As filed with the Securities and Exchange Commission on May 14, 1996
Registration No. 2-93214
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 27 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY [ ]
ACT OF 1940
AMENDMENT NO. 28 [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 July 13, 1996 after
filing pursuant to paragraph (a) 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.
<PAGE>
CROSS REFERENCE SHEET
May 14, 1996
Prospectus
Form N-1A Item No. Caption
- ------------------ -------
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 Re-
strictions; 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;
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 Restric-
tions; General Informa-
tion
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 - 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 Restric-
tions;
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 Money Market Funds: Elite
Cash Reserve (formerly Fiduciary Reserve), Elite Government Reserve, Elite
Treasury Reserve (formerly Fiduciary Treasury Reserve) and Elite Tax-Free
Reserve Portfolios (formerly Fiduciary Tax-Free Reserve)
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 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 Policies............ Investment
Objective and
Policies
<PAGE>
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
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 Institutional Shares, included as part of
Post-Effective Amendment No. 26 to the Registration Statement on Form
N-1A of CoreFunds, Inc. (File No. 2-93214) filed with the Securities
and Exchange Commission on April 19, 1996 is hereby incorporated by
reference as if set forth herein.
The prospectus for the CoreFund Individual Shares, included as part of
Post-Effective Amendment No. 26 to the Registration Statement on Form
N-1A of CoreFunds, Inc. (File No. 2-93214) filed with the Securities
and Exchange Commission on April 19, 1996 is hereby incorporated by
reference as if set forth herein.
The prospectus for the CoreFund Equity Index Fund, included as part of
Post-Effective Amendment No. 26 to the Registration Statement on Form
N-1A of CoreFunds, Inc. (File No. 2-93214) filed with the Securities
and Exchange Commission on April 19, 1996 is hereby incorporated by
reference as if set forth herein.
<PAGE>
COREFUND
ELITE MONEY MARKET FUNDS
PROSPECTUS
COREFUNDS, INC.
JULY 12, 1996
ELITE MONEY MARKET FUNDS
CLASS Y AND CLASS C SHARES
CoreFunds, Inc. is an open-end management investment company presently
offering two different classes of shares in twenty-one diversified and non-
diversified portfolios that offer a variety of investment opportunities.
These portfolios are managed by CoreStates Investment Advisers, Inc.
("CoreStates Advisers"). This Prospectus relates to Class Y and Class C Shares
in four Elite money market portfolios (the "Elite Funds").
This Prospectus gives you information about the Elite Funds that you
should be aware of before investing. Additional information about the Funds,
contained in a Statement of Additional Information dated July 13, 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. AN INVESTMENT IN THE FUNDS IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO
ASSURANCE THAT EITHER OF 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 Table................ 3 Financial Highlights.................................... 4
</TABLE>
INFORMATION ON THE FUNDS
<TABLE>
<S> <C>
Investment Objectives of the Funds..................... 6 Administrator...........................................20
Investment Policies.................................... 6 Distributor.............................................20
Other Investment Practices of the Expenses................................................20
Funds............................................... 7 Glass-Steagall Act......................................21
Types of Securities in Which the Funds Performance Information.................................21
Invest.............................................. 9 Total Return and Yield..................................21
Investment Restrictions................................13 In General..............................................22
Investor Considerations................................15 How to Purchase and Redeem Shares.......................22
Investment Suitability..............................15 Purchase of Shares......................................22
Investment Risks....................................15 Redemption of Shares....................................23
Distributions..........................................16 Description of Shares...................................23
Taxes..................................................16 General Information.....................................24
Valuation of Shares....................................18 Description of Ratings..................................25
Net Asset Value.....................................18 Description of Municipal and Corporate
Portfolio Pricing...................................18 Bond Ratings............................................25
Management.............................................19 Description of Municipal Note
Investment Adviser..................................19 Ratings.................................................26
Fund Managers.......................................20
</TABLE>
<TABLE>
<S> <C> <C>
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 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 or Class C shares of the Funds.
THE INFORMATION CONTAINED IN THE TABLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.
<TABLE>
<CAPTION>
--------- -------------- ---------- ----------
ELITE ELITE ELITE ELITE
CASH GOVERNMENT TREASURY TAX-FREE
Class Y Shares RESERVE RESERVE RESERVE RESERVE
--------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases........................ none none none none
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)................. .08% .08% .08% .08%
12b-1 Fees..................................................... none none none none
Administrative Fees After Fee Waivers (2)...................... .07% .07% .07% .07%
Other Expenses (3)............................................. .04% .07% .04% .04%
Net Annual Fund Operating Expenses (4)......................... .19% .22% .19% .19%
EXAMPLE
You would pay the following 1 year $2 $2 $2 $2
expenses on a $1,000 investment, 3 year 6 7 6 6
assuming (1) a 5% annual return 5 year 11 12 11 11
and (2) redemption at the end 10 year 24 28 24 24
of each time period.(5)
</TABLE>
- --------------------------------------------------------------------------------
1 Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .20% of the average net assets of each Fund.
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 any fee waivers, such expense ratios would be
.49%, .52%, .49% and .49% for Elite Cash Reserve, Elite Government Reserve,
Elite Treasury Reserve and Elite Tax-Free Reserve, respectively.
5 Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one, three, five and ten years, would be $5, $16,
$27 and $62 for Elite Cash Reserve, $5, $17, $29 and $65 for Elite Government
Reserve, $5, $16, $27 and $62 for Elite Treasury Reserve and $5, $16, $27 and
$62 for Elite Tax-Free Reserve.
Transaction and Operating Expense Tables 3
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION AND OPERATING EXPENSE TABLES (continued)
<TABLE>
<CAPTION>
--------- -------------- ---------- ----------
ELITE ELITE ELITE ELITE
CASH GOVERNMENT TREASURY TAX-FREE
Class C Shares RESERVE RESERVE RESERVE RESERVE
--------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases........................ none none none none
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)................. .08% .08% .08% .08%
12b-1 Fees..................................................... .25% .25% .25% .25%
Administrative Fees After Fee Waivers (2)...................... .07% .07% .07% .07%
Other Expenses (3)............................................. .04% .07% .04% .04%
Net Annual Fund Operating Expenses (4)......................... .44% .47% .44% .44%
EXAMPLE
You would pay the following 1 year $5 $5 $5 $5
expenses on a $1,000 investment, 3 year 14 15 14 14
assuming (1) a 5% annual return 5 year 25 26 25 25
and (2) redemption at the end 10 year 55 59 55 55
of each time period. (5)
</TABLE>
- --------------------------------------------------------------------------------
1 Absent voluntary waivers, the Adviser's investment advisory fees are
calculated at the annual rate of .20% of the average net assets of each Fund.
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 any fee waivers, such expense ratios would be
.74%, .77%, .74% and .74% for Elite Cash Reserve, Elite Government Reserve,
Elite Treasury Reserve and Elite Tax-Free Reserve, respectively.
5 Absent the voluntary fee waiver of the Adviser and the Administrator, the
amounts in this Example, for one, three, five and ten years, would be $8, $24,
$41 and $92 for Elite Cash Reserve, $8, $25, $43 and $95 for Elite Government
Reserve, $8, $24, $41 and $92 for Elite Treasury Reserve and $8, $24, $41 and
$92 for Elite Tax-Free Reserve.
4 Transaction and Operating Expense Tables
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS /X/ COREFUND
The tables that follow present information about the investment results of
the Class Y shares of the Elite Cash Reserve, Elite Treasury Reserve and Elite
Tax-Free Reserve Funds (formerly the 'Fiduciary Funds'). The Elite Government
Reserve has not yet commenced operations. In addition, the Class C shares for
each of the Funds have not yet been introduced. The financial highlights for
each of the Elite Cash Reserve, Elite Treasury Reserve and Elite Tax-Free
Reserve have been audited by Ernst & Young LLP, independent 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>
Net
Assets
Net Asset Dividends End of Ratio of
Value, Net from Net Net Asset Period Expenses to
Beginning Investment Investment Value, End Total (thousands Average Net
Year of Period Income Income of Period Return omitted) Assets
- --------------------------------------- ----------- ----------- ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------
ELITE CASH RESERVE
- ----------------------
(FORMERLY FIDUCIARY RESERVE)
CLASS Y
1995** (unaudited)..................... $ 1.00 0.03 (0.03) $ 1.00 2.89% $ 346,771 0.17%
1995................................... $ 1.00 0.05 (0.05) $ 1.00 5.46% $ 406,597 0.17%
1994................................... $ 1.00 0.03 (0.03) $ 1.00 3.31% $ 382,814 0.16%
1993................................... $ 1.00 0.03 (0.03) $ 1.00 3.29% $ 424,363 0.17%
1992................................... $ 1.00 0.05 (0.05) $ 1.00 5.04% $ 416,945 0.18%
1991................................... $ 1.00 0.07 (0.07) $ 1.00 7.49% $ 453,947 0.15%
1990 (1)............................... $ 1.00 0.08 (0.08) $ 1.00 8.03%+ $ 232,091 0.13%
- --------------------------
ELITE TREASURY RESERVE
- --------------------------
(FORMERLY FIDUCIARY TREASURY RESERVE)
CLASS Y
1995** (unaudited)..................... $ 1.00 0.03 (0.03) $ 1.00 2.85% $ 19,551 0.19%
1995................................... $ 1.00 0.05 (0.05) $ 1.00 5.24% $ 18,396 0.23%
1994................................... $ 1.00 0.03 (0.03) $ 1.00 3.10% $ 20,363 0.28%
1993................................... $ 1.00 0.03 (0.03) $ 1.00 3.17% $ 27,614 0.18%
1992 (2)............................... $ 1.00 0.02 (0.02) $ 1.00 2.00%+ $ 49,328 0.05%
- --------------------------
ELITE TAX-FREE RESERVE
- --------------------------
(FORMERLY FIDUCIARY TAX-FREE RESERVE)
CLASS Y
1995** (unaudited)..................... $ 1.00 0.02 (0.02) $ 1.00 1.82% $ 76,881 0.18%
1995................................... $ 1.00 0.03 (0.03) $ 1.00 3.41% $ 72,593 0.19%
1994................................... $ 1.00 0.02 (0.02) $ 1.00 2.32% $ 78,219 0.17%
1993................................... $ 1.00 0.02 (0.02) $ 1.00 2.48% $ 48,424 0.19%
1992 (3)............................... $ 1.00 0.02 (0.02) $ 1.00 1.50%+ $ 66,158 0.17%
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Ratio of Average Net Average Net
Net Income Assets Assets
to Average (Excluding (Excluding
Year Net Assets Waivers) Waivers)
- --------------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
- ----------------------
ELITE CASH RESERVE
- ----------------------
(FORMERLY FIDUCIARY RESERVE)
CLASS Y
1995** (unaudited)..................... 5.66% 0.81% 5.02%
1995................................... 5.35% 0.81% 4.71%
1994................................... 3.24% 0.84% 2.56%
1993................................... 3.25% 0.81% 2.61%
1992................................... 4.96% 0.83% 4.31%
1991................................... 7.05% 0.80% 6.40%
1990 (1)............................... 8.42% 0.83% 7.72%
- --------------------------
ELITE TREASURY RESERVE
- --------------------------
(FORMERLY FIDUCIARY TREASURY RESERVE)
CLASS Y
1995** (unaudited)..................... 5.60% 0.83% 4.96%
1995................................... 5.09% 0.87% 4.45%
1994................................... 3.03% 0.91% 2.40%
1993................................... 3.19% 0.85% 2.52%
1992 (2)............................... 3.95% 0.80% 3.20%
- --------------------------
ELITE TAX-FREE RESERVE
- --------------------------
(FORMERLY FIDUCIARY TAX-FREE RESERVE)
CLASS Y
1995** (unaudited)..................... 3.58% 0.82% 2.94%
1995................................... 3.37% 0.83% 2.73%
1994................................... 2.29% 0.82% 1.64%
1993................................... 2.45% 0.83% 1.81%
1992 (3)............................... 3.00% 0.89% 2.28%
</TABLE>
- ------------------
+ Returns shown are for the period indicated and have not been annualized.
** Ratios for the six-month period ended December 31, 1995 have been annualized
and are unaudited.
1 The Elite Cash Reserve (formerly the Fiduciary Reserve) commenced operations
on August 7, 1989. Ratios for this period have been annualized.
2 The Elite Treasury Reserve (formerly the Fiduciary Treasury Reserve) commenced
operations on December 10, 1991. Ratios for this peirod have been annualized.
3 The Elite Tax-Free Reserve (formerly the Fiduciary Tax-Free Reserve) commenced
operations on November 19, 1991. Ratios for this period have been annualized.
Financial Highlights 5
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ON THE FUNDS
/X/
INVESTMENT
OBJECTIVES
OF THE FUNDS
The descriptions that follow are designed to help you choose the Elite Fund that
best fits your investment objectives. The objectives of each Elite 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 other portfolios offered by CoreFunds.
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.
CASH RESERVE The investment objective of CoreFund Elite Cash Reserve ('Cash
Reserve') is to provide as high a level of current interest as is consistent
with liquidity and relative stability of principal.
GOVERNMENT RESERVE The investment objective of CoreFund Elite Government Reserve
('Government Reserve') is to provide current interest income, liquidity and
safety of principal.
TREASURY RESERVE The investment objective of CoreFund Elite Treasury Reserve
('Treasury Reserve') is to provide current interest income, liquidity and safety
of principal.
TAX-FREE RESERVE The investment objective of CoreFund Elite Tax-Free Reserve is
to provide current interest income that is exempt from federal income taxes as
is consistent with liquidity and relative stability of principal.
/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.'
ALL FUNDS Investments by money market funds such as the Funds 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
6 Investment Objectives
----
<PAGE>
- --------------------------------------------------------------------------------
/X/ COREFUND
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 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.
GOVERNMENT RESERVE Government Reserve invests in U.S. Treasury obligations,
obligations issued or guaranteed as to principal and interest by the agencies or
instrumentalities of the U.S. government, and repurchase agreements involving
such obligations.
TREASURY RESERVE Treasury Reserve intends to invest in direct obligations of the
U.S. Treasury, such as bills, bonds, and notes, and in 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.
Under normal circumstances, the Fund intends to invest at least 80% of its
assets in tax-free securities. 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
Investent Policies 7
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INFORMATION ON THE FUNDS (continued)
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, as amended (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 and applicable state law. Such investments will be
limited to amounts not in excess of 5% of a Fund's total assets at the time of
purchase.
REVERSE REPURCHASE AGREEMENTS--
Elite Cash Reserve, Elite Government Reserve and Elite Tax-Free Reserve
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.
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
8 Investment Policies
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/X/ COREFUND
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.
/X/
TYPES OF
SECURITIES IN
WHICH THE
FUNDS
INVEST
CASH RESERVE The various types of securities invested in by Cash Reserve 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.
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 above 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. Because of these features, STRIPS
may be subject to greater interest rate volatility than interest-paying U.S.
Treasury obligations. See also 'Taxes.'
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.
With respect to bank obligations, in addition to certificates of deposit
and bankers' acceptances, Cash Reserve may invest in foreign securities and time
deposits.
Types of Securities 9
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INFORMATION ON THE FUNDS (continued)
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.
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.
With respect to asset-backed securities, the asset-backed securities in
which Cash Reserve invests must have final maturities of 13 months or less.
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 Investors Service, Inc. ('Moody's')
and/or 'A-1' or better by Standard & Poor's Corporation ('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').
GOVERNMENT RESERVE Government Reserve will invest in U.S. Government
Obligations, including U.S. Treasury Securities and U.S. Government Agency
Securities. Government Reserve may also invest in STRIPS.
TREASURY RESERVE Treasury Reserve will invest in U.S. Treasury obligations, such
as bills, notes, and bonds, and separately traded
10 Types of Securities
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/X/ COREFUND
Interest and principal component parts of such obligations, such as STRIPS.
Treasury Reserve may also invest in repurchase agreements fully collaterized by
U.S. Treasury obligations.
TAX-FREE RESERVE Tax-Free Reserve will invest in municipal securities which
include, but are not limited to, 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 and variable rate
demand obligations. The two principal classifications of municipal securities
which may be held by this Fund are 'general obligation' securities and 'revenue'
securities. These are discussed below, along with other municipal securities in
which this 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 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 related to the credit standing of the
corporate user of the facility involved.
3. Moral Obligation Bonds
The portfolio of Tax-Free Reserve 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 Tax-Free Reserve 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 the Fund, it 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 Tax-Free Reserve 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
Tax-Free Reserve may purchase municipal securities on a 'when-issued'
basis (as described in 'Other Investment Practices of the Funds'). This 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 the Fund will set aside cash or
liquid assets to satisfy its purchase commitments in the manner described, its
liquidity and ability to manage
Types of Securities 11
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INFORMATION ON THE FUNDS (continued)
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.
CREDIT RATINGS
Municipal securities, in which Tax-Free Reserve invests will be determined by
CoreStates Advisers to present miminal credit risks, pursuant to guidelines
approved by the Board of Directors. Such securities, at the time of purchase,
must be rated in the highest short-term rating category of Moody's and/or S&P.
Therefore, rated 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 of purchase must be
determined to be of comparable quality by CoreStates Advisers, pursuant to
guidelines approved by the Board of Directors, or must be issued by an issuer
having comparable short-term securities outstanding that satisfy the above
rating criteria. To the extent that the ratings accorded by Moody's or S&P may
change as a result of changes in their rating systems, Tax-Free Reserve 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 meets, or is of comparable quality to, such Fund's
rating criteria, it will require that the issuer's obligations 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'),
12 Types of Securities
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/X/ COREFUND
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.
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 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.
/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
Investment Restrictions 13
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INFORMATION ON THE FUNDS (continued)
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, enter into repurchase agreements and lend its portfolio securities,
in accordance with its policies and limitations.
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. 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, 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 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.
4. 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. With respect to Cash Reserve, Government Reserve and Treasury Reserve,
there is no limitation with respect to its investment in obligations issued or
guaranteed by the U.S. Government or its instrumentalities. With respect to
Tax-Free Reserve, 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.
PORTFOLIO TURNOVER It is not a policy of the Funds to purchase or sell
securities for trading purposes. However, CoreStates Advisers manages 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.
High rates of portfolio turnover necessarily result in correspondingly
heavy 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
14 Investment Restrictions
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/X/ COREFUND
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.
/X/
INVESTOR
CONSIDERATIONS
INVESTMENT SUITABILITY _________________________________________________________
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.
Government Reserve, by investing only in direct obligations of the U.S.
Government, and in U.S. Government Agency securities, is suitable for investors
seeking current income with a higher degree of safety afforded by U.S.
Government and Agency securities.
Treasury Reserve, because it is restricted to direct obligations of the
U.S. Government, is suitable for investors for whom a high degree of safety is a
primary concern. This Fund is considered to be the most secure of the Funds and
is appropriate for investors seeking current income and the highest degree of
safety.
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 _______________________________________________________________
While each of the Funds will attempt to maintain a stable net asset value of
$1.00 per share, there is no guarantee that any Fund will be able to do so. The
Funds are neither insured nor guaranteed by the U.S. Government.
Securities held by Cash Reserve, Government Reserve and Treasury Reserve
may be subject, on a limited basis, to credit risk. Credit risk is the
possibility that an issuer of securities held in a Fund's investment portfolio
will be unable to make timely payments of either principal or interest. 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). Market risk is the potential for a
decline in the price of fixed-income securities due to rising interest rates.
Call risk relates to municipal bonds during periods of falling interest rates
and involves the possibility that securities with high interest rates will be
prepaid (or 'called') by
Investor Considerations 15
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INFORMATION ON THE FUNDS (continued)
the issuer prior to maturity. Such an event would require such Fund to invest
the resulting proceeds elsewhere, at generally lower interest rates, which would
cause fluctuations in its net income.
Because of the concerns listed above, 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.
Investors should understand, however, that while all investments carry a
risk factor, the exposure of the Funds to investment risk will generally be very
low, as a result of their diversification and the high-quality and short-term
maturity of their investment portfolios.
/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. Shares of the 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.
Dividends are paid in the form of additional 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 net investment income of each of the Funds is declared daily as a
dividend to its shareholders and paid monthly. Capital gains distributions, if
any, will be made by the 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.
/X/
TAXES
The following is only a brief summary of some of the important federal income
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.
16 Distributions
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/X/ COREFUND
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, 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.
TAX-FREE RESERVE
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 Tax-Free Reserve 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 this Fund is not deductible for federal income
tax purposes. Furthermore, this Fund 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 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.
Tax-Free Reserve 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 Consquences.
Except as noted below, tax-exempt interest dividends and other
distributions
Taxes 17
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INFORMATION ON THE FUNDS (continued)
paid by Tax-Free Reserve 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.
STRIPS
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.
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 the Statement of
Additional Information for further information regarding taxes.
/X/
VALUATION OF
SHARES
NET ASSET VALUE ________________________________________________________________
The net asset value per share of each of the Funds for purposes of pricing
purchase and redemption orders is normally determined as of 4:00 p.m. (Eastern
standard 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. The
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
18 Valuation of Shares
----
<PAGE>
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/X/ COREFUND
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.
The assets in the 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 _____________________________________________________________
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.
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.
Management 19
<PAGE>
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INFORMATION ON THE FUNDS (continued)
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 Fund,
computed daily and paid monthly, at the annual rate of .20% of the average daily
net assets of such 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 the Funds in maintaining competitive expense ratios.
FUND MANAGERS __________________________________________________________________
The following individuals are primarily responsible for managing the Elite
Funds:
ELITE CASH RESERVE
Rosemary B. Crowley, a Senior Investment Officer of CoreStates Advisers, is
responsible for managing the Elite Cash Reserve. Ms. Crowley also manages the
Cash Reserve and 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 Instutitional Sales Department
and in 1981 transferred to the Investment Management Division.
ELITE GOVERNMENT RESERVE
ELITE TREASURY RESERVE
Ronald R. Brasten, Senior Investment Officer, is portfolio manager of the Elite
Government Reserve and Elite Treasury Reserve. 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 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.
ELITE TAX-FREE RESERVE
Folu Abiona, Senior Investment Officer, is portfolio manager of the Elite
Tax-Free Reserve. 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 lfe, 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.
20 Management
----
<PAGE>
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/X/ COREFUND
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.
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 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.
In addition to quoting total return, the 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 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
Performance Information 21
<PAGE>
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INFORMATION ON THE FUNDS (continued)
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 Tax-Free Reserve 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.
IN GENERAL _____________________________________________________________________
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.
/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 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 Fund are offered only to residents of states in which the shares are
eligible for purchase.
An order received by 12:00 p.m. (Eastern standard 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 same business day.
An order received after 12:00 p.m. (Eastern standard 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
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. 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 standard time) of their intentions to
wire money provided that federal funds are received by the custodian on the same
business day.
The minimum investment amount is $1,000,000 for the initial purchase of
Class Y shares by an investor which amount may be
22 How to Purchase and Redeem Shares
----
<PAGE>
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/X/ COREFUND
waived at the discretion of the Distributor. There is no minimum for subsequent
investments.
The minimum investment amount is $500 for the initial purchase of Class C
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 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 12:00 p.m. (Eastern standard time) on any
business day. Payment will be made the same 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 CoreFunds Investor
Services. 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 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 the following twenty-one portfolios: Growth Equity, Equity,
Special Equity, Equity Index, International Growth, Balanced, Bond,
Short-Intermediate 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, Elite Cash Reserve,
Elite Government Reserve, Elite Treasury Reserve and Elite Tax-Free Reserve.
CoreFunds may in the future create one or more additional portfolios, or one or
more classes of shares within a portfolio. Shares of portfolios other than the
Elite Funds are offered in separate prospectuses.
CoreFunds offers two classes of each portfolio except for the Equity Index
Fund. Class Y Shares are primarily offered to
Description of Shares 23
<PAGE>
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INFORMATION ON THE FUNDS (continued)
various types of institutional investors. Class A and Class C Shares are offered
to the general public as well as to various types of institutional investors.
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 Classes A and C Shares. The distribution and transfer agent expenses
charged Classes A and C Shares result in Classes 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 Classes A and C Shares.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO 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
COREFUNDS 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 portfolio represents an equal proportionate
interest in that portfolio with each other share of the same portfolio and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to such portfolio 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 portfolios of CoreFunds 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.
24 Description of Shares
----
<PAGE>
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/X/ COREFUND
/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.
/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 repayprincipal 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
Description of Ratings 25
<PAGE>
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INFORMATION ON THE FUNDS (continued)
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 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
26 Description of Ratings
----
<PAGE>
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/X/ COREFUND
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.
Description of Ratings 27
<PAGE>
NOTES
<PAGE>
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
CORESTATES
CORESTATES
INVESTMENT ADVISERS
For Current Performance, Purchase, Redemption And
Other Information, Call 1-800-355-CORE (2673)
Cor-F-051-02
COREFUND
ELITE MONEY MARKET FUNDS
COREFUND
ELITE MONEY MARKET FUNDS
Class Y And Class C Shares
Prospectus
July 13, 1996
Elite Cash Reserve
Elite Government Reserve
Elite Treasury Reserve
Elite Tax-Free Reserve
<PAGE>
COREFUNDS, INC.
Statement of Additional Information
Dated July 13, 1996
TABLE OF CONTENTS
-----------------
THE COMPANY............................................................... 3
ADDITIONAL INVESTMENT POLICIES............................................ 3
ADDITIONAL INVESTMENT RESTRICTIONS........................................ 23
TEMPORARY INVESTMENTS..................................................... 28
SPECIAL CONSIDERATIONS.................................................... 30
NET ASSET VALUE........................................................... 32
DIVIDENDS................................................................. 33
TOTAL RETURN.............................................................. 34
YIELDS.................................................................... 36
ADDITIONAL INFORMATION CONCERNING TAXES................................... 37
DESCRIPTION OF SHARES..................................................... 40
DIRECTORS AND OFFICERS.................................................... 43
PRINCIPAL HOLDERS OF SECURITIES........................................... 44
INVESTMENT ADVISER........................................................ 56
SUB-ADVISERS.............................................................. 58
PORTFOLIO TRANSACTIONS.................................................... 60
ADMINISTRATOR............................................................. 62
DISTRIBUTOR............................................................... 64
CUSTODIAN AND TRANSFER AGENT.............................................. 65
EXPENSES.................................................................. 66
LEGAL COUNSEL............................................................. 66
MISCELLANEOUS............................................................. 66
APPENDIX.................................................................. B-68
FINANCIAL STATEMENTS...................................................... S-1
This Statement of Additional Information is meant to be read in
conjunction with the applicable Prospectuses for the portfolios offered by
CoreFunds, Inc. dated July 13, 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.
<PAGE>
THE COMPANY
CoreFunds, Inc. (the "Company") is an open-end management investment
company presently offering shares in twenty-one diversified and non-diversified
portfolios (the "Fund" or "Funds"). The Company is authorized to offer separate
series of shares of beneficial interest (the "Shares") of each Fund.
Shareholders may purchase Shares through 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.
Equity Funds: Taxable Money Market Funds:
- Growth Equity Fund - Cash Reserve
- Equity Fund - Treasury Reserve
- Equity Index Fund - Elite Cash Reserve
- International Growth Fund - Elite Government Reserve
- Balanced Fund - Elite Treasury Reserve
- Special Equity Fund
Fixed Income Funds: Tax-Exempt Money Market Funds:
- Short-Intermediate Bond Fund - Tax-Free Reserve
- Bond Fund - Elite 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
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.
ADDITIONAL INVESTMENT POLICIES
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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, 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
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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.
Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary").
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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 on other budget programs was restrained to a growth
rate below 4.7% and sources of revenues other than taxes
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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.
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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.
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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 assesses 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.
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- 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
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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
B-28
<PAGE>
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.
B-29
<PAGE>
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 22.0% and 21.44%, respectively, for the period from
11/1/94 to 10/31/95.
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<PAGE>
- Special Equity Fund -
The average annualized total return for Class Y Shares and Class A
Shares of the Special Equity Fund were 24.44% and 24.44%, respectively, for the
period from 11/01/94 to 10/31/95.
- 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.
- 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.
- Bond Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of the Bond Fund were 13.87% and 13.83%, respectively, for the period
from 11/01/94 to 10/31/95.
- Short Term Income Fund -
The average annualized total returns for Class Y Shares and Class A
Shares of the Short Term Income Fund were 2.87% and 2.57%, respectively, for the
period from 11/01/94 to 10/31/95.
- 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 -
B-34
<PAGE>
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 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
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<PAGE>
expenses accrued for the period, net of reimbursements. This calculation can
be expressed as follows:
A-B 6
Yield = 2[( + 1) - 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.
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.
B-36
<PAGE>
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 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.
B-37
<PAGE>
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.
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
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<PAGE>
railroad retirement benefits received by an individual during any taxable year
will be included in the gross income of such individual if the individual's
modified adjusted gross income (which includes exempt-interest dividends) plus
one-half of the Social Security benefits or railroad retirement benefits
received by such individual during that taxable year exceeds the base amount
described in Section 86 of the Code.
Issuers of bonds purchased by a Fund (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Shareholders should be aware
that exempt-interest dividends may become subject to federal income taxation
retroactively to the date of issuance of the bonds to which such dividends are
attributable if such representations are determined to have been inaccurate or
if the issuers (or the beneficiary) of the bonds fail to comply with certain
covenants made at that time.
The percentage of total dividends paid by each Fund with respect to
any taxable year which qualifies as federal exempt-interest dividends will be
the same for all shareholders receiving dividends during such year. Interest on
indebtedness incurred by a shareholder to purchase or carry Fund shares will
generally not be deductible for federal income tax purposes. Any loss on the
sale or exchange of shares held for six months or less will be disallowed to the
extent of any exempt-interest dividends received by the selling shareholder with
respect to such shares.
In addition, while each of these Funds will seek to invest
substantially all of its assets in tax-exempt obligations (except on a temporary
basis or for temporary defensive periods), any investment company taxable income
earned by a Fund will be distributed. In general, a Fund's investment company
taxable income would include interest income received from Temporary Investments
(as defined herein), plus any net short-term capital gains realized by the Fund,
subject to certain adjustments and excluding net long-term capital gains for the
taxable year over the net short-term capital losses, if any, for such year ("net
capital gains"). To the extent such income is distributed by a Fund (whether in
cash or additional Shares), it will generally be taxable to shareholders as
ordinary income. Additionally, any net capital gains distributed to shareholders
will be taxable to shareholders as 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-one portfolios, consisting of an
institutional class of shares (Class Y) and individual classes of shares (Class
A or Class C), as listed below:
Class of Shares # of Shares Fund
- --------------- ----------- ----
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 50 million Equity Fund
Class A 50 million Equity Fund
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<PAGE>
Class of Shares # of Shares Fund
- --------------- ----------- ----
Class Y 25 million International
Growth Fund
Class A 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 Tax-Free Reserve
Class C 250 million Tax-Free Reserve
Class Y 100 million Balanced Fund
Class A 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 750 million Elite Cash Reserve
Class C 750 million Elite Cash Reserve
Class Y 250 million Elite Treasury Reserve
Class C 250 million Elite Treasury Reserve
Class Y 1 billion Elite Government Reserve
Class C 1 billion Elite Government Reserve
Class Y 250 million Elite Tax-Free Reserve
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<PAGE>
Class of Shares # of Shares Fund
- --------------- ----------- ----
Class C 250 million Elite Tax-Free 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
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 Fund 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).
B-41
<PAGE>
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 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.
B-42
<PAGE>
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.
<TABLE>
<CAPTION>
COMPENSATION TABLE
==================================================================================================
(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
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:
B-43
<PAGE>
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
Patterson & Co. 8,235,206.706 95.47%
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 Growth Equity Fund:
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
Patterson & Co. 25,970.755 12.10%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
- 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:
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
B-44
<PAGE>
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
- Special Equity Fund -
As of May 10, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Special Equity Fund:
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
MAM & Co. 5,144,345.7910 97.01%
c/o Kim Kutzer
P.O. Box 16004
Reading, PA 19612-6024
As of May 10, 1996, the following account was a holder of record of
5% or more of the outstanding Class A Shares of Special Equity Fund:
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
NFSC 23,961.4370 26.65%
One World Financial Center
P.O. Box 3908
Church Street
New York, NY 10008-3908
State Street Bank and Trust Company 5,428.2240 6.06%
For the IRA Rollover of
Bernard J. Daney
121 Ponds Lane
Wilmington, DE 19807-2129
- 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-45
<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-46
<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
- Bond Fund -
As of May 10, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Bond Fund:
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
MAM Co. 18,816,960.2150 99.35%
P.O. Box 16004
Reading, PA 19612-6004
B-47
<PAGE>
As of May 10, 1996, the following account was a holder of record of
5% or more of the outstanding Class A Shares of Bond Fund:
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
NFSC 36,064.5760 28.32%
One World Financial Center
P.O. Box 3508
Church St. Station
New York, NY 10019-3909
Meridian Trust Company 9,697.3150 7.61%
For IRA Rollover of Shiras E. Holmes
8761 W. Barkhurst Ave.
Pittsburgh, PA 15237-4193
- 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:
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 Financial 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
B-48
<PAGE>
Irene Sungaila 5,049.49 5.00%
5214 Burton Street
Philadelphia, PA 19124
- Short Term Income Fund -
As of May 10, 1996, the following account was a holder of record of
5% or more of the outstanding Class Y Shares of Short Term Income Fund:
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
MAM & Co. 3,081,762.5710 99.95%
c/o Kim Kutzer
P.O. Box 16004
Reading, PA 19612-6004
As of May 10, 1996, the following account was a holder of record of
5% or more of the outstanding Class A Shares of Short Term Income Fund:
Name Amount of Record Percent of Total
---- ---------------- ----------------
Ownership Shares Outstanding
--------- ------------------
BFDS 20.251 39.09%
2 Heritage Drive
8th Floor
North Quincy, MA 02171-2144
Meridian Trust Company 12.2440 23.63%
For Christopher S. Harrison
1755 Third Ave.
York, PA 17403-1912
Meridian Trust Company 9.0730 17.51%
For Betty V. Walter
64 York Rd.
Jacobus, PA 17407-1110
SEI Financial Services 5.2580 10.15%
680 E. Swedesford Road
Wayne, PA 19087-1610
Meridian Trust Company 4.5390 8.76%
For Nancy Lee DeCarlucci
943 Florida Avenue
Pittsburgh, PA 15228-2055
- 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:
B-49
<PAGE>
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
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:
B-50
<PAGE>
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
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:
B-51
<PAGE>
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
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:
B-52
<PAGE>
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
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
- Elite Cash Reserve (formerly Fiduciary Reserve)-
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding shares of Elite Cash 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
- Elite Treasury Reserve (formerly Fiduciary Treasury Reserve) -
As of April 16, 1996, the following account was a holder of record of
5% or more of the outstanding shares of Elite 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-53
<PAGE>
- Elite Tax-Free Reserve (formerly 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 Elite 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
B-54
<PAGE>
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 Corp acquired 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 (except for the Pennsylvania Municipal Bond Fund) approved new
investment advisory agreements with CoreStates Advisors as well as new
investment sub-advisory agreements with all existing sub-advisors to the Funds.
The Pennsylvania Municial Bond Fund intends to resolicit a proxy statement to
shareholders for the purpose of approving a new investment advisory agreement.
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.
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<PAGE>
For the fiscal year ended June 30, 1995, CoreStates Advisers was paid
investment advisory fees by Equity Fund totalling $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.
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<PAGE>
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 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 Elite Treasury Reserve (formerly 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 Elite Cash Reserve (formerly 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 Elite Tax-Free Reserve (formerly 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.
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.
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<PAGE>
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.
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.
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<PAGE>
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 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
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<PAGE>
inquire or take into consideration whether the issuer of securities proposed for
purchase or sale by a Fund is another commercial customer of any of the Advisers
and, in dealing with their other commercial customers, the Advisers will not
inquire or take into consideration whether securities of those customers are
held by a Fund.
It is expected that the Funds may execute brokerage or other agency
transactions through the Distributor, a registered broker-dealer, or an
affiliate of the Adviser for a commission in conformity with the Investment
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
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<PAGE>
It is not a policy of the Funds to purchase or sell securities for
trading purposes. However, the Advisers manage the Funds without regard
generally to restrictions on portfolio turnover, except those imposed by
provisions of the federal tax laws regarding short-term trading. Generally, the
Funds will not trade for short-term profits, but when circumstances warrant,
investments may be sold without regard to the length of time held. It is
expected that the Equity Funds' annual portfolio turnover rates will not exceed
100%. A 100% turnover rate would occur, for example, if all of a portfolio's
securities are replaced within a one year period. With respect to the Fixed
Income Funds, the annual portfolio turnover rate may exceed 100% due to changes
in portfolio duration, yield curve strategy or commitments to forward delivery
mortgage-backed securities. The portfolio turnover rate for the Global Bond Fund
during its first year of operation could be as high as 400%. With the exception
of Global Bond, however, it is expected that the annual turnover rate for the
Fixed Income Funds will not exceed 250%.
High rates of portfolio turnover necessarily result in correspondingly
heavier brokerage and portfolio trading costs which are paid by a Fund. Trading
in fixed income securities does not generally involve the payment of brokerage
commissions, but does involve indirect transaction costs. In addition to
portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains. 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
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<PAGE>
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.
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
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<PAGE>
$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 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, Elite Treasury Reserve
(formerly 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, Elite Cash Reserve
(formerly 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, Elite Tax-Free Reserve
(formerly 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.
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
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this 12b-1 Plan and related distribution agreement; (vii) assisting customers in
changing dividend options, account designations and addresses; (viii) performing
sub-accounting functions; (ix) processing dividend payments from the Funds on
behalf of customers; (x) forwarding certain shareholder communications from the
Funds (such as proxies, Shareholder reports and dividend, distribution and tax
notices) to customers; and (xi) providing such other similar services as may be
reasonably requested to the extent they are permitted to do so under applicable
statutes, rules or regulations. The actual fee paid to a securities
broker/dealer or financial institution will be based upon the extent and quality
of the services provided.
Continuance of the Plan must be approved annually by shareholders or by
a majority of the Directors of the Company and by a majority of the Directors
who are not interested persons (as defined in the Investment Company Act) and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreement relating to the Plan (the "Qualified Directors"). The Plan
requires that quarterly reports of such expenditures be furnished to and
reviewed by the Directors. The Plan may not be amended to materially increase
the amount which may be spent thereunder without approval by a majority of the
outstanding shares of the affected Fund series. All material amendments of the
Plan require approval by a majority of the Directors of the Company and the
Qualified Directors.
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
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Fund. Such fees are based upon relative asset values and shareholder
accounts, and may include certain transaction charges and out-of-pocket
expenses.
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.
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<PAGE>
The Funds' Prospectuses and this Statement of Additional Information do
not constitute an offering of the securities herein described in any state in
which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses and this Statement of Additional
Information.
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<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.
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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.
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<PAGE>
FINANCIAL STATEMENTS
- All Funds -
The following are the audited financial statements of each Fund except
the Equity, Special Equity, Bond and Short Term Income Funds, for the
fiscal year ended June 30, 1995 and unaudited financial statements as of
December 31, 1995. For the audited financial statements, the reports of Ernst &
Young LLP, independent auditors, appears in the CoreFunds' 1995 Annual Report to
Shareholders. For the Equity, Special Equity, Bond and Short Term Income Funds,
audited 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.
For purposes of the filing of this Post-Effective Amendment No. 27,
such audited and unaudited financial statements and reports of independent
auditors are incorporated by reference to Post-Effective Amendment No. 26 to
the CoreFunds Registration Statement on Form N-1A (File No. 2-93214) filed with
the SEC on April 19, 1996.
FS-1
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,
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<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.
*(n) Articles of Amendment dated March 6, 1996 to
Registrant's Articles of Incorporation dated
September 11, 1984.
*(o) Articles Supplementary dated March 29, 1996
to Registratant's Articles of Incorporation
dated September 11, 1984.
(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.
C-3
<PAGE>
(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-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-
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<PAGE>
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 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
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<PAGE>
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 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
C-6
<PAGE>
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 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.
C-7
<PAGE>
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
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.
C-8
<PAGE>
(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.
(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.
*(c) Custodian Agreement between Registrant and
CoreStates Bank, N.A. dated June 2, 1995.
(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.
C-9
<PAGE>
(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 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.
*(g) Transfer Agent Agreement between the
Registrant and State Street Bank and Trust
Company dated November 16, 1995.
(10) Opinion and consent of Morgan, Lewis &
Bockius LLP, filed under Rule 24f-2 as part
of Registrant's Rule 24f-2 Notice.
*(11) Consent of Ernst & Young LLP dated
May 10, 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.
C-10
<PAGE>
(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 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
C-11
<PAGE>
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
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
C-12
<PAGE>
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 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
C-13
<PAGE>
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:
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").
C-14
<PAGE>
(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 --
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 --
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
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 --
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) State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02110 (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(a) under the 1933 Act and has duly
caused this Post-Effective Amendment No. 27 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 10th day
of May, 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.
27 to the Registration Statement has been signed below by the following persons
in the capacities and on the date(s) indicated.
/s/ David G. Lee President & Chief May 10, 1996
- ----------------- Executive Officer
David G. Lee
* Director May 10, 1996
- ----------------------
Erin Anderson
* Director May 10, 1996
- ----------------------
Emil J. Mikity
* Director May 10, 1996
- ----------------------
George H. Strong
<PAGE>
/s/ Stephen G. Meyer Controller May 10, 1996
- ---------------------
Stephen G. Meyer
* Treasurer & May 10, 1996
- ----------------------
Carmen V. Romeo Assistant Secretary
*By: /s/ David G. Lee
-----------------
David G. Lee
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
1(n) Articles of Amendment dated March 6, 1996
1(o) Articles Supplementary dated March 29, 1996.
8(c) Custodian Agreement between Registrant and CoreStates Bank,
N.A.
9(g) Transfer Agent Agreement between Registrant and State Street
Bank and Trust Company
11 Consent of Ernst & Young LLP
27 Financial Data Schedule
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statements
of Additional Information for 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, Elite Cash Reserve Fund (formerly the Fiduciary Reserve
Fund), Elite Treasury Reserve Fund (formerly the Fiduciary Treasury Reserve
Fund), and Elite Tax-Free Reserve Fund (formerly the 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
or 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, in Post-Effective Amendment No. 27 to the Registration
Statement (Form N-1A No. 33-93214) and related Prospectuses of CoreFunds, Inc.,
which are incorporated by reference in its Post-Effective Amendment No. 26
to the Registration Statement (Form N-1A No. 33-93214) filed with the
Securities and Exchange Commission on April 19, 1996.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
May 10, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000752761
<NAME> COREFUND, INC.
<SERIES>
<NUMBER> 031
<NAME> ELITE CASH RESERVE (formerly Fiduciary Reserve)
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 348520
<INVESTMENTS-AT-VALUE> 348520
<RECEIVABLES> 75
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 348596
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1825
<TOTAL-LIABILITIES> 1825
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 346771
<SHARES-COMMON-STOCK> 346771
<SHARES-COMMON-PRIOR> 406597
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 346771
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11571
<OTHER-INCOME> 0
<EXPENSES-NET> (399)
<NET-INVESTMENT-INCOME> 11232
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 11232
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11232)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 224287
<NUMBER-OF-SHARES-REDEEMED> (284113)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (59826)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1610
<AVERAGE-NET-ASSETS> 394001
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000752761
<NAME> COREFUND, INC.
<SERIES>
<NUMBER> 101
<NAME> ELITE TAX FREE (formerly Fiduciary Tax-Free)
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-01-1995
<INVESTMENTS-AT-COST> 76688
<INVESTMENTS-AT-VALUE> 76688
<RECEIVABLES> 561
<ASSETS-OTHER> 2
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<TABLE> <S> <C>
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<CIK> 0000752761
<NAME> COREFUND, INC.
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<NAME> ELITE TREASURY (formerly Fidicuary Treasury)
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</TABLE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
COREFUNDS, INC.
COREFUNDS, INC. (the "Corporation"), formerly named Red Oak
Cash Reserve Fund, Inc., a corporation organized under the laws of the State of
Maryland, having its principal place of business at 680 East Swedesford Road,
Wayne, Pennsylvania 19087, does hereby certify to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940. As hereinafter set forth, the
Corporation has classified its authorized, unissued and unclassified capital
stock in accordance with Section 2-105(c) of the Maryland General Corporation
Law and under authority contained in the Articles of Incorporation of the
Corporation.
SECOND: Pursuant to the authority contained in Section
2-605(a)(4) of the Maryland General Corporation Law and under authority
contained in Article VI of the Articles of Incorporation, the Board of Directors
by a resolution adopted at a meeting held on December 7, 1995, voted to change
the designation of its portfolio classes or series of common stock in order to
conform such class designations to industry standards for the benefit of
shareholders.
THIRD: Pursuant to the requirements of Section 2-607 of the
Maryland General Corporation Law, the Board of Directors has determined to file
of record these Articles of Amendment, which Amendment is limited to a change
expressly permitted by Section 2-605 of the Maryland General Corporation Law,
and was approved by a majority of the Board without action by shareholders, and
that such Amendment is solely for the purpose of changing the designation of the
Corporation's classes and series of common stock.
FOURTH: The Articles of Amendment of the Corporation are
hereby amended by changing the designations of the Corporation's classes and
series of common stock set forth in Article VI of the Articles of Incorporation,
as supplemented, as follows:
Class A Common Stock and Class A Common Stock, Series B shall be
designated as Cash Reserve Class Y and Cash Reserve Class C,
respectively; Class B Common Stock and Class B Common Stock, Series B
shall be designated as Treasury Reserve Class Y and Treasury Reserve
Class C, respectively; Class C Common Stock shall be designated as
Fiduciary Reserve Class Y; Class D Common Stock and Class D Common
<PAGE>
Stock, Series B shall be designated as Equity Fund Class Y and Equity
Fund Class A, respectively; Class E Common Stock and Class E Common
Stock, Series B shall be designated as International Growth Fund Class
Y and International Growth Fund Class A, respectively; Class F Common
Stock shall be designated as Equity Index Fund Class Y; Class G Common
Stock and Class G Common Stock, Series B shall be designated as Growth
Equity Fund Class Y and Growth Equity Fund Class A, respectively; Class
H Common Stock and Class H Common Stock, Series B shall be designated
as Short Intermediate Bond Fund Class Y and Short Intermediate Bond
Fund Class A, respectively; Class I Common Stock shall be designated as
Fiduciary Tax-Free Reserve Class Y; Class J Common Stock and Class J
Common Stock, Series B shall be designated as Tax-Free Reserve Class Y
and Tax-Free Reserve Class C, respectively; Class K Common Stock shall
be designated as Fiduciary Treasury Reserve Class Y; Class L Common
Stock and Class L Common Stock, Series B shall be designated as
Balanced Fund Class Y and Balanced Fund Class A, respectively; Class M
Common Stock and Class M Common Stock, Series B shall be designated as
Government Income Fund Class Y and Government Income Fund Class A,
respectively; Class N Common Stock and Class N Common Stock, Series B
shall be designated as Intermediate Bond Fund Class Y and Intermediate
Bond Fund Class A, respectively; Class O Common Stock and Class O
Common Stock, Series B shall be designated as Global Bond Fund Class Y
and Global Bond Fund Class A, respectively; Class P Common Stock and
Class P Common Stock, Series B shall be designated as Pennsylvania
Municipal Bond Fund Class Y and Pennsylvania Municipal Bond Fund Class
A, respectively; Class Q Common Stock and Class Q Common Stock, Series
B shall be designated as New Jersey Municipal Bond Fund Class Y and New
Jersey Municipal Bond Fund Class A, respectively; Class R Common Stock
shall be designated as Elite Cash Reserve Class Y; Class S Common Stock
shall be designated as Elite Government Reserve Class Y; and Class T
Common Stock shall be designated as Elite Treasury Reserve Class Y.
FIFTH: As so redesignated each share of Cash Reserve Class Y,
Cash Reserve Class C, Treasury Reserve Class Y, Treasury Reserve Class C,
Fiduciary Reserve Class Y, Equity Fund Class Y, Equity Fund Class A,
International Growth Fund Class Y, International Growth Fund Class A, Equity
Index Fund Class Y, Growth Equity Fund Class Y, Growth Equity Fund Class A,
Short Intermediate Bond Fund Class Y, Short Intermediate Bond Fund Class A,
Fiduciary Tax-Free Reserve Class Y, Tax-Free Reserve Class Y, Tax-Free Reserve
Class C, Fiduciary Treasury Reserve Class Y, Balanced Fund Class Y, Balanced
Fund Class A, Government Income Fund Class Y, Government Income Fund Class A,
Intermediate Municipal Bond Fund Class Y, Intermediate Municipal Bond Fund Class
A, Global Bond Fund Class Y, Global Bond Fund Class A,
2
<PAGE>
Pennsylvania Municipal Bond Fund Class Y, Pennsylvania Municipal Bond Fund Class
A, New Jersey Municipal Bond Fund Class Y, New Jersey Municipal Bond Fund Class
A, Elite Cash Reserve Class Y, Elite Government Reserve Class Y, Elite Treasury
Reserve Class Y and Class U Common Stock shall have all the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption that are set
forth in the Corporation's Articles of Incorporation with respect to its shares
of capital stock.
SIXTH: The officers of the Corporation be, and each of them
hereby is, authorized and empowered to execute and deliver any and all
documents, instruments, papers and writings, including but not limited to these
Articles of Amendment to be filed with the State Department of Assessments and
Taxation of Maryland and to do any and all other acts in the name of the
Corporation, or on its behalf, as may be necessary or desirable in connection
with the furtherance of the foregoing resolutions.
SEVENTH: The aforesaid action by the Board of Directors of
the Corporation was taken pursuant to authority and power contained in the
Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, COREFUNDS, INC. has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested by its Secretary as of the
29th day of February, 1996.
COREFUNDS, INC.
By: /s/ David G. Lee
-------------------------
David G. Lee
President
[SEAL]
Attest:
/s/ James W. Jennings
- -------------------------
James W. Jennings, Esq.
Secretary
3
<PAGE>
THE UNDERSIGNED, President of COREFUNDS, INC., who executed on
behalf of said corporation the foregoing Articles of Amendment to the Charter,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said corporation, the foregoing Articles of Amendment to the
Charter to be the corporate act of said corporation and further certifies that,
to the best of his knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in all material
respects, under the penalties of perjury.
/s/ David G. Lee
----------------------------
David G. Lee
President
4
COREFUNDS, INC.
ARTICLES SUPPLEMENTARY
COREFUNDS, INC. (the "Corporation"), formerly named Red Oak
Cash Reserve Fund, Inc., a corporation organized under the laws of the State of
Maryland, does hereby file for record with the State Department of Assessments
and Taxation of Maryland the following Articles Supplementary to its Articles of
Incorporation:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940. As hereinafter set forth, the
Corporation has classified its authorized, unissued and unclassified capital
stock in accordance with Section 2-105(c) of the Maryland General Corporation
Law and under authority contained in the Articles of Incorporation of the
Corporation.
SECOND: Immediately before the increase and classification
hereinbefore set forth and upon filing for record these Articles Supplementary,
the Corporation has authority to issue twenty billion (20,000,000,000) shares of
the Corporation of the par value of one mill ($.001) per share and of the
aggregate par value of twenty million dollars ($20,000,000), of which one
billion (1,000,000,000) are classified as Cash Reserve Class Y, one billion
(1,000,000,000) are classified as Cash Reserve Class C, one billion
(1,000,000,000) are classified as Treasury Reserve Class Y, one billion
(1,000,000,000) are classified as Treasury Reserve Class C, seven hundred fifty
million (750,000,000) are classified as Fiduciary Reserve Class Y, twenty-five
million (25,000,000) are classified as Equity Fund Class Y, twenty-five million
(25,000,000) are classified as Equity Fund Class A, twenty-five million
(25,000,000) are classified as International Growth Fund Class Y, twenty-five
million (25,000,000) are classified as International Growth Fund Class Y, five
hundred million (500,000,000) are classified as Equity Index Fund Class Y, one
hundred million (100,000,000) are classified as Growth Equity Fund Class Y, one
hundred million (100,000,000) are classified as Growth Equity Fund Class A, one
hundred million (100,000,000) are classified as Short Intermediate Bond Fund
Class Y, one hundred million (100,000,000) are classified as Short Intermediate
Bond Fund Class A, two hundred fifty million (250,000,000) are classified as
Fiduciary Tax-Free Class Y, two hundred fifty million (250,000,000) are
classified as Tax-Free Reserve Class Y, two hundred fifty million (250,000,000)
are classified as Tax-Free Reserve Class C, two hundred fifty million
(250,000,000) are classified as Fiduciary Treasury Reserve Class Y, one hundred
million (100,000,000) are classified as Balanced Fund Class Y, one hundred
million (100,000,000) are classified as Balanced Fund Class A, one hundred
million (100,000,000) are classified as Government Income Fund Class Y, one
hundred million (100,000,000) are classified as Government Income Fund Class A,
one hundred million (100,000,000) are classified as Intermediate Municipal Bond
Fund Class Y, one hundred million (100,000,000) are classified as Intermediate
Municipal Bond Fund Class A, twenty-five million (25,000,000) are classified as
Global Bond Fund Class Y, twenty-five million (25,000,000) are classified as
Global Bond Fund Class A, one hundred million (100,000,000) are classified as
Pennsylvania Municipal Bond Fund Class Y, one
<PAGE>
hundred million (100,000,000) are classified as Pennsylvania Municipal Bond Fund
Class A, one hundred million (100,000,000) are classified as Class P Common
Stock, Series C, one hundred million (100,000,000) are classified as New Jersey
Municipal Bond Fund Class Y, one hundred million (100,000,000) are classified as
New Jersey Municipal Bond Fund Class A, one hundred million (100,000,000) are
classified as Class Q Common Stock, Series C, one billion (1,000,000,000) are
classified as Elite Cash Reserve Class Y, one billion (1,000,000,000) are
classified as Elite Government Reserve Class Y, one billion (1,000,000,000) are
classified as Elite Treasury Reserve Class Y, one billion (1,000,000,000) are
classified as Class U Common Stock, and two billion (2,000,000,000) are
unclassified.
THIRD: Pursuant to the authority contained in Section 2-105(c)
of the Maryland General Corporation Law, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
approved an increase in the aggregate number of shares of common stock that the
Corporation has to issue from twenty billion (20,000,000,000) of the par value
of one mill ($.001) to thirty billion (30,000,000,000) of the par value of one
mill ($.001), with an aggregate par value of thirty million dollars
($30,000,000).
FOURTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified one billion (1,000,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Special Equity Fund Class Y, of the
par value of one mill ($.001) per share.
FIFTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified one billion (1,000,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Special Equity Fund Class A, of the
par value of one mill ($.001) per share.
SIXTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified one billion (1,000,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Short-Term Income Fund Class Y, of the
par value of one mill ($.001) per share.
SEVENTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified one billion (1,000,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Short-Term Income Fund Class A, of the
par value of one mill ($.001) per share.
2
<PAGE>
EIGHTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified one billion (1,000,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Bond Fund Class Y, of the par value of
one mill ($.001) per share.
NINTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified one billion (1,000,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Bond Fund Class A, of the par value of
one mill ($.001) per share.
TENTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified two hundred and fifty million (250,000,000) of the authorized,
unissued and unclassified shares of the Corporation as Treasury Reserve Class Y,
of the par value of one mill ($.001) per share.
ELEVENTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified two hundred fifty million (250,000,000) of the authorized, unissued
and unclassified shares of the Corporation as Treasury Reserve Class C, of the
par value of one mill ($.001) per share.
TWELFTH: Pursuant to the authority contained in Article VI of
the Articles of Incorporation of the Corporation, the Board of Directors of the
Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified twenty-five million (25,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Equity Fund Class Y, of the par value
of one mill ($.001) per share.
THIRTEENTH: Pursuant to the authority contained in Article VI
of the Articles of Incorporation of the Corporation, the Board of Directors of
the Corporation, by a resolution adopted at a meeting held on December 7, 1995,
classified twenty-five million (25,000,000) of the authorized, unissued and
unclassified shares of the Corporation as Equity Fund Class A, of the par value
of one mill ($.001) per share.
FOURTEENTH: Each share of Cash Reserve Class Y, Cash Reserve
Class C, Treasury Reserve Class Y, Treasury Reserve Class C, Fiduciary Reserve
Class Y, Equity Fund Class Y, Equity Fund Class A, International Growth Fund
Class Y, International Growth Fund Class A, Equity Index Fund Class Y, Growth
Equity Fund Class Y, Growth Equity Fund Class A, Short Intermediate Bond Fund
Class Y, Short Intermediate Bond Fund Class A, Fiduciary Tax-Free Reserve Class
Y, Tax-Free Reserve Class Y, Tax-Free Reserve Class C, Fiduciary Treasury
Reserve Class Y, Balanced Fund Class Y, Balanced Fund Class A, Government Income
Fund Class Y,
3
<PAGE>
Government Income Fund Class A, Intermediate Municipal Bond Fund Class Y,
Intermediate Municipal Bond Fund Class A, Global Bond Fund Class Y, Global Bond
Fund Class A, Pennsylvania Municipal Bond Fund Class Y, Pennsylvania Municipal
Bond Fund Class A, Class P Common Stock, Series C, New Jersey Municipal Bond
Fund Class Y, New Jersey Municipal Bond Fund Class A, Class Q Common Stock,
Series C, Elite Cash Reserve Class Y, Elite Government Reserve Class Y, Elite
Treasury Reserve Class Y, Class U Common Stock, Special Equity Fund Class Y,
Special Equity Class A, Short-Term Income Fund Y, Short-Term Income Fund A, Bond
Fund Class Y and Bond Fund Class A shall have all the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption that are set forth in the
Corporation's Articles of Incorporation with respect to its shares of capital
stock.
FIFTEENTH: For any class or series that adopts a rule 12b-1
plan pursuant to the Investment Company Act of 1940, expenses related to the
distribution of, and other identified expenses that should properly be allocated
to, the shares of such particular class or series of capital stock may be
charged to and borne solely by such class or series and the bearing of expenses
solely by that class or series of capital stock may be appropriately reflected
(in a manner determined by the Board of Directors) and cause differences in the
net asset value attributable to, and the dividend, redemption and liquidation
rights of, the shares of each such class or series of capital stock.
SIXTEENTH: Immediately after the increase and classification
hereinbefore set forth and upon filing for record these Articles Supplementary,
the Corporation has authority to issue thirty billion (30,000,000,000) shares of
the Corporation of the par value of one mill ($.001) per share and of the
aggregate par value of thirty million dollars ($30,000,000), of which one
billion (1,000,000,000) are classified as Cash Reserve Class Y, one billion
(1,000,000,000) are classified as Cash Reserve Class C, one billion two hundred
fifty million (1,250,000,000) are classified as Treasury Reserve Class Y, one
billion two hundred fifty million (1,250,000,000) are classified as Treasury
Reserve Class C, seven hundred fifty million (750,000,000) are classified as
Fiduciary Reserve Class Y, fifty million (50,000,000) are classified as Equity
Fund Class Y, fifty million (50,000,000) are classified as Equity Fund Class A,
twenty-five million (25,000,000) are classified as International Growth Fund
Class Y, twenty-five million (25,000,000) are classified as International Growth
Fund Class Y, five hundred million (500,000,000) are classified as Equity Index
Fund Class Y, one hundred million (100,000,000) are classified as Growth Equity
Fund Class Y, one hundred million (100,000,000) are classified as Growth Equity
Fund Class A, one hundred million (100,000,000) are classified as Short
Intermediate Bond Fund Class Y, one hundred million (100,000,000) are classified
as Short Intermediate Bond Fund Class A, two hundred fifty million (250,000,000)
are classified as Fiduciary Tax-Free Class Y, two hundred fifty million
(250,000,000) are classified as Tax-Free Reserve Class Y, two hundred fifty
million (250,000,000) are classified as Tax-Free Reserve Class A, two hundred
fifty million (250,000,000) are classified as Fiduciary Treasury Reserve Class
Y,
4
<PAGE>
one hundred million (100,000,000) are classified as Balanced Fund Class Y, one
hundred million (100,000,000) are classified as Balanced Fund Class A, one
hundred million (100,000,000) are classified as Government Income Fund Class Y,
one hundred million (100,000,000) are classified as Government Income Fund Class
A, one hundred million (100,000,000) are classified as Intermediate Municipal
Bond Fund Class Y, one hundred million (100,000,000) are classified as
Intermediate Municipal Bond Fund Class A, twenty-five million (25,000,000) are
classified as Global Bond Fund Class Y, twenty-five million (25,000,000) are
classified as Global Bond Fund Class A, one hundred million (100,000,000) are
classified as Pennsylvania Municipal Bond Fund Class Y, one hundred million
(100,000,000) are classified as Pennsylvania Municipal Bond Fund Class A, one
hundred million (100,000,000) as classified as Class P Common Stock, Series C,
one hundred million (100,000,000) are classified as New Jersey Municipal Bond
Fund Class Y, one hundred million (100,000,000) are classified as New Jersey
Municipal Bond Fund Class A, one hundred million (100,000,000) are classified as
Class Q Common Stock, Series C, one billion (1,000,000,000) are classified as
Elite Cash Reserve Class Y, one billion (1,000,000,000) are classified as Elite
Government Reserve Class Y, one billion (1,000,000,000) are classified as Elite
Treasury Reserve Class Y, one billion (1,000,000,000) are classified as Class U
Common Stock, one billion (1,000,000,000) are classified as Special Equity Fund
Class Y, one billion (1,000,000,000) are classified as Special Equity Fund Class
A, one billion (1,000,000,000) are classified as Short-Term Income Fund Class Y,
one billion (1,000,000,000) are classified as Short-Term Income Fund Class Y,
one billion (1,000,000,000) are classified as Short-Term Income Fund Class A,
one billion (1,000,000,000) are classified as Bond Fund Class Y, one billion
(1,000,000,000) are classified as Short-Term Income Fund Class A and eleven
billion four hundred fifty million (11,450,000,000) are unclassified.
SEVENTEENTH: The aforesaid action by the Board of Directors of
the Corporation was taken pursuant to authority and power contained in the
Articles of Incorporation of the Corporation.
5
<PAGE>
IN WITNESS WHEREOF, COREFUNDS, INC. has caused these presents
to be signed in its name and on its behalf by its President and its corporate
seal to be hereunto affixed and attested by its Secretary as of the 26th day of
March, 1996.
COREFUNDS, INC.
By: /s/ David G. Lee
--------------------------
David G. Lee
President
[SEAL]
Attest:
/s/ James W. Jennings
- ----------------------
James W. Jennings
Secretary
6
<PAGE>
THE UNDERSIGNED, President of COREFUNDS, INC., who executed on
behalf of said corporation the foregoing Articles Supplementary to the Charter,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said corporation, the foregoing Articles Supplementary to the
Charter to be the corporate act of said corporation and further certifies that,
to the best of his knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in all material
respects, under the penalties of perjury.
/s/ David G. Lee
------------------------
David G. Lee
President
7
CUSTODIAN AGREEMENT
COREFUNDS, INC.
This Agreement, dated as of the 2nd day of June, 1995 by and
between COREFUNDS, INC. (the "Fund"), a Maryland Corporation, and
CoreStates Bank, N.A. (the "Bank").
WITNESSETH:
WHEREAS, the Fund desires to appoint the Bank to act as
Custodian of its portfolio securities, cash and-other property
from time to time deposited with or collected by the Bank for the
Fund;
WHEREAS, the Bank is qualified and authorized to act as
Custodian for the Fund and the separate series thereof (each a
"Portfolio" and, collectively, the "Portfolios"), and is willing
to act in such capacity upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto, intending
to be legally bound, do hereby agree as follows:
SECTION 1. The terms as defined in this Section wherever used in
this Agreement, or in any amendment or supplement hereto, shall
have meanings herein specified unless the context otherwise
requires .
CUSTODIAN: The term Custodian shall mean the Bank in its
capacity as Custodian under this Agreement.
DEPOSITORY: The term Depository means any depository service
which acts as a system for the central handling of securities
where all securities of any particular class or series of an
issuer deposited within the system are treated as fungible and
may be transferred by bookkeeping entry without physical
delivery.
PROPER INSTRUCTIONS. For purposes of this Agreement, the
Custodian shall be deemed to have received Proper Instructions
upon receipt of written (including instructions received by means
of computer terminals or facsimile transmissions), telephone or
telegraphic instructions from a person or persons authorized from
time to time by the Directors of the Fund to give the particular
class of instructions. Telephone or telegraphic instructions
shall be confirmed in writing by such person or persons as said
Directors shall have from time to time authorized to give the
particular class of instructions in question. The Custodian may
act upon telephone or telegraphic instructions without awaiting
<PAGE>
receipt of written confirmation, and shall not be liable for the
Fund's failure to confirm such instructions in writing.
SECURITIES: The term Securities means stocks, bonds, rights,
warrants and all other negotiable or non-negotiable paper issued
in certificated or book-entry form commonly known as "securities"
in banking custom or practice.
SHAREHOLDERS: The term Shareholders shall mean the registered
owners from time to time of the Shares of the Fund in accordance
with the registry records maintained by the Fund or agents on its
behalf.
SHARES: The term Shares of the Fund shall mean the issued and
outstanding shares of common stock of the Fund.
SECTION 2. The Fund hereby appoints the Custodian as Custodian
of the Fund's cash, Securities and other property, to be held by
the Custodian as provided in this Agreement. The Custodian
hereby accepts such appointment subject to the terms and
conditions hereinafter provided. The Bank shall open a separate
custodial account in the name of the Fund on the books and
records of the Bank to hold the Securities of the Fund deposited
with, transferred to or collected by the Bank for the account of
the Fund, and a separate cash account to which the Bank shall
credit monies received by the Bank for the account of or from the
Fund. Such cash shall be segregated from the assets of others
and shall be and remain the sole property of the Fund.
SECTION 3. The Fund shall from time to time file with the
Custodian a certified copy of each resolution of its Board of
Directors authorizing the person or persons to give Proper
Instructions and specifying the class of instructions that may be
given by each person to the Custodian under this Agreement,
together with certified signatures of such persons authorized to
sign, which shall constitute conclusive evidence of the authority
of the officers and signatories designated therein to act, and
shall be considered in full force and effect with the Custodian
fully protected in acting in reliance thereon until it receives
written notice to the contrary; provided, however, that if the
certifying officer is authorized to give Proper Instructions, the
certification shall be also signed by a second officer of the
Fund.
SECTION 4. The Fund will cause to be deposited with the
Custodian hereunder the applicable net asset value of Shares sold
from time to time whether representing initial issue, other stock
or reinvestments of dividends and/or distributions payable to
Shareholders.
-2-
<PAGE>
SECTION 5. The Bank, acting as agent for the Fund, is
authorized, directed and instructed subject to the further
provisions of this Agreement:
(a) to hold Securities issued only in bearer form in bearer form;
(b) to register in the name of the nominee of the Bank, the Bank's
Depositories, or sub-custodians, (i) Securities issued only in registered
form, and (ii) Securities issued in both bearer and registered form, which
are freely interchangeable without penalty;
(c) to deposit any Securities which are eligible for deposit (i) with any
domestic or foreign Depository on such terms and conditions as such
Depository may require, including provisions for limitation or exclusion of
liability on the part of the Depository; and (ii) with any sub-custodian
which the Bank uses, including any subsidiary or affiliate of the Bank;
(d) (i) to credit for the account of the Fund all proceeds received and
payable on or in respect of the assets maintained hereunder,
(ii) to debit the account of the Fund for the cost of acquiring Securities
the Bank has received for the Fund, against delivery of such
Securities to the Bank,
(iii) to present for payment Securities and other obligations (including
coupons) upon maturity, when called for redemption, and when income
payments are due, and
(iv) to make exchanges of Securities which, in the Bank's opinion, are
purely ministerial as, for example, the exchange of Securities in
temporary form for Securities in definitive form or the mandatory
exchange of certificates
(e) to forward to the Fund, and/or any other person designated by the Fund, all
proxies and proxy materials received by the Bank in connection with
Securities held in the Fund's account, which have been registered in the
name of the Bank's nominee, or are being held by any Depository, or
sub-custodian, on behalf of the Bank;
(f) to sell any fractional interest of any Securities which the Bank has
received resulting from any stock
-3-
<PAGE>
dividend, stock split, distribution, exchange, conversion or similar activity;
(g) to release the Fund's name, address and aggregate share position to the
issuers of any domestic Securities in the account of the Fund, provided,
however, the Fund may instruct the Bank not to provide any such information
to any issuer;
(h) to endorse and collect all checks, drafts or other orders for the payment
of money received by the Bank for the account of or from the Fund;
(i) at the direction of the Fund, to enroll designated Securities belonging to
the Fund and held hereunder in a program for the automatic reinvestment of
all income and capital gains distributions on those Securities in new
shares (an "Automatic Reinvestment Program"), or instruct any Depository
holding such Securities to enroll those Securities in an Automatic
Reinvestment Program;
(j) at the direction of the Fund, to receive, deliver and transfer Securities
and make payments and collections of monies in connection therewith, enter
purchase and sale orders and perform any other acts incidental or necessary
to the performance of the above acts with brokers, dealers or similar
agents selected by the Fund, including any broker, dealer or similar agent
affiliated with the Bank, for the account and risk of the Fund in
accordance with accepted industry practice in the relevant market,
provided, however, if it is determined that any certificated Securities
transferred to a Depository or sub-custodian, the Bank, or the Bank's
nominee, the Bank's sole responsibility for such Securities under this
Agreement shall be to safekeep the Securities in accordance with Section 11
hereof; and
(k) to notify the Fund and/or any other person designated by the Fund upon
receipt of notice by the Bank of any call for redemption, tender offer,
subscription rights, merger, consolidation, reorganization or
recapitalization which (i) appears in The Wall Street Journal (New York
edition), The Standard & Poor's Called Bond Record for Preferred Stocks,
Financial Daily Called Bond Service, The Kenny Services, any official
notifications from The Depository Trust Company and such other publications
or services to which the Bank may from time to time subscribe, (ii)
requires the Bank to act in response thereto, and (iii) pertain to
Securities belonging to the Fund and held
-4-
<PAGE>
hereunder which have been registered in the name of the Bank's nominee or
are being held by a Depository or sub-custodian on behalf of the Bank.
Notwithstanding anything contained herein to the contrary, the Fund shall
have the sole responsibility for monitoring the applicable dates on which
Securities with put option features must be exercised. All solicitation
fees payable to the Bank as agent in connection herewith will be retained
by the Bank unless expressly agreed tc the contrary in writing by the Bank.
Notwithstanding anything in this Section to the contrary, the
Bank is authorized to hold Securities for the Fund which have
transfer limitations imposed upon them by the Securities Act of
1933, as amended, or represent shares of mutual funds (i) in the
name of the Fund, (ii) in the name of the Bank's nominee, or
(iii) with any Depository or sub-custodian.
SECTION 6. The Custodian's compensation shall be as agreed to
from time to time by the Fund and the Custodian. The Bank is
authorized to charge the Fund's account for such compensation.
All expenses and taxes payable with respect to the Securities in
the account of the Fund including, without limitation, commission
charges on purchases and sales and the amount of any loss or
liability for stockholders' assessments or otherwise, claimed or
asserted against the bank or against the Bank's nominee by reason
of any registration hereunder shall be charged to the Fund.
SECTION 7. In connection with its functions under this
Agreement, the Custodian shall:
(a) render to the Fund a daily report of all monies received or paid on behalf
of the Fund; and
(b) create, maintain and retain all records relating to its activities and
obligations under this Agreement in such manner as will meet the
obligations of the Fund with respect to said Custodian's activities in
accordance with generally accepted accounting principles. All records
maintained by the Custodian in connection with the performance of its
duties under this Agreement will remain the property of the Fund and in the
event of termination of this Agreement will be relinquished to the Fund.
SECTION 8. Any Securities deposited with any Depository or with
any sub-custodian will be represented in accounts in the name of
the Bank which include only property held by the Bank as
Custodian for customers in which the Bank acts in a fiduciary or
agency capacity.
-5-
<PAGE>
Should any Securities which are forwarded to the Bank by the
Fund, and which are subsequently deposited to the Bank's account
in any Depository or with any sub-custodian, or which the Fund
may arrange to deposit in the Bank's account in any Depository or
with any sub-custodian, not be deemed acceptable for deposit by
such Depository or sub-custodian, for any reason, and as a result
thereof there is a short position in the account of the Bank with
the Depository for such Security, the Fund agrees to furnish the
Bank immediately with like Securities in acceptable form.
SECTION 9. The Fund represents and warrants that: (1) it has the
legal right, power and authority to execute, deliver and perform
this Agreement and to carry out all of the transactions
contemplated hereby; (ii) it has obtained all necessary
authorizations; (iii) the execution, delivery and performance of
this Agreement and the carrying out of any of the transactions
contemplated hereby will not be in conflict with, result in a
breach of or constitute a default under any agreement or other
instrument to which the Fund is a party or which is otherwise
known to the Fund; (iv) it does not require the consent or
approval of any governmental agency or instrumentality, except
any such consents and approvals which the Fund has obtained; (v)
the execution and delivery of this Agreement by the Fund will not
violate any law, regulation, charter, by-law, order of any court
or governmental agency or judgment applicable to the Fund; and
(vi) all persons executing this Agreement on behalf of the Fund
and carrying out the transactions contemplated hereby on behalf
of the Fund are duly authorized to do so.
In the event any of the foregoing representations should become
untrue, incorrect or misleading, the Fund agrees to notify the
Bank immediately in writing thereof.
SECTION 10. The Bank represents and warrants that: (i) it has
the legal right, power and authority to execute, deliver and
perform this Agreement and to carry out all of the transactions
contemplated hereby; (ii) it has obtained all necessary
authorizations; (iii) the execution, delivery and performance of
this Agreement and the carrying out of any of the transactions
contemplated hereby will not be in conflict with, result in a
breach of or constitute a default under any agreement or other
instrument to which the Bank is a party or which is otherwise
known to the Bank; (iv) it does not require the consent or
approval of any governmental agency or instrumentality, except
any such consents and approvals which the Bank has obtained; (v)
the execution and delivery of this Agreement by the Bank will not
violate any law, regulation, charter, by-law, order of any court
or governmental agency or judgment applicable to the Bank; and
(vi) all persons executing this Agreement on behalf of the Bank
and carrying out the transactions contemplated hereby on behalf
of the Bank are duly authorized to do so. In the event that any
of the foregoing representations should become untrue, incorrect
-6-
<PAGE>
or misleading, the Bank agrees to notify the Fund immediately in
writing thereof.
SECTION 11. All cash and Securities held by the Bank hereunder
shall be kept with the care exercised as to the Bank's own
similar property. The Bank may at its option insure itself
against loss from any cause but shall be under no obligation to
insure for the benefit of the Fund.
SECTION 12. No liability of any kind shall be attached to or
incurred by the Custodian by reason of its custody of the Fund's
assets held by it from time to time under this Agreement, or
otherwise by reason of its position as Custodian hereunder except
only for its own negligence, bad faith, or willful misconduct in
the performance of its duties as specifically set forth in the
Custodian Agreement. Without limiting the generality of the
foregoing sentence, the Custodian:
(a) may rely upon the advice of counsel for the Fund; and for any action taken
or suffered in good faith based upon such advice or statements the
Custodian shall not be liable to anyone;
(b) shall not be liable for anything done or suffered to be done in good faith
in accordance with any request or advice of, or based upon information
furnished by, the Fund or its authorized officers or agents;
(c) is authorized to accept a certificate of the Secretary or Assistant
Secretary of the Fund, or Proper Instructions, to the effect that a
resolution in the form submitted has been duly adopted by its Board of
Directors or by the Shareholders, as conclusive evidence that such
resolution has been duly adopted and is in full force and effect; and
(d) may rely and shall be protected in acting upon any signature, written
(including telegraph or other mechanical) instructions, request, letter of
transmittal, certificate, opinion of counsel, statement, instrument,
report, notice, consent, order, or other paper or document reasonably
believed by it to be genuine and to have been signed, forwarded or
presented by the purchaser, Fund or other proper party or parties.
SECTION 13. The Fund, its successors and assigns do hereby fully
indemnify and hold harmless the Custodian its successors and
assigns, from any and all loss, liability, claims, demand,
actions, suits and expenses of any nature as the same may arise
from the failure of the Fund to comply with any law, rule,
regulation or order of the United States, any state or any other
-7-
<PAGE>
jurisdiction, governmental authority, body, or board relating to
the sale, registration, qualification of units of beneficial
interest in the Fund, or from the failure of the Fund to perform
any duty or obligation under this Agreement.
Upon written request of the Custodian, the Fund shall assume the
entire defense of any claim subject to the foregoing indemnity,
or the joint defense with the Custodian of such claim, as the
Custodian shall request. The indemnities and defense provisions
of this Section 13 shall indefinitely survive termination of this
Agreement.
SECTION 14. If so instructed by the Fund, the Custodian shall
appoint one or more U.S. banking institutions as sub-custodian
(including, but not limited to, U.S. banks located in foreign
countries) of Securities and moneys at any time owned by the
Fund. The Custodian shall have no liability to the Fund or an
other person by reason of any act or omission of any sub-
custodian so appointed, and the Fund shall indemnify the
Custodian and save it harmless from any and against any and all
actions, suits, and claims, whether groundless or otherwise, and
from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses, and liabilities arising
directly or indirectly out of or in connection with the
performance of any sub-custodian which the Custodian was
instructed to appoint. The Custodian shall not be under any
obligation to prosecute or to defend any action, suit, or claim
arising out of or in connection with the performance of any such
sub-custodian, which, in the opinion of its counsel, may involve
it in expense or liability, and the Fund shall, so often as
reasonably requested, furnish the Custodian with satisfactory
indemnity against such expense or liability, and upon request of
the Custodian, the Fund shall assume the entire defense of any
action, suit, or claim subject to the foregoing indemnity. The
Fund shall pay all fees and expenses of any Sub-Custodian which
the Fund instructs the Custodian to appoint.
In addition, the Custodian may from time to time in its
discretion appoint in writing (and may at any time remove) any
other bank or trust company (which may include a foreign branch
or agency of a bank or trust company) as sub-Custodian hereunder,
to carry out as agent of the Custodian, in accordance with the
terms of this Agreement, such of the provisions of this Agreement
as the Custodian may from time to time direct; provided, however,
that any such sub-custodian (which must itself meet the
qualifications for a successor custodian set forth in Section 16
hereof and which must be selected with reasonable care, having in
mind the duties to be assigned to it) is understood to be the
agent of the Custodian and not of the Fund, and the Custodian
shall be fully responsible for the acts of any sub-custodian
which the Custodian shall appoint in its discretion, and the
-8-
<PAGE>
Custodian shall not be relieved of any of its responsibilities
hereunder by the appointment of any such sub-custodian.
SECTION 15. This Agreement may be amended from time to time
without notice to or approval of the Shareholders by a
supplemental agreement executed by the Fund and the Bank and
amending and supplementing this Agreement in the manner mutually
agreed.
SECTION 16. Either the Fund or the Custodian may give one
hundred twenty (120) days' written notice to the other of the
termination of this Agreement, such termination to take effect at
the time specified in the notice. In case such notice of
termination is given either by the Fund or by the Custodian, the
Directors of the Fund shall, by resolution duly adopted, promptly
appoint a successor Custodian (the "Successor Custodian") which
Successor Custodian shall be a bank, trust company, or a bank and
trust company in good standing, with legal capacity to accept
custody of the cash and Securities of a mutual fund. Upon
receipt of written notice from the Fund of the appointment of
such Successor Custodian and upon receipt of Proper Instructions,
the Custodian shall deliver such cash and Securities as it may
then be holding hereunder directly and only to the Successor
Custodian. Unless or until a Successor Custodian has been
appointed as above provided, the Custodian then acting shall
continue to act as Custodian under this Agreement.
Every Successor Custodian appointed hereunder shall execute and
deliver an appropriate written acceptance of its appointment and
shall thereupon become vested with the rights, powers,
obligations and custody of its predecessor Custodian. The
Custodian ceasing to act shall nevertheless, upon request of the
Fund and the Successor Custodian and upon payment of its charges
and disbursements, execute an instrument in form approved by its
counsel transferring to the Successor Custodian all the
predecessor Custodian's rights, duties, obligations and custody.
Subject to the provisions of Section 22 hereof, in case the
Custodian shall consolidate with or merge into any other
corporation, the corporation remaining after or resulting from
such consolidation or merger shall ipso facto without the
execution of filing of any papers or other documents, succeed to
and be substituted for the Custodian with like effect as though
originally named as such, provided, however, in every case that
said Successor corporation maintains the qualifications set out
in Section 17(f) of the Investment Company Act of 1940, as
amended
SECTION 17. This Agreement shall take effect when assets of the
Fund are first delivered to the Custodian.
-9-
<PAGE>
SECTION 18. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to
be an original, but such counterparts shall together constitute
but one and the same instrument.
SECTION 19. A copy of the Articles of Incorporation of the Fund
is on file with the Secretary of State of the State of Maryland,
and notice is hereby given that this instrument is executed on
behalf of the Directors of the Fund as Directors and not
individually and that the obligations of this instrument are not
binding upon any of the Directors, officers or Shareholders of
the Fund individually, but binding only upon the assets and
property of the Fund. No Portfolio of the Fund shall be liable
for the obligations of any other Portfolio of the Fund.
SECTION 20. The Custodian shall create and maintain all records
relating to its activities and obligations under this Agreement
in such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, as amended, with particular
attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, applicable Federal and state tax laws and any other
law or administrative rules or procedures which may be applicable
to the Fund.
Subject to security requirements of the Custodian applicable to
its own employees having access to similar records within the
Custodian, the books and records of the Custodian pertaining to
this Agreement shall be open to inspection and audit at any
reasonable times by officers of, attorneys for, and auditors
employed by, the Fund.
SECTION 21. Nothing contained in this Agreement is intended to
or shall require the Custodian in any capacity hereunder to
perform any functions or duties on any holiday or other day of
special observance on which the Custodian is closed. Functions
or duties normally scheduled to be performed on such days shall
be performed on, and as of, the next business day the Custodian
iS open.
SECTION 22. This Agreement shall extend to and shall be binding
upon the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of its Board of
Directors.
SECTION 23. All communications (other than Proper Instructions
which are to be furnished hereunder to either party, or under any
amendment hereto, shall be sent by mail to the address listed
below, provided that in the event that the Bank, in its sole
discretion, shall determine that an emergency exists, the Bank
-10-
<PAGE>
may use such other means of communications as the Bank deems
advisable.
To the Fund: Kevin P. Robins
SEI Corporation
680 East Swedesford Road
Wayne, PA 19087
To the Bank: Mark E. Stalnecker
CSIA
1500 Market Street
Philadelphia, PA 19101-2558
SECTION 24. This Agreement, and any amendments hereto, shall be
governed, construed and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania applicable to agreements made
and to be performed entirely within such Commonwealth.
-11-
<PAGE>
IN WITNESS WHEREOF, the Fund and the Custodian have caused this
Agreement to be signed by their respective officers as of the day
and year first above written.
COREFUNDS. INC.
By: /s/ Richard J. Shoch
------------------------------
Name: Richard J. Shoch
Title: Assistant Secretary
CORESTATES BANK, N.A.
By: /s/ Mark Stalnecker
------------------------------
Name: Mark Stalnecker
Title: Executive Vice President
-12-
TRANSFER AGENCY AND SERVICE AGREEMENT
between
COREFUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
1. Terms of Appointment; Duties of the Bank................... 1
2. Fees and Expenses.......................................... 3
3. Representations and Warranties of the Bank ................ 4
4. Representations and Warranties of the Fund ................ 4
5. Data Access and Proprietary Information................... 5
6. Indemnification............................................ 6
7. Standard of Care .......................................... 7
8. Covenants of the Fund and the Bank ........................ 8
9. Termination of Agreement .................................. 8
10. Additional Funds .......................................... 9
11. Assignment ................................................ 9
12. Amendment.................................................. 9
13. Massachusetts Law to Apply................................. 9
14. Force Majeure.............................................. 9
15. Consequential Damages .................................... 10
16. Merger of Agreement ...................................... 10
17. Counterparts.............................................. 10
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 16th day of November, 1995, by and between
CoreFunds, Inc., a Maryland corporation, having its principal office and place
of business at 680 East Swedesford Road, Wayne, PA 19087 (the "Fund"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in fourteen series, the
Growth Equity Fund, Value Equity Fund, Equity Index Fund, International Growth
Fund, Balanced Fund, Intermediate Bond 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 (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Article 10, being herein referred to as a "Portfolio", and collectively as the
"Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Terms of Appointment: Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund, on behalf of the Portfolios, hereby employs and appoints the Bank
to act as, and the Bank agrees to act as its transfer agent for the
Fund's authorized and issued shares of its common stock, $ par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
<PAGE>
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Articles of Incorporation of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) Issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the
Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such shares, which functions shall be the sole
responsibility of the Fund.
2
<PAGE>
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses
to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and (ii)
provide a system which will enable the Fund to monitor the total
number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only
a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund agrees
on behalf of each of the Portfolios to pay the Bank an annual maintenance
fee for each Shareholder account as set out in the initial fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject
to mutual written agreement between the Fund and the Bank.
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2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, tabulating proxies, records
storage, or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the
Bank at the request or with the consent of the Fund, will be reimbursed by
the Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced to
the Bank by the Fund at least seven (7) days prior to the mailing date of
such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a corporation duly organized and existing and in good standing under
the laws of Maryland.
4.2 It is empowered under applicable laws and by its Articles of Incorporation
and By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Articles of Incorporation and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
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4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. Data Access and Proprietary Information
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or
other proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat
all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated in
writing by the Bank and solely in accordance with the Bank's applicable
user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired hereunder
from being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized transactions
agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect at
the Bank's expense the rights of the Bank in Proprietary Information at
common law, under federal copyright law and under other federal or
state law.
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Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible
for the contents of such data and the Fund agrees to make no claim against
the Bank arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely on
the validity and authenticity of such instruction without undertaking any
further inquiry as long as such instruction is undertaken in conformity
with security procedures established bY the Bank from time to time.
6. Indemnification
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and against,
any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct which
arise out of the breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by
the Bank or its agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer
agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf of
the applicable Portfolio.
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(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state
or in violation of any stop order or other determination or ruling by
any federal agency or any state with respect to the offer or sale of
such Shares in such state.
6.2 At any time the Bank may apply to any officer of the Fund for instructions,
and may consult with legal counsel with respect to any matter arising in
connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund on behalf of the applicable
Portfolio for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper
or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank
or its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.3 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend against
said claim in its own name or in the name of the Bank. The Bank shall in no
case confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Bank except with the Fund's prior written
consent.
7. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best efforts
within reasonable limits to insure the accuracy of all services performed under
this Agreement, but assumes no responsibility and shall not be liable for loss
or damage due to errors unless said errors are caused by its negligence, bad
faith, or willful misconduct or that of its employees.
8. Covenants of the Fund and the Bank
8.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
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(a) A certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the Fund and all
amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms
and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
9. Termination of Agreement
9.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all out-of-pocket expenses
associated with the movement of records and material will be borne by the
Fund on behalf of the applicable Portfolio(s). Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated
with such termination and/or a charge equivalent to the average of three
(3) months' fees.
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10. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the Growth Equity Fund, Value Equity Fund, Equity Index Fund,
International Growth Fund, Balanced Fund, Intermediate Bond 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 with respect to which it
desires to have the Bank render services as transfer agent under the terms
hereof, it shall so notify the Bank in writing, and if the Bank agrees in
writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
11. Assignment
11.1 Except as provided in Section 11.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc., a
Massachusetts corporation ("BFDS") which is duly registered as a transfer
agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934,
as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as
a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund
for the acts and omissions of any subcontractor as it is for its own acts
and omissions.
12. Amendment
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Directors of the Fund.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
14. Force Majeure
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall
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not be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
15. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
16. Merger of Agreement
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
17. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
COREFUNDS, INC.
BY: /s/ Kevin P. Robins
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ATTEST:
/s/ Richard J. Shoch
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STATE STREET BANK AND TRUST COMPANY
BY: /s/ Russell E. Lewis
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ATTEST: Executive Vice President
/s/ Francine S. Hayes
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