.
(b) Powers of Attorney for Mr. Carmen Romeo, Treasurer and
Assistant Secretary of Registrant, and Ms. Jean Young,
Controller of Registrant is incorporated herein by
reference to Exhibit (24)(b) of Post-Effective
Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A, as filed with the Securities
and Exchange Commission on November 15, 1994.
*(27) Financial Data Schedule
- ------------------
*Filed with this Post-Effective Amendment.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
As of April 17, 1996 the number of record holders of each
class of securities of the Registrant was:
Title of Class Number of Record Holders
-------------- ------------------------
Cash Reserve-Class Y 555
Cash Reserve-Class C 900
Treasury Reserve-Class Y 293
Treasury Reserve-Class C 290
Fiduciary Reserve-Class Y 6
Fiduciary Tax-Free Reserve-Class Y 6
Tax-Free Reserve-Class Y 31
Tax-Free Reserve-Class C 111
Fiduciary Treasury Reserve - Class Y 6
Short-Intermediate Bond Fund-Class Y 58
Short-Intermediate Bond Fund-Class A 317
Bond Fund-Class Y 17
Bond Fund-Class A 295
Short Term Income Fund-Class Y 5
Short Term Income Fund-Class A 6
Equity Fund-Class Y 64
Equity Fund-Class A 1,494
Special Equity Fund-Class Y 8
Special Equity Fund-Class A 238
International Growth Fund-Class Y 25
C-11
<PAGE>
International Growth Fund-Class A 348
Equity Index Fund-Class Y 1,429
Growth Equity Fund-Class Y 58
Growth Equity Fund-Class A 323
Balanced Fund-Class Y 16
Balanced Fund-Class A 323
Government Income Fund-Class Y 14
Government Income Fund-Class A 106
Intermediate Municipal Bond Fund-Class Y 11
Intermediate Municipal Bond Fund-Class A 64
Global Bond Fund-Class Y 13
Global Bond Fund-Class A 18
Pennsylvania Municipal Bond Fund-Class Y 9
Pennsylvania Municipal Bond Fund-Class A 66
New Jersey Municipal Bond Fund-Class Y 9
New Jersey Municipal Bond Fund-Class A 12
Item 27. Indemnification
Article VII, Section 3 of the Registrant's Articles of
Incorporation, incorporated by reference as Exhibit (1)
hereto, and Article VI, Section 2 of Registrant's By-Laws,
filed as Exhibit (2) hereto, provide for the indemnification
of Registrant's directors and officers. Indemnification of
the Registrant's principal underwriter, custodian, and
transfer agent is provided for, respectively, in Section
1.11 of the Distribution Agreement, incorporated by
reference as Exhibit (6) hereto, Sections 3, 18, and 19 of
the Custodian Agreement, incorporated by reference as
Exhibit (8)(b) hereto, and Sections 14, 37, and 38 of the
Transfer Agency Agreement, incorporated by reference as
Exhibit (9)(b) hereto. Registrant has obtained from a major
insurance carrier a directors' and officers' liability
policy covering certain types of errors and omissions. In no
event will Registrant indemnify any of its directors,
officers, employees, its investment adviser or principal
underwriter against any liability to which such person would
otherwise be subject by reason of his willful misfeasance,
bad faith, or gross negligence in the performance of his
duties as director, officer, employee, investment adviser,
or principal underwriter, or by reason of his reckless
disregard of the duties involved in the conduct of his
office or under the advisory or underwriting agreement with
Registrant. Registrant will comply with Rule 484 under the
Securities Act of 1933 and Release 11330 under the
Investment Company Act of 1940 in connection with any
indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers, and controlling persons of Registrant pursuant to
the foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in
C-12
<PAGE>
the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other
than the payment by Registrant of expenses incurred or paid
by a director, officer, or controlling person of Registrant
in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
CoreStates Investment Advisers, Inc. ("CoreStates Advisers")
is a subsidiary of CoreStates Bank, N.A., which is itself a
subsidiary of CoreStates Financial Corp. CoreStates
Financial Corp is a bank holding company registered under
the Bank Holding Company Act. CoreStates Financial Corp is
engaged through its principal subsidiaries, CoreStates Bank,
N.A., a national banking association, and Hamilton Bank, a
Pennsylvania banking institution, in commercial,
international and consumer banking and in providing trust
services. CoreStates Financial Corp through other direct and
indirect subsidiaries also provides consumer financing,
factoring and commercial financing and financing advisory
services. As of July 31, 1995, CoreStates Financial Corp had
total assets of over $29 billion (pro forma). The principal
executive office of CoreStates Financial Corp is located at
Broad and Chestnut Streets, Philadelphia, Pennsylvania
19101. To the knowledge of Registrant, none of the directors
or officers of CoreStates Advisers except those set forth
below, is or has been, at any time during the past two
calendar years, engaged in any other business, profession,
vocation, or employment of a substantial nature, except that
certain directors and officers of CoreStates Advisers also
hold various positions with, and engage in business for,
CoreStates Advisers, or its subsidiaries. Set forth below
are the names and principal businesses of the directors and
certain of the senior executive officers of CoreStates
Advisers who are engaged in any other business, profession,
vocation, or employment of a substantial nature.
Item 29. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.
Registrant's distributor, SEI Financial Services Company ("SFS"), acts
as distributor for:
C-13
<PAGE>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds(R) August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
Inventor Funds, Inc. August 1, 1994
The Achievement Funds Trust December 27, 1994
Insurance Investment Products Trust December 30, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
SFS provides numerous financial services to investment managers,
pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement and consulting
services ("Funds Evaluation") and automated execution, clearing and
settlement of securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to each
director, officer or partner of each principal underwriter named in the answer
to Item 21 of Part B. Unless otherwise noted, the business address of each
director or officer is 680 East Swedesford Road, Wayne, PA 19087.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ----- ------------------- ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --
Henry H. Greer Director, President & Chief Operating Officer --
Carmen V. Romeo Director, Executive Vice President & Treasurer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Charles A. Marsh Executive Vice President-Capital Resources Division --
C-14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
David G. Lee Senior Vice President President
William Madden Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & --
Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Crudup Managing Director --
Vic Galef Managing Director --
Kim Kirk Managing Director --
John Krzeminski Managing Director --
Carolyn McLaurin Managing Director & Vice President --
Barbara Moore Managing Director --
Donald Pepin Managing Director --
Mark Samuels Managing Director --
Wayne M. Withrow Managing Director --
Mick Duncan Team Leader --
Robert S. Ludwig Team Leader & Vice President --
Vicki Malloy Team Leader --
Robert Aller Vice President --
Steve Bendinelli Vice President --
Cris Brookmyer Vice President & Controller --
Gordon W. Carpenter Vice President --
Robert B. Carroll Vice President & Assistant Secretary --
Todd Cipperman Vice President & Assistant Secretary
Ed Daly Vice President --
Jeff Drennen Vice President --
Lucinda Duncalfe Vice President --
Kathy Heilig Vice President --
Larry Hutchison Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Donald H. Korytowski Vice President --
Jack May Vice President --
Sandra K. Orlow Vice President & Assistant Secretary --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
William Zawaski Vice President --
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
James Dougherty Director of Brokerage Services --
</TABLE>
Item 30. Location of Accounts and Records
(1) CoreStates Investment Advisers, Inc., PNB Building, Broad and Chestnut
Streets, Philadelphia, PA 19101 (records relating to its functions as
investment adviser).
(2) SEI Financial Management Corporation, 680 E. Swedesford Road, Wayne,
PA 19087 (records relating to its function as administrator).
(3) SEI Financial Services Corporation, 680 E. Swedesford Road, Wayne, PA
19087 (records relating to its function as distributor).
(4) CoreStates Bank, N.A., 510 Walnut Street Mail Stop FC 1-9-7-2,
Philadelphia, PA 19106 (records relating to its functions as
custodian).
(5) Fund/Plan Services, Inc., P. O. Box 874, Conshohocken, PA 19428
(records relating to its functions as transfer agent).
(6) Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia, PA
19103 (Articles of Incorporation, By-Laws, and Minute Books).
Item 31. Management Services
None.
Item 32. Undertakings
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940
inform the Board of Directors of their desire to communicate with
shareholders of the Registrant, the Directors will inform such
shareholders as to the approximate number of shareholders of record and
the approximate costs of mailing or afford said shareholders access to a
list of shareholders.
C-16
<PAGE>
Registrant undertakes to hold a meeting of shareholders for the purpose of
voting upon the questions of removal of a Director(s) when requested in
writing to do so by the holders of at least 10% of Registrant's
outstanding shares and in connections with such Investment Company Act of
1940 relating to shareholder communications.
Registrant undertakes to furnish each prospective person to whom a
prospectus will be delivered with a copy of the Registrant's latest annual
report to shareholders, when such annual report is issued containing
information called for by Item 5A of Form N-1A, upon request and without
charge.
C-17
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, ("1933
Act"), and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the 1933 Act and has duly
caused this Post-Effective Amendment No. 26 to Registration Statement No.
2-93214 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wayne, Commonwealth of Pennsylvania on the 18th day
of April, 1996.
COREFUNDS, INC.
/s/ David G. Lee
--------------------------------
David G. Lee
President
ATTEST: /s/ Stephen G. Meyer
---------------------------
Stephen G. Meyer
Controller
Pursuant to the requirements of the 1933 Act, this Post-Effective Amendment No.
26 to the Registration Statement has been signed below by the following persons
in the capacities and on the date(s) indicated.
<TABLE>
<S> <C> <C>
/s/ David G. Lee President & Chief April 18, 1996
- ---------------------- Executive Officer
David G. Lee
* Director April 18, 1996
- ----------------------
Erin Anderson
* Director April 18, 1996
- ----------------------
Emil J. Mikity
* Director April 18, 1996
- ----------------------
George H. Strong
/s/ Stephen G. Meyer Controller April 18, 1996
- ----------------------
Stephen G. Meyer
* Treasurer & April 18, 1996
- ---------------------- Assistant Secretary
Carmen V. Romeo
</TABLE>
*By: /s/ David G. Lee
------------------------
David G. Lee
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
27 Financial Data Schedules
99.11(a) Consent of Ernst & Young LLP
99.11(b) Consent of Coopers & Lybrand LLP
<TABLE> <S> <C>
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<TABLE> <S> <C>
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<TABLE> <S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<SERIES>
<NUMBER> 051
<NAME> INTERNATIONAL GROWTH CLASS A
<MULTIPLIER> 1,000
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<FISCAL-YEAR-END> JUN-30-1996
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<OVERDISTRIBUTION-NII> (149)
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<OVERDISTRIBUTION-GAINS> 0
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<INTEREST-INCOME> 45
<OTHER-INCOME> 0
<EXPENSES-NET> (678)
<NET-INVESTMENT-INCOME> 418
<REALIZED-GAINS-CURRENT> 4165
<APPREC-INCREASE-CURRENT> 5042
<NET-CHANGE-FROM-OPS> 9207
<EQUALIZATION> (5472)
<DISTRIBUTIONS-OF-INCOME> (2440)
<DISTRIBUTIONS-OF-GAINS> (548)
<DISTRIBUTIONS-OTHER> 0
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Consent of Independent Auditors
We consent to the references to our firm under the caption "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this Post
Effective Amendment Number 26 to the Registration Statement (Form N1A No.
33-93214) of the Growth Equity Fund, Equity Index Fund, International Growth
Fund, Balanced Fund, Government Income Fund, Short-Intermediate Bond Fund
(formerly the Intermediate Bond Fund), Intermediate Municipal Bond Fund, Global
Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund,
Cash Reserve Fund, Treasury Reserve Fund, Tax-Free Reserve Fund, Fiduciary
Reserve Fund, Fiduciary Treasury Reserve Fund, and Fiduciary Tax-Free Reserve
Fund, and to the use of our report dated August 14, 1995, included in the 1995
Annual Report to Shareholders of CoreFunds, Inc., and to the use of our reports
dated August 14, 1995, included in the 1995 Annual Reports of the Fiduciary
Reserve Fund, Fiduciary Treasury Reserve Fund, and Fiduciary Tax-Free
Reserve Fund.
/s/ Ernst & Young LLP
------------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
April 17, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the following with respect to Post-Effective Amendment No. 26
pursuant to the Securities Act of 1933, as amended, to the Registration
Statement on Form N-1A of the CoreFunds, Inc. (File No. 2-93214):
o The inclusion of our report dated December 8, 1995, accompanying the
financial statements and financial highlights of The Conestoga Funds,
in the Statement of Additional Information.
o The incorporation by reference of our report dated December 8, 1995
into the Prospectus.
o The reference to our Firm under the heading "Financial Highlights" in
the Prospectus of The Conestoga Funds, (comprising of the Equity Fund,
Special Equity Fund, Bond Fund, and Short Term Income Fund), and under
the heading "Financial Statements" in the Statement of Additional
Information.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 18, 1996
