PROSPECTUS FOR INSTITUTIONAL SHARES
NOVEMBER 1, 1997
Picture of sailboats on a pier with onlookers passing by.
CoreFunds Investing our experience in your future
EQUITY FUNDS
BALANCED FUND
INCOME FUNDS
TAX-EXEMPT INCOME FUNDS
MONEY MARKET FUNDS
/X/
CoreFund(R)
Family of Mutual Funds
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INTRODUCING COREFUNDS
This Prospectus introduces you to seventeen of the mutual funds offered by
CoreFunds, Inc. ("CoreFunds"), an open-end management investment company.
CoreFunds consists of twenty-one diversified and non-diversified portfolios.
This Prospectus offers:
|__ Class Y (Institutional) shares of the Equity Funds
|__ Class Y (Institutional) shares of the Fixed Income Funds and
|__ Class Y (Institutional) shares of the Money Market Funds.
Materials relating to Class A, Class B and Class C (Individual) Shares of the
Funds may be obtained by calling 1-800-355-CORE, or by writing to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
CoreStates Investment Advisers, Inc. ("CoreStates Advisers") serves as the
investment adviser to each Fund. The International Growth Fund and Global Bond
Fund also retain investment sub-advisers. CoreStates Advisers has extensive
experience in the management of money market, tax-free, fixed income, equity and
international investments.
You may choose to invest in any of the CoreFunds offered in this Prospectus.
Read your prospectus before you invest and keep it for future reference.
Additional information about the Funds, contained in a Statement of Additional
Information dated November 1, 1997 has been filed with the Securities and
Exchange Commission. It is incorporated in this Prospectus by reference. To
obtain a copy without charge, call 1-800-355-CORE or write to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
AN IMPORTANT WORD ABOUT MUTUAL FUNDS:
SHARES OF THE FUNDS ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR GUARANTEED
OR ENDORSED BY, CORESTATES BANK, N.A., THE PARENT CORPORATION OF EACH FUND'S
INVESTMENT ADVISER, OR ANY OF ITS AFFILIATES.
SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENTS IN FUND SHARES INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE CASH RESERVE, THE TREASURY RESERVE AND/OR THE TAX-FREE
RESERVE IS NOT INSURED AND IS NOT GUARANTEED BY THE U.S. GOVERNMENT, AND WE CAN
NOT ASSURE YOU THAT THESE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES. ALSO, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
WHAT YOU WILL FIND IN THIS PROSPECTUS
INFORMATION ON THE FUNDS
EQUITY FUNDS
Equity Index............................................2
Core Equity.............................................4
Growth Equity...........................................6
Special Equity..........................................8
International Growth...................................10
BALANCED FUND
Balanced...............................................12
FIXED INCOME FUNDS
Short Term Income......................................14
Short-Intermediate Bond................................16
Government Income......................................18
Bond...................................................20
Global Bond............................................22
Intermediate Municipal Bond............................24
Pennsylvania Municipal Bond............................26
New Jersey Municipal Bond..............................28
MONEY MARKET FUNDS
Treasury Reserve.......................................30
Cash Reserve...........................................32
Tax-Free Reserve.......................................34
GENERAL INFORMATION
General Investment Policies and Practices..............36
Distributions..........................................42
Taxes..................................................42
Valuation of Shares....................................44
Management.............................................45
Performance Information................................46
How to Purchase and Redeem Shares......................47
Description of Shares..................................48
General Information....................................49
1
<PAGE>
EQUITY INDEX FUND
SUMMARY
Equity Index Fund seeks to match the performance of the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index) by investing primarily in stocks
represented in the S&P 500 Index.
INVESTMENT OBJECTIVE
Equity Index Fund seeks investment results that achieve price and yield
performance similar to the S&P 500 Index.
PORTFOLIO INVESTMENTS
The Fund invests at least 90% of its total assets in equity securities that
represent a composite of the S&P 500 Index. The S&P 500 Index consists of 500
common stocks, most of which are listed on the New York Stock Exchange. In
choosing the 500 stocks which are included in the S&P 500 Index, S&P considers
market values and industry diversification.
The Fund's investment portfolio will generally consist of common stocks of as
many issuers listed in the S&P 500 Index as is feasible. CoreStates Advisers
uses a computer model that closely monitors the industry weightings of the S&P
500 Index. Although CoreStates Advisers does not screen securities by
traditional methods of financial and market analyses, it monitors the Fund's
investments with a view toward removing stocks of companies which exhibit
extreme financial distress or which may impair the Fund's ability to achieve its
investment objective.
Equity Index Fund strives to provide a total return comparable to the S&P 500
Index. (Please see page 36 for more information about General Investment
Policies and Practices.)
Equity Index Fund is not sponsored by nor affiliated with Standard & Poor's
Corporation ("S&P").
RISK CONSIDERATIONS
Like all equity funds, Equity Index Fund is subject to two primary types of
risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Equity Index Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Lary Aasheim, CFA, a Managing Director and Director of Research of CoreStates
Advisers, is portfolio manager of Equity Index Fund. Prior to joining CoreStates
Advisers in 1990, Mr. Aasheim worked as an analyst at First Fidelity
Bank/Fidelity Bank, First Pennsylvania Bank and Bear Stearns in New York.
(Please see page 45 for more information about the Fund's Investment Adviser.)
2
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .15%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .22%
Total Fund Operating Expenses After Fee Waivers(3) .37%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .71%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $4 12 21 47
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Equity Index Fund. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991(1)
CLASS Y (INSTITUTIONAL)* -------------------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 28.47 23.79 20.54 20.97 19.22 18.46 19.48
Net Investment Income $ 0.51 0.51 0.52 0.55 0.52 0.52 0.03
Realized and Unrealized Net Gains (Losses) on Securities $ 9.16 5.47 4.24 (0.43) 1.84 1.80 (0.94)
Distributions from Net Investment Income $ (0.51) (0.51) (0.52) (0.55) (0.52) (0.48) (0.02)
Distributions from Capital Gains $ (0.24) (0.79) (0.99) -- (0.09) (1.08) (0.09)
Net Asset Value, End of Period $ 37.39 28.47 23.79 20.54 20.97 19.22 18.46
Total Return 34.44% 25.69 24.45 0.55 12.39 12.59 (4.64)+
Net Assets, End of Period (000 omitted) $ 241,413 166,350 112,533 72,552 50,551 20,166 12,117
Ratio of Expenses to Average Net Assets 0.37% 0.35 0.37 0.35 0.49 0.57 0.97
Ratio of Net Income to Average Net Assets 1.63% 1.94 2.48 2.63 2.82 2.66 1.79
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.71% 0.71 0.76 0.75 0.88 1.06 1.20
Ratio of Net Income to Average Net Assets (Excluding Waivers) 1.29% 1.59 2.09 2.23 2.43 2.17 1.56
Portfolio Turnover Rate 11% 13 27 13 4 27 --
Average Commission Rate Paid(2) $ 0.0545 0.0641 n/a n/a n/a n/a n/a
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class Y
Shares.
+ This figure has not been annualized.
(1) Commenced operations June 1, 1991. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Presentation of the rate is only required for fiscal periods beginning after
September 1, 1995.
3
<PAGE>
CORE EQUITY FUND
SUMMARY
Core Equity Fund seeks maximum total return by investing in a diversified
portfolio of common stocks.
INVESTMENT OBJECTIVE
Core Equity Fund seeks maximum total return in excess of the S&P 500 Index.
PORTFOLIO INVESTMENTS
The Fund invests principally in a diversified portfolio of common stocks
including stocks of companies with:
|__ large market capitalizations (i.e., over $5 billion)
|__ medium market capitalizations (i.e., between $1 billion and
$5 billion) and
|__ small market capitalizations (i.e., under $1 billion).
Market capitalization means the total number of common shares of a company's
stock outstanding multiplied by the market price per share.
In addition, up to 20% of the Fund's total assets may be invested in:
|__ securities convertible into common stocks
|__ preferred stocks
|__ corporate bonds and notes
|__ warrants
|__ Short-Term Obligations and
|__ sponsored and unsponsored American Depositary Receipts ("ADRs").
Core Equity Fund strives to provide a total return greater than broad stock
market indices such as the S&P 500 Index. (Please see page 36 for more
information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Increased Business and Economic Sensitivity - Small and medium capitalization
companies may be more vulnerable than larger, more established organizations to
adverse business or economic developments. In particular, small capitalization
companies may have limited product lines, markets and financial resources and
may be dependent upon a relatively small management group. These securities may
be traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Also, like all equity funds, Core Equity Fund is subject to two primary types of
risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance, during a specific
period, may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Core Equity Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Joseph E. Stocke, CFA, is a Senior Managing Director of CoreStates Advisers and
manages Core Equity and Special Equity Funds. He is also a Senior Investment
Manager/Equities with Meridian Investment Company, an affiliate of CoreStates
Advisers. He has been with Meridian since 1983. (Please see page 45 for more
information about the Fund's Investment Adviser.)
4
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .74%
12b-1 Fees none
Other Expenses After Fee Waivers(1) .19%
Total Operating Expenses After Fee Waivers(2) .93%
(1) Absent voluntary waivers by the Administrator, Other Expenses would be .28%
of average net assets.
(2) Absent the fee waivers described above, Total Operating Expenses would have
been 1.02%. This fee waiver is voluntary and may be discontinued at any time
at the discretion of the service provider that is waiving its fee. Total
Operating Expenses have been restated to reflect anticipated expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $19 31 51 114
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Core Equity Fund. The financial highlights for the Fund for
the periods from November 1, 1995 through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
financial highlights for the Fund for the periods ended October 31, 1990 through
October 31, 1995 were audited by Coopers & Lybrand LLP, independent auditors for
the predecessor fund. The annual report for the Fund is available to
shareholders at no charge by calling CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
INSTITUTIONAL PRIOR
CLASS CLASS
1997 1996 1995 1994 1993 1992 1991 1990(1)
CLASS Y (INSTITUTIONAL)(3)* ------------------ ---------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30 October 31
- --------------------------------------------------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.26 17.07 15.00 15.39 13.93 13.08 8.95 10.00
Net Investment Income $ 0.12 0.14 0.19 0.11 0.14 0.19 0.26 0.14
Realized and Unrealized Net Gains (Losses) on Securities $ 5.32 1.49 2.87 0.22 1.89 1.02 4.13 (1.05)
Distributions from Net Investment Income $ (0.12) (0.14) (0.19) (0.11) (0.14) (0.19) (0.26) (0.14)
Distributions from Capital Gains $ (1.47) (1.30) (0.80) (0.61) (0.43) (0.17) -- --
Net Asset Value, End of Period $ 21.11 17.26 17.07 15.00 15.39 13.93 13.08 8.95
Total Return(2) 33.10% 19.24 22.00 2.21 14.90 9.27 49.37 (9.22)
Net Assets, End of Period (000 omitted) $515,015 414,824 378,352 50,128 45,677 28,103 12,830 5,982
Ratio of Expenses to Average Net Assets 0.98% 0.97 1.05 1.49 1.20 0.92 0.54 0.65
Ratio of Net Income to Average Net Assets 0.63% 1.15 1.44 0.75 0.94 1.47 2.30 2.29
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.03% 1.01 1.10 1.51 1.41 1.23 1.48 1.59
Ratio of Net Income to Average Net Assets (Excluding Waivers) 0.58% 1.11 1.44 0.73 0.73 1.17 1.36 1.35
Portfolio Turnover Rate** 79% 114 119 35 24 39 68 43
Average Commission Rate Paid(4) $ 0.0512 0.0636 n/a n/a n/a n/a n/a n/a
</TABLE>
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21, 1995
through October 31, 1995. For the year ended October 31, 1995, the Financial
Highlights' ratios of expenses, net investment income, total return, and the
per share investment activities and distributions reflect this allocation.
Also, on April 15, 1996, the assets of the Conestoga Equity Fund were
acquired by CoreFunds. At that time the Institutional Class Shares of the
Fund were exchanged for Class Y Shares.
** For the period ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
(1) Commenced operations February 28, 1990. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return for the period ended June 30, 1996 is for an eight-month
period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
periods November 1 to October 31.
(4) Presentation of the rate is only required for fiscal periods beginning after
September 1, 1995.
5
<PAGE>
GROWTH EQUITY FUND
SUMMARY
Growth Equity Fund seeks capital growth and an increasing flow of dividends by
investing primarily in common stocks.
INVESTMENT OBJECTIVE
Growth Equity Fund seeks capital growth and an increasing flow of dividends.
PORTFOLIO INVESTMENTS
The Fund invests in a diversified portfolio of equity securities which
CoreStates Advisers believe show the potential for growth of earnings over time,
including:
|__ common stocks
|__ preferred stocks
|__ convertible securities and
|__ other equity securities of companies.
Growth Equity Fund strives to provide a return greater than stock market indices
such as the Russell 1000 Growth Index, the S&P 500 Index and the Lipper Growth
Fund Index. (Please see page 36 for more information about General Investment
Policies and Practices.)
RISK CONSIDERATIONS
Increased Business and Economic Sensitivity - Small and medium capitalization
companies may be more vulnerable than larger, more established organizations to
adverse business or economic developments. In particular, small capitalization
companies may have limited product lines, markets and financial resources and
may be dependent upon a relatively small management group. These securities may
be traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Also, like all equity funds, the Growth Equity Fund is subject to two primary
types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance, during a specific
period, may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Growth Equity Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Steve Dalton is a Managing Director of CoreStates Advisers and manages Growth
Equity and Balanced Funds. Mr. Dalton has been a senior portfolio manager of
balanced portfolios since 1986 and a member of the CoreStates Advisers' Equity
Policy Committee since 1990. (Please see page 45 for more information about the
Fund's Investment Adviser.)
6
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .75%
12b-1 Fees none
Other Expenses After Fee Waivers(1) .21%
Total Operating Expenses After Fee Waivers(2) .96%
(1) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(2) Absent the fee waivers described above, Total Operating Expenses would have
been 1.05%. This fee waiver is voluntary and may be discontinued at any time
at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Year 5 Years 10 Years
------ ------ ------- --------
You would pay the following expenses on a $10 31 53 118
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Growth Equity Fund. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992(1)
CLASS Y (INSTITUTIONAL)* ---------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.19 11.18 9.11 9.95 8.74 10.00
Net Investment Income $ 0.04 0.08 0.08 0.05 0.08 0.05
Realized and Unrealized Net Gains (Losses) on Securities $ 2.81 3.36 2.07 (0.84) 1.21 (1.26)
Distributions from Net Investment Income $(0.04) (0.08) (0.08) (0.05) (0.08) (0.05)
Distributions from Capital Gains $ (1.57) (0.35) -- -- -- --
Net Asset Value, End of Period $ 15.43 14.19 11.18 9.11 9.95 8.74
Total Return 21.67% 31.36 23.71 (8.01) 14.76 (12.05)+
Net Assets, End of Period (000 omitted) $147,700 120,073 91,345 64,877 63,777 33,418
Ratio of Expenses to Average Net Assets 0.96% 0.89 0.76 0.69 0.43 0.14
Ratio of Net Income to Average Net Assets 0.30% 0.64 0.84 0.48 0.85 1.38
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.06% 1.05 1.10 1.11 1.11 1.12
Ratio of Net Income to Average Net Assets (Excluding Waivers) 0.20% 0.48 0.50 0.06 0.17 0.40
Portfolio Turnover Rate 74% 81 113 127 103 66
Average Commission Rate Paid(2) $0.0451 0.0601 n/a n/a n/a n/a
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class Y
Shares.
+ This figure has not been annualized.
(1) Commenced operations February 3, 1992. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Presentation of the rate is only required for fiscal periods beginning after
September 1, 1995.
7
<PAGE>
SPECIAL EQUITY FUND
SUMMARY
Special Equity Fund seeks capital growth by investing principally in a
diversified portfolio of common stocks.
INVESTMENT OBJECTIVE
Special Equity Fund seeks capital growth.
PORTFOLIO INVESTMENTS
The Fund invests principally in a diversified portfolio of common stocks of
domestic companies that CoreStates Advisers expect will experience growth in
earnings and price including stocks of companies with:
|__ small market capitalizations (i.e., under $1 billion)
|__ medium market capitalizations (i.e., between $1 billion and $5 billion) and
|__ large market capitalizations (i.e., over $5 billion).
Market capitalization means the total number of common shares of a company's
stock outstanding multiplied by the market price per share.
In addition, up to 35% of the Fund's total assets may be invested in:
|__ preferred stocks
|__ securities convertible into common stock
|__ corporate bonds and notes
|__ warrants
|__ Short-Term Obligations and
|__ sponsored and unsponsored ADRs, European Depositary Receipts ("EDRs") and
Global Depositary Receipts ("GDRs").
Special Equity Fund strives to provide a return greater than stock
market indices such as the Russell 3000 Equal Weighted Index. (Please see page
36 for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Increased Business and Economic Sensitivity - Small and medium capitalization
companies may be more vulnerable than larger, more established organizations to
adverse business or economic developments. In particular, small capitalization
companies may have limited product lines, markets and financial resources and
may be dependent upon a relatively small management group. These securities may
be traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Also, like all equity funds, Special Equity Fund is subject to two other primary
types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Special Equity Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Joseph E. Stocke, CFA, is a Senior Managing Director of CoreStates Advisers and
manages Core Equity and Special Equity Funds. He is also a Senior Investment
Manager/Equities with Meridian Investment Company, an affiliate of CoreStates
Advisers. He has been with Meridian since 1983. (Please see page 45 for more
information about the Fund's Investment Adviser.)
8
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .83%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .22%
Total Operating Expenses After Fee Waivers(3) 1.05%
(1) Absent voluntary waivers, investment advisory fees would be 1.50% of
average net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.81%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect a reduction in fee
waivers and expense reimbursements.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $11 34 58 129
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Special Equity Fund. The financial highlights for the Fund for
the periods from November 1, 1995 through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
financial highlights for the Fund for the periods ended October 31, 1994 through
October 31, 1995 were audited by Coopers & Lybrand LLP, independent auditors for
the predecessor fund. The annual report for the Fund is available to
shareholders at no charge by calling CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
INSTITUTIONAL PRIOR
CLASS CLASS
1997 1996 1995 1994(1)
CLASS Y (INSTITUTIONAL)(3)* ------------------- ---------------------
For a Share Outstanding Throughout the Period Ended June 30 October 31
- --------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.86 11.42 9.37 10.00
Net Investment Income $ 0.02 0.07 0.12 0.06
Realized and Unrealized Net Gains (Losses) on Securities $ 1.81 2.13 2.12 (0.63)
Distributions from Net Investment Income $ (0.03) (0.07) (0.12) (0.06)
Distributions from Capital Gains $ (2.39) (1.69) (0.07) --
Net Asset Value, End of Period $ 11.27 11.86 11.42 9.37
Total Return(2) 17.94% 22.27 24.44 (5.72)
Net Assets, End of Period (000 omitted) $ 71,980 63,680 57,396 10,069
Ratio of Expenses to Average Net Assets 0.84% 0.34 0.32 0.15
Ratio of Net Income to Average Net Assets 0.19% 0.94 1.14 1.06
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.82% 1.79 1.97 2.10
Ratio of Net (Loss) to Average Net Assets (Excluding Waivers) (0.79)% (0.51) (0.51) (0.89)
Portfolio Turnover Rate** 74% 72 129 39
Average Commission Rate Paid(4) $ 0.0257 0.0539 n/a n/a
</TABLE>
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21,
1995 through October 31, 1995. For the year ended October 31, 1995, the
Financial Highlights' ratios of expenses, net investment income, total
return, and the per share investment activities and distributions reflect
this allocation. Also, on April 22, 1996, the assets of the Conestoga
Special Equity Fund were acquired by CoreFunds. At that time the
Institutional Class Shares of the Fund were exchanged for Class Y Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
(1) Commenced operations March 15, 1994. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return for the period ended June 30, 1996 is for an eight-month
period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
period November 1 to October 31.
(4) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
9
<PAGE>
INTERNATIONAL GROWTH FUND
SUMMARY
International Growth Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies located outside the United States.
INVESTMENT OBJECTIVE
International Growth Fund seeks long-term capital appreciation, consistent with
reasonable risk, by investing primarily in appreciation-oriented equity
securities of companies located outside the United States.
PORTFOLIO INVESTMENTS
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of companies located in at least three different
countries. Companies are located in a country if they are headquartered or doing
business primarily in that country. The Fund invests in appreciation-oriented
equity securities of companies located outside the United States, including:
Australia Hong Kong Singapore Germany
Canada Japan Sweden Netherlands
France Mexico Switzerland United Kingdom
'Appreciation-oriented' securities are equity securities of companies that the
Fund's Adviser and Sub-Advisers believe have the greatest potential for
long-term growth.
Most foreign equity securities are purchased on stock exchanges or in
over-the-counter markets located in the countries in which the principal offices
of the issuers are located.
International Growth Fund strives to provide a return greater than stock market
indices such as the Morgan Stanley Capital International EAFE Index. (Please see
page 36 for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
There are special risks associated with international investing. See "Foreign
Securities" on page 36.
Also, like all equity funds, International Growth Fund is subject to two primary
types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
International Growth Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that foreign stocks can provide
|__ are able to tolerate fluctuations in the principal value of their
investment and
|__ are aware of the unique risks of international investing, including
exposure to currency fluctuations.
FUND MANAGEMENT
CoreStates Advisers has delegated day-to-day portfolio management functions to
Martin Currie, Inc. ("Martin Currie") and Aberdeen Fund Managers, Inc.
("Aberdeen Managers") (the "Sub-Advisers").
Michael J. Gibson, a Vice President of Martin Currie, is the lead director of
the investment team responsible for managing a portion of International Growth
Fund. Mr. Gibson has 25 years of portfolio investment experience in
international stock markets. He joined Martin Currie in 1983.
Bev Hendry, Chief Executive Officer of Aberdeen Managers, is the lead director
of the investment team responsible for managing a portion of International
Growth Fund. He joined Aberdeen's parent in 1987. (Please see page 45 for more
information about the Fund's Investment Adviser and Sub-Advisers.)
10
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .80%
12b-1 Fees none
Other Expenses After Fee Waivers(1) .36%
Total Operating Expenses After Fee Waivers(2) 1.16%
(1) Absent voluntary waivers by the Administrator, Other Expenses would be .45%
of average net assets.
(2) Absent the fee waivers described above, Total Operating Expenses would have
been 1.25%. This fee waiver is voluntary and may be discontinued at any time
at the discretion of the service provider that is waiving its fee. Total
Operating Expenses have been restated to reflect anticipated expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $12 37 64 141
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of International Growth Fund. The financial highlights for the
Fund for the periods from inception through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990(1)
CLASS Y (INSTITUTIONAL)* -----------------------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.97 12.29 13.18 11.71 10.52 10.10 10.75 10.00
Net Investment Income $ 0.14 0.16 0.12 0.12 0.10 0.17 0.19 0.11
Realized and Unrealized Net Gains (Losses) on Securities $ 1.84 1.86 (0.17) 1.78 1.16 0.31 (0.44) 0.86
Distributions from Net Investment Income $ (0.37) (0.28) (0.04) (0.12) (0.07) -- (0.27) (0.09)
Distributions from Capital Gains $ (0.86) (0.06) (0.80) (0.31) -- (0.06) (0.13) (0.13)
Net Asset Value, End of Period $ 14.72 13.97 12.29 13.18 11.71 10.52 10.10 10.75
Total Return 15.43% 16.72 (0.21) 16.28 12.06 4.90 (2.71) 9.74+
Net Assets, End of Period (000 omitted) $163,117 139,275 110,838 108,911 61,655 42,594 20,582 13,513
Ratio of Expenses to Average Net Assets 1.20% 1.14 1.05 0.99 0.99 0.96 0.99 1.22
Ratio of Net Income to Average Net Assets 0.82% 1.05 0.98 0.23 1.22 1.67 1.80 2.57
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.29% 1.25 1.19 1.18 1.28 1.40 1.56 1.99
Ratio of Net Income to Average Net Assets (Excluding Waivers) 0.73% 0.94 0.84 0.04 0.93 1.23 1.23 1.80
Portfolio Turnover Rate** 59% 41 59 67 59 87 49 20
Average Commission Rate Paid(2) $0.0080 0.0270 n/a n/a n/a n/a n/a n/a
</TABLE>
* On April 15, 1996, the assets of the Conestoga International Equity Fund
were acquired by CoreFunds. At that time, the Institutional Class Shares of
the Fund were exchanged for Class Y Shares.
** For the period ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations February 12, 1990. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Presentation of the rate is only required for fiscal periods beginning after
September 1, 1995.
11
<PAGE>
BALANCED FUND
SUMMARY
Balanced Fund seeks to provide total return while preserving capital by
investing in a combination of common stocks and fixed income securities.
INVESTMENT OBJECTIVE
Balanced Fund seeks to provide total return while preserving capital.
PORTFOLIO INVESTMENTS
The Fund invests in a combination of:
|__ common stocks
|__ convertible securities
|__ fixed income securities and
|__ Short-Term Obligations.
Under normal conditions, the Fund will invest a minimum of 25% of its assets in
senior fixed income securities and between 30% and 75% of its assets in common
stocks. Balanced Fund may also invest in U.S. dollar denominated securities of
foreign issuers (including ADRs).
In managing Balanced Fund, CoreStates Advisers combines separate equity, fixed
income and asset allocation strategies. Long-term growth is pursued through
equity holdings, and current income through fixed income securities and common
stock dividends. The asset allocation strategy shifts the stock / fixed income /
money market instrument mix based on its judgment of the relative attractiveness
of these markets and securities.
Balanced Fund strives to provide a return greater than indices such as the
Lipper Balanced Fund Average. (Please see page 36 for more information about
General Investment Policies and Practices.)
RISK CONSIDERATIONS
Because Balanced Fund invests in both stocks and fixed income securities, it is
subject to five primary types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. It is also known as Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities may suffer
substantial declines in credit quality and market value due to corporate
restructurings. While event risk may be high for certain corporate securities
held by the Fund, event risk in the aggregate should be low because of the
Fund's diversified holdings.
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Balanced Fund may be appropriate for investors who:
|__ seek to capture interest income from bonds
|__ seek the capital appreciation potential of stocks and
|__ want to reduce risk through diversification among securities and asset
types.
FUND MANAGEMENT
Steve Dalton is a Managing Director of CoreStates Advisers and manages Growth
Equity and Balanced Funds. Mr. Dalton has been a senior portfolio manager of
balanced portfolios since 1986 and a member of the CoreStates Advisers' Equity
Policy Committee since 1990. (Please see page 45 for more information about the
Fund's Investment Adviser.)
12
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .58%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .20%
Total Operating Expenses After Fee Waivers(3) .78%
(1) Absent voluntary waivers, investment advisory fees would be .70% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .99%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $8 25 43 97
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Balanced Fund. The financial highlights for the Fund for the
periods from inception through June 30, 1997 have been audited by Ernst & Young
LLP, independent auditors, whose report appears in CoreFunds' annual report
which accompanies the Statement of Additional Information. The annual report for
the Fund is available to shareholders at no charge by calling CoreFunds at
1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS Y (INSTITUTIONAL)* -------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.59 11.06 9.88 10.39 10.00
Net Investment Income $ 0.36 0.33 0.35 0.35 0.16
Realized and Unrealized Net Gains (Losses) on Securities $ 1.61 1.68 1.21 (0.51) 0.39
Distributions from Net Investment Income $ (0.36) (0.33) (0.35) (0.35) (0.16)
Distributions from Capital Gains $ (0.68) (0.15) (0.03) -- --
Net Asset Value, End of Period $ 13.52 12.59 11.06 9.88 10.39
Total Return 16.44% 18.41 16.21 (1.62) 5.52+
Net Assets, End of Period (000 omitted) $113,642 102,515 61,092 42,429 29,434
Ratio of Expenses to Average Net Assets 0.78% 0.81 0.73 0.62 0.45
Ratio of Net Income to Average Net Assets 2.79% 2.79 3.51 3.46 3.38
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.00% 1.03 1.07 1.08 1.39
Ratio of Net Income to Average Net Assets (Excluding Waivers) 2.57% 2.57 3.17 3.00 2.45
Portfolio Turnover Rate** 54% 74 46 56 21
Average Commission Rate Paid(2) $ 0.0033 0.0621 n/a n/a n/a
</TABLE>
* On April 15, 1996, the assets of the Conestoga Balanced Fund were acquired
by CoreFunds. At that time, the Institutional Class Shares of the Fund were
exchanged for Class Y Shares.
** For the year ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Presentation of the rate is only required for fiscal periods beginning after
September 1, 1995.
13
<PAGE>
SHORT TERM INCOME FUND
SUMMARY
Short Term Income Fund seeks to provide investors with consistent income and
principal stability by investing in a portfolio of investment grade debt
securities.
INVESTMENT OBJECTIVE
Short Term Income Fund seeks consistent current income with relative stability
of principal.
PORTFOLIO INVESTMENTS
The Fund invests principally in investment grade debt securities including:
|__ corporate bonds, debentures and notes
|__ equipment lease and trust certificates
|__ asset-backed and mortgage-backed securities and
|__ obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
If a security held by the Fund is downgraded below the minimum required ratings,
CoreStates Advisers will reassess the creditworthiness of the security.
The Fund may invest up to 35% of its total assets in U.S. dollar denominated
international debt securities for which the primary trading market is the U.S.
("Yankee Bonds"). Normally, the Fund's portfolio securities will have maximum
expected or remaining maturities of three years or less. The Fund's normal
average dollar-weighted portfolio maturity is about one year.
Short Term Income Fund strives to provide a return greater than bond indices
such as the Merrill Lynch 1-Year Treasury Bill Index. (Please see page 36 for
more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Short Term Income Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will
be prepaid (or 'called') by the issuer prior to maturity during periods of
falling interest rates. This would require the Fund to invest the resulting
proceeds elsewhere, at generally lower interest rates. This is also known as
Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities
may suffer substantial declines in credit quality and market value due to
corporate restructurings. While event risk may be high for certain corporate
securities held by the Fund, event risk in the aggregate should be low because
of the Fund's diversified holdings.
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Short Term Income Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money market
fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
John Ackler is Senior Investment Officer of CoreStates Advisers and manages
Short Term Income Fund and Cash Reserve. He is also responsible for the
management of the CoreStates Liquidity Fund, as well as numerous individually
managed fixed income funds. Mr. Ackler joined CoreStates as an internal auditor
in 1992 and transferred to CoreStates Advisers in August 1993. (Please see page
45 for more information about the Fund's Investment Adviser.)
14
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .25%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .22%
Total Operating Expenses After Fee Waivers(3) .47%
(1) Absent voluntary waivers, investment advisory fees would be .74% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.05%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $5 15 26 59
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Short Term Income Fund. The financial highlights for the Fund
for the periods from November 1, 1995 through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
financial highlights for the Fund for the period ended October 31, 1995 were
audited by Coopers & Lybrand LLP, independent auditors for the predecessor fund.
The annual report for the Fund is available to shareholders at no charge by
calling CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
INSTITUTIONAL
CLASS
1997 1996 1995(1)
CLASS Y (INSTITUTIONAL)(3)* -------------------- ------------
For a Share Outstanding Throughout the Period Ended June 30 October 31
- --------------------------------------------------- ---------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.94 10.05 10.00
Net Investment Income $ 0.53 0.36 0.25
Realized and Unrealized Net Gains (Losses) on Securities $ 0.03 (0.08) 0.03
Distributions from Net Investment Income $ (0.53) (0.38) (0.23)
Distributions from Capital Gains $ -- (0.01) --
Net Asset Value, End of Period $ 9.97 9.94 10.05
Total Return(2) 5.82% 2.78 2.87+
Net Assets, End of Period (000 omitted) $37,011 30,132 36,059
Ratio of Expenses to Average Net Assets 0.47% 0.51 0.63
Ratio of Net Income to Average Net Assets 5.37% 5.31 5.43
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.05% 1.03 1.08
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.79% 4.79 4.98
Portfolio Turnover Rate** 99% 102 40
</TABLE>
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21, 1995
through October 31, 1995. For the year ended October 31, 1995, the Financial
Highlights' ratios of expenses, net investment income, total return, and the
per share investment activities and distributions reflect this allocation.
Also, on April 22, 1996, the assets of the Conestoga Short-Term Income Fund
were acquired by CoreFunds. At that time the Institutional Class Shares of
the Fund were exchanged for Class Y Shares.
** For the period ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations May 15, 1995. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return for the period ended June 30, 1996 is for an eight-month
period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. The prior year is for the
period from inception to October 31.
15
<PAGE>
SHORT-INTERMEDIATE BOND FUND
SUMMARY
Short-Intermediate Bond Fund seeks to provide investors with income by investing
in a diversified portfolio of fixed income securities with maturities averaging
from two to five years.
INVESTMENT OBJECTIVE
Short-Intermediate Bond Fund seeks a moderate level of current income consistent
with conservation of capital.
PORTFOLIO INVESTMENTS
The Fund intends to invest at least 65% of its total assets in bonds under
normal market conditions. The Fund maintains a maximum average maturity of no
more than five years. By maintaining this maturity range, CoreStates Advisers
expects the Fund's net asset value to be relatively stable while providing
higher income than money market funds.
The Fund invests primarily in a portfolio of intermediate term, investment
grade, fixed income obligations with an expected average weighted maturity of
two to five years including:
|__ corporate debt securities (bonds and commercial paper)
|__ securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
If a security held by the Fund is downgraded below the minimum required ratings,
CoreStates Advisers will reassess the creditworthiness of the security.
Short-Intermediate Bond Fund strives to provide a return greater than bond
indices such as the Merrill Lynch 1-3 Year Treasury Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Short-Intermediate Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk -The possibility that securities with high interest rates will
be prepaid (or 'called') by the issuer prior to maturity during periods of
falling interest rates. This would require the Fund to invest the resulting
proceeds elsewhere, at generally lower interest rates. This is also known as
Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities may suffer
substantial declines in credit quality and market value due to corporate
restructurings. While event risk may be high for certain
corporate securities held by the Fund, event risk in the aggregate should be low
because of the Fund's diversified holdings.
INVESTMENT SUITABILITY
Short-Intermediate Bond Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money market
fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Daniel R. Taylor is an Investment Officer of CoreStates Advisers and the
portfolio manager of the Short-Intermediate Bond Fund. He has been employed by
CoreStates for a number of years in various capacities, including Commercial
Lending Credit Analyst. (Please see page 45 for more information about the
Fund's Investment Adviser.)
16
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .29%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .20%
Total Operating Expenses After Fee Waivers(3) .49%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .79%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $5 16 27 62
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Short-Intermediate Bond Fund. The financial highlights for the
Fund for the periods from inception through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994 1993 1992(1)
-------------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.76 9.84 9.63 10.18 10.01 10.00
Net Investment Income $ 0.59 0.57 0.53 0.43 0.47 0.23
Realized and Unrealized Net Gains (Losses) on Securities $ 0.07 (0.08) 0.21 (0.53) 0.31 0.01
Distributions from Net Investment Income $ (0.59) (0.57) (0.53) (0.43) (0.47) (0.23)
Distributions from Capital Gains $ -- -- -- (0.02) (0.14) --
Net Asset Value, End of Period $ 9.83 9.76 9.84 9.63 10.18 10.01
Total Return 6.90% 5.05 8.22 (0.32) 7.90 2.49+
Net Assets, End of Period (000 omitted) $163,153 159,841 55,128 48,379 44,692 22,623
Ratio of Expenses to Average Net Assets 0.49% 0.55 0.60 0.58 0.42 0.11
Ratio of Net Income to Average Net Assets 5.98% 5.80 5.76 4.30 4.62 5.73
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.80% 0.81 0.84 0.86 0.86 0.84
Ratio of Net Income to Average Net Assets (Excluding Waivers) 5.67% 5.54 5.52 4.02 4.18 5.00
Portfolio Turnover Rate** 158% 257 405 299 188 51
</TABLE>
* On April 15, 1996, the assets of the Conestoga Intermediate Income Fund
were acquired by CoreFunds. At that time, the Institutional Class Shares of
the Fund were exchanged for Class Y Shares.
** For the year ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations February 3, 1992. Unless otherwise noted, all ratios
for the period have been annualized.
17
<PAGE>
GOVERNMENT INCOME FUND
SUMMARY
Government Income Fund seeks to provide investors with income, as well as
preservation of principal investment and liquidity by investing in a portfolio
of U.S. Government guaranteed securities.
INVESTMENT OBJECTIVE
Government Income Fund seeks current income while preserving principal value and
maintaining liquidity.
PORTFOLIO INVESTMENTS
The Fund invests exclusively in:
|__ U.S. Treasury securities
|__ mortgage-backed securities issued or guaranteed by U.S. Government agencies
and
|__ repurchase agreements involving any of these obligations.
The Fund's average maturity is generally about six to ten years.
Government Income Fund strives to provide a return greater than bond indices
such as the Salomon Brothers Broad Investment Grade Bond Index. (Please see page
36 for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Government Income Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Government Income Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money
market fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
William T. Lawrence, a Vice President of CoreStates Advisers, is the portfolio
manager for Government Income Fund and Bond Fund. He joined CoreStates Advisers
in 1991. Prior to that, he was Vice President, Fixed Income Sales, for First
Boston Corp. (Please see page 45 for more information about the Fund's
Investment Adviser.)
18
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .47%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .23%
Total Operating Expenses After Fee Waivers(3) .70%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .32%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .82%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $7 22 39 87
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption at
the end of each time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Government Income Fund. The financial highlights for the Fund
for the periods from inception through June 30, 1997 have been audited by Ernst
& Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994 1993(1)
---------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.62 9.83 9.52 10.18 10.00
Net Investment Income $ 0.62 0.61 0.62 0.50 0.13
Realized and Unrealized Net Gains (Losses) on Securities $ 0.14 (0.21) 0.31 (0.62) 0.18
Distributions from Net Investment Income $ (0.62) (0.61) (0.62) (0.50) (0.13)
Distributions from Capital Gains $ -- -- -- (0.04) --
Net Asset Value, End of Period $ 9.76 9.62 9.83 9.52 10.18
Total Return 8.15% 4.09 10.26 (1.34) 3.12+
Net Assets, End of Period (000 omitted) $19,007 13,943 11,305 9,089 6,323
Ratio of Expenses to Average Net Assets 0.70% 0.64 0.59 0.50 0.44
Ratio of Net Income to Average Net Assets 6.40% 6.17 6.53 4.93 5.41
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.85% 0.89 0.98 1.00 1.10
Ratio of Net Income to Average Net Assets (Excluding Waivers) 6.25% 5.92 6.14 4.43 4.75
Portfolio Turnover Rate 120% 131 368 157 93
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class
Y Shares.
+ This figure has not been annualized.
(1) Commenced operations April 1, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
19
<PAGE>
BOND FUND
SUMMARY
Bond Fund seeks to provide investors with maximum long-term total return by
investing in a diversified portfolio of debt securities.
INVESTMENT OBJECTIVE
Bond Fund seeks to maximize long-term total return.
PORTFOLIO INVESTMENTS
The Fund normally invests at least 80% of its total assets in investment grade
debt securities of all types including:
|__ domestic and foreign bonds, debentures and notes
|__ equipment lease and trust certificates
|__ asset-backed and mortgage-backed securities and
|__ obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
If a security held by the Fund is downgraded below investment grade, CoreStates
Advisers will reassess the creditworthiness of the security.
The Fund also may invest in:
|__ first mortgage loans and participation certificates
|__ pools of mortgages issued or guaranteed by the U.S. Government, its
agencies or instrumentalities
|__ preferred stocks
|__ convertible debt securities
|__ common stock obtained upon the conversion or exchange of convertible
securities and
|__ Short-Term Obligations.
Securities in which the Fund invests may have warrants or options attached. The
Fund anticipates investing no more than 5% of its net assets in debt securities
rated below investment grade.
Bond Fund strives to provide a return greater than bond indices such as the
Lehman Aggregate Bond Index. (Please see page 36 for more information about
General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities may suffer
substantial declines in credit quality and market value due to corporate
restructurings. While event risk may be high for certain corporate securities
held by the Fund, event risk in the aggregate should be low because of the
Fund's diversified holdings.
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Bond Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money market
fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
William T. Lawrence, a Vice President of CoreStates Advisers, is the portfolio
manager for the Bond Fund and the Government Income Fund. He joined CoreStates
Advisers in 1991. Prior to that, he was Vice President, Fixed Income Sales, for
First Boston Corp. (Please see page 45 for more information about the Fund's
Investment Adviser.)
20
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .35%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .21%
Total Operating Expenses After Fee Waivers(3) .56%
(1) Absent voluntary waivers, investment advisory fees would be .74% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.04%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 6 18 31 70
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption
at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Bond Fund. The financial highlights for the Fund for the
periods from November 1, 1995 through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The financial
highlights for the Fund for the periods ended October 31, 1990 through October
31, 1995 were audited by Coopers & Lybrand LLP, independent auditors for the
predecessor fund. The annual report for the Fund is available to shareholders at
no charge by calling CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
INSTITUTIONAL PRIOR
CLASS CLASS
CLASS Y (INSTITUTIONAL)(3)* 1997 1996 1995 1994 1993 1992 1991 1990(1)
----------------------------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30 October 31
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.15 10.55 9.81 11.18 10.89 10.65 9.96 10.00
Net Investment Income $ 0.64 0.43 0.61 0.53 0.56 0.70 0.78 0.50
Realized and Unrealized Net Gains
(Losses) on Securities $ 0.09 (0.30) 0.71 (1.04) 0.54 0.32 0.69 (0.04)
Distributions from Net Investment Income $ (0.64) (0.45) (0.58) (0.52) (0.56) (0.68) (0.78) (0.50)
Distributions from Capital Gains $ -- (0.08) -- (0.34) (0.25) (0.10) -- --
Net Asset Value, End of Period $ 10.24 10.15 10.55 9.81 11.18 10.89 10.65 9.96
Total Return(2) 7.43% 1.23 13.87 (4.75) 10.63 9.82 15.16 4.64+
Net Assets, End of Period (000 omitted) $182,364 198,605 194,442 23,377 27,346 15,180 7,255 4,593
Ratio of Expenses to Average Net Assets 0.56% 0.55 0.71 1.01 0.88 0.46 0.47 0.68
Ratio of Net Income to Average Net Assets 6.29% 6.28 6.09 5.07 5.16 6.78 7.71 7.75
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.04% 0.97 1.12 1.60 1.49 1.24 1.41 1.62
Ratio of Net Income to Average Net Assets
(Excluding Waivers) 5.81% 5.86 5.68 4.48 4.55 6.01 6.78 6.81
Portfolio Turnover Rate** 210% 190 352 232 158 99 47 23
</TABLE>
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21,
1995 through October 31, 1995. For the year ended October 31, 1995, the
Financial Highlights' ratios of expenses, net investment income, total
return, and the per share investment activities and distributions reflect
this allocation. Also, on April 22, 1996, the assets of the Conestoga Bond
Fund were acquired by CoreFunds. At that time the Institutional Class
Shares of the Fund were exchanged for Class Y Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations February 28, 1990. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return for the period ended June 30, 1996 is for an eight-month
period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
period from November 1 to October 31.
21
<PAGE>
GLOBAL BOND FUND
SUMMARY
Global Bond Fund seeks to provide investors with capital appreciation and income
by investing in a portfolio of U.S. and foreign fixed income securities.
INVESTMENT OBJECTIVE
Global Bond Fund seeks capital appreciation and current income.
PORTFOLIO INVESTMENTS
The Fund invests primarily in U.S. government and corporate debt
securities and fixed income securities of foreign issuers denominated in U.S.
dollars and other currencies. Under normal circumstances, the Fund will invest
at least 65% of its total assets in investment grade fixed income securities,
including:
|__ debt obligations of foreign or domestic government entities
|__ corporate obligations and
|__ obligations of supranational agencies, including the International Bank of
Reconstruction and Development, the InterAmerican Development Bank, and the
Asian Development Bank.
If a security held by the Fund is downgraded below the minimum required ratings,
CoreStates Advisers will reassess the creditworthiness of the security. There
are no restrictions on the average maturity of the Fund or the maturity of any
single instrument.
The Fund will invest in securities of issuers, governments or agencies located
in at least three of the following countries:
Australia Finland Japan Spain
Austria France Luxembourg Sweden
Belgium Germany Netherlands Switzerland
Canada Ireland New Zealand United Kingdom
Denmark Italy Norway United States
Issuers are located in a country if they are headquartered or doing business
primarily in that country.
The Fund may invest up to 5% of its assets in debt obligations that are
denominated in the currencies of developing countries and that are of comparable
quality, as determined by the Adviser and Sub-Adviser, Analytico TSA
International, Inc. ('Analytic').
Global Bond Fund strives to provide a return greater than bond indices such
as the J.P. Morgan Global Government Bond Index.
RISK CONSIDERATIONS
There are special risks associated with international investing. See `Foreign
Securities' information on page 36.
Also, like all fixed income funds, Global Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Global Bond Fund may be appropriate for investors who are:
|__ looking for capital appreciation and current income
|__ seeking enhanced overall returns by virtue of international diversification
|__ able to hold their investment over a long time period in anticipation of
the returns that foreign securities can provide
|__ able to tolerate fluctuations in the principal value of their investment
and
|__ aware of the unique risks of international investing, including their
exposure to currency fluctuations.
FUND MANAGEMENT
CoreStates Advisers has delegated some of its portfolio management functions to
Analytic (the "Sub-Adviser").
George McNeill is Managing Director of Analytic and the portfolio manager
for Global Bond Fund. He has over 35 years of experience in managing fixed
income portfolios. He served as the senior investment officer for Gillett
Brothers (1977-1981), Reserve Asset Managers (1981-1989), and Axe-Houghton, Ltd.
(1989-1996). Together with United Asset Management Corporation of Boston, Mr.
McNeill founded Alpha Global in 1996, which then merged with Analytic. (Please
see page 45 for more information about the Fund's Investment Adviser and
Sub-Adviser.)
22
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .50%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .34%
Total Operating Expenses After Fee Waivers(3) .84%
(1) Absent voluntary waivers, investment advisory fees would be .60% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .43%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.03%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect anticipated
expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 9 27 47 104
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption at
the end of each time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Global Bond Fund. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994(1)
--------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
--------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.70 9.62 9.06 10.00
Net Investment Income $ 0.49 0.47 0.62 0.25
Realized and Unrealized Net Gains (Losses) on Securities $ 0.09 0.30 0.24 (1.15)
Distributions from Net Investment Income $ (0.74) (0.69) (0.30) (0.04)
Distributions from Capital Gains $ -- -- -- --
Net Asset Value, End of Period $ 9.54 9.70 9.62 9.06
Total Return 6.18% 8.00 9.70 (9.00)+
Net Assets, End of Period (000 omitted) $34,590 32,998 26,898 24,957
Ratio of Expenses to Average Net Assets 0.85% 0.71 0.64 0.73
Ratio of Net Income to Average Net Assets 5.14% 5.81 6.84 5.04
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.03% 0.95 1.03 1.12
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.96% 5.57 6.45 4.65
Portfolio Turnover Rate 90% 67 133 161
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class
Y Shares.
+ This figure has not been annualized.
(1) Commenced operations December 15, 1993. Unless otherwise noted, all ratios
for the period have been annualized.
23
<PAGE>
INTERMEDIATE MUNICIPAL BOND FUND
SUMMARY
Intermediate Municipal Bond Fund seeks to provide investors with federal
tax-free income, as well as preservation of principal investment by investing in
a portfolio of investment grade, municipal securities with intermediate-term
maturities.
INVESTMENT OBJECTIVE
Intermediate Municipal Bond Fund seeks the highest level of income exempt from
federal income taxes that can be obtained, consistent with the preservation of
capital.
PORTFOLIO INVESTMENTS
The Fund invests in a diversified portfolio of investment grade (i.e., rated in
one of the top four rating categories), intermediate term municipal securities.
Substantially all of the Fund's assets are invested in intermediate term
municipal obligations, including those issued by, or on behalf of:
|__ states
|__ municipalities
|__ territories and possessions of the U.S.
|__ the District of Columbia and
|__ their political subdivisions, agencies, instrumentalities and authorities.
If a security held by the Fund is downgraded below investment grade, CoreStates
Advisers will reassess the creditworthiness of the security.
Under normal circumstances, at least 80% of the Fund's assets are invested
in municipal securities the interest on which is exempt from regular federal
income taxes in the opinion of counsel to the issuer. Up to 20% of the Fund's
assets can be invested in taxable obligations for defensive purposes or when
appropriate tax-exempt securities are not available.
Intermediate Municipal Bond Fund strives to provide a return greater than
bond indices such as the Lehman Brothers 7-Year Municipal Bond Index. (Please
see page 36 for more information about General Investment Policies and
Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Intermediate Municipal Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Intermediate Municipal Bond Fund may be appropriate for investors who:
|__ are looking for an investment that offers a higher level of current income
exempt from federal income taxes and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Joseph R. Baxter is a Vice President of CoreStates Advisers and head of the
Tax-Advantaged unit at CoreStates Advisers. He manages Intermediate Municipal
Bond Fund, Pennsylvania Municipal Bond Fund, and New Jersey Municipal Bond Fund.
He is also directly responsible for management of the CoreStates Pennsylvania
Tax-Exempt Common Trust Fund. Brian G. Snyder, a Senior Investment Officer of
CoreStates Advisers, co-manages Intermediate Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, and New Jersey Municipal Bond Fund. Mr. Snyder also manages
several CoreStates common trust funds and individual accounts of the
Tax-Advantaged unit. Mr. Snyder has worked at CoreStates since 1985 and joined
CoreStates Advisers in 1989. (Please see page 45 for more information about the
Fund's Investment Adviser.)
24
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .07%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .48%
Total Operating Expenses After Fee Waivers(3) .55%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .57%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.07%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 6 18 31 69
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption at
the end of each time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Intermediate Municipal Bond Fund. The financial highlights for
the Fund for the periods from inception through June 30, 1997 have been audited
by Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994 1993(1)
--------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.92 9.83 9.68 10.09 10.00
Net Investment Income $ 0.42 0.37 0.38 0.39 0.04
Realized and Unrealized Net Gains (Losses) on Securities $ 0.13 0.09 0.15 (0.41) 0.09
Distributions from Net Investment Income $(0.42) (0.37) (0.38) (0.39) (0.04)
Distributions from Capital Gains $ -- -- -- -- --
Net Asset Value, End of Period $10.05 9.92 9.83 9.68 10.09
Total Return 5.62% 4.74 5.58 (0.27) 1.33+
Net Assets, End of Period (000 omitted) $ 993 403 365 1,088 2,009
Ratio of Expenses to Average Net Assets 0.55% 0.81 0.82 0.63 0.58
Ratio of Net Income to Average Net Assets 4.20% 3.73 3.91 3.91 2.74
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.02% 1.31 1.26 1.17 1.45
Ratio of Net Income to Average Net Assets (Excluding Waivers) 3.73% 3.23 3.47 3.37 1.87
Portfolio Turnover Rate 22% 10 9 43 10
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class
Y Shares.
+ This figure has not been annualized.
(1) Commenced operations May 3, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
25
<PAGE>
PENNSYLVANIA MUNICIPAL BOND FUND
SUMMARY
Pennsylvania Municipal Bond Fund seeks to provide investors with income free of
federal and Pennsylvania income taxes, as well as preservation of principal
investment by investing in a portfolio of high grade municipal securities.
INVESTMENT OBJECTIVE
Pennsylvania Municipal Bond Fund seeks current income exempt from federal and
Pennsylvania income taxation with preservation of capital.
PORTFOLIO INVESTMENTS
The Fund invests primarily in municipal securities, including:
|__ municipal bonds rated in one of the three highest ratings categories and
|__ municipal notes rated in one of the two highest ratings categories.
Under normal circumstances, at least 80% of the Fund's assets will be invested
in municipal securities the interest on which is exempt from regular federal
income tax. At least 65% of the Fund's assets will be invested in municipal
securities, the interest on which is exempt from Pennsylvania personal income
tax ('Pennsylvania Municipal Securities'). There are no restrictions on the
average maturity of the Fund or the maturity of a single instrument, and the
Fund will generally invest more than 25% of its net assets in municipal
securities whose issuers are located in Pennsylvania.
The Fund may invest up to 20% of its assets in municipal bonds rated BBB by
S&P or Baa by Moody's Investors Services, Inc. (`Moody's'). If a security held
by the Fund is downgraded below the minimum required ratings, CoreStates
Advisers will reassess the creditworthiness of the security. The Fund will not
hold securities rated below BB.
The Fund may also invest up to 20% of its assets in taxable obligations,
including:
|__ commercial paper
|__ unrated securities of comparable quality, as determined by CoreStates
Advisers and
|__ securities subject to the Federal Alternative Minimum Tax ("AMT").
Pennsylvania Municipal Bond Fund strives to provide a return greater than bond
indices such as the Lehman Brothers Pennsylvania Bond Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Pennsylvania Municipal Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Special Risk Factors - The Fund's concentration of investments in Pennsylvania
Municipal Securities raises special investment considerations. Changes in the
economic condition and governmental policies of the Commonwealth of Pennsylvania
and its municipalities could adversely affect the value of the Fund.
INVESTMENT SUITABILITY
Pennsylvania Municipal Bond Fund may be appropriate for investors who:
|__ are Pennsylvania residents
|__ are looking for an investment that offers a higher level of current income
exempt from federal income taxes and Pennsylvania state income taxes and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Joseph R. Baxter is a Vice President of CoreStates Advisers and head of the
Tax-Advantaged unit at CoreStates Advisers. He manages Intermediate Municipal
Bond Fund, Pennsylvania Municipal Bond Fund, and New Jersey Municipal Bond Fund.
He is also directly responsible for management of the CoreStates Pennsylvania
Tax-Exempt Common Trust Fund. Brian G. Snyder, a Senior Investment Officer of
CoreStates Advisers, co-manages Intermediate Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, and New Jersey Municipal Bond Fund. Mr. Snyder also manages
several CoreStates common trust funds and individual accounts of the
Tax-Advantaged unit. Mr. Snyder has worked at CoreStates since 1985 and joined
CoreStates Advisers in 1989. (Please see page 45 for more information about the
Fund's Investment Adviser.)
26
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .00%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .08%
Total Operating Expenses After Fee Waivers(3) .08%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .33%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .83%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 1 3 5 10
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption
at the end of each time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Pennsylvania Municipal Bond Fund. The financial highlights for
the Fund for the periods from inception through June 30, 1997 have been audited
by Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994(1)
-------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
-------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.22 10.16 9.95 10.00
Net Investment Income $ 0.54 0.55 0.51 0.06
Realized and Unrealized Net Gains (Losses) on Securities $ 0.25 0.06 0.21 (0.05)
Distributions from Net Investment Income $ (0.54) (0.55) (0.51) (0.06)
Distributions from Capital Gains $ -- -- -- --
Net Asset Value, End of Period $ 10.47 10.22 10.16 9.95
Total Return 7.92% 6.02 7.50 0.14+
Net Assets, End of Period (000 omitted) $10,171 8,864 2,272 434
Ratio of Expenses to Average Net Assets 0.08% 0.21 0.39 0.42
Ratio of Net Income to Average Net Assets 5.23% 5.25 5.26 5.09
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.83% 0.96 1.14 1.17
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.48% 4.50 4.51 4.34
Portfolio Turnover Rate** 39% 92 18 3
</TABLE>
* On April 15, 1996, the assets of the Conestoga Pennsylvania Tax-Free Bond
Fund were acquired by CoreFunds. At that time, the Institutional Class
Shares of the Fund were exchanged for Class Y Shares.
** For the year ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations May 16, 1994. Unless otherwise noted, all ratios for
the period have been annualized.
27
<PAGE>
NEW JERSEY MUNICIPAL BOND FUND
SUMMARY
New Jersey Municipal Bond Fund seeks to provide investors with income free of
federal and New Jersey income taxes, as well as preservation of principal
investment by investing in a portfolio of high grade municipal securities.
INVESTMENT OBJECTIVE
New Jersey Municipal Bond Fund seeks current income exempt from federal and New
Jersey income taxation with preservation of capital.
PORTFOLIO INVESTMENTS
The Fund invests primarily in municipal securities, including:
|__ municipal bonds rated in one of the three highest ratings categories and
|__ municipal notes rated in one of the two highest ratings categories.
Under normal circumstances, at least 80% of this Fund's assets will be invested
in municipal securities the interest on which is exempt from regular federal
income tax. At least 65% of the Fund's assets will be invested in municipal
securities the interest on which is exempt from New Jersey personal income tax
('New Jersey Municipal Securities'). There are no restrictions on the average
maturity of the Fund or the maturity of a single instrument, and the Fund will
generally invest more than 25% of its net assets in municipal securities whose
issuers are located in New Jersey.
The Fund may invest up to 20% of its assets in municipal bonds rated BBB by
S&P or Baa by Moody's. If a security held by the Fund is downgraded below the
minimum required ratings, CoreStates Advisers will reassess the creditworthiness
of the security. The Fund will not hold securities rated below BB.
The Fund may also invest up to 20% of its assets in taxable obligations,
including:
|__ commercial paper
|__ unrated securities of comparable quality, as determined by CoreStates
Advisers and
|__ securities subject to the Federal Alternative Minimum Tax ("AMT").
New Jersey Municipal Bond Fund strives to provide a return greater than bond
indices such as the Lehman Brothers New Jersey Bond Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, New Jersey Municipal Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Special Risk Factors - The Fund's concentration of investments in New Jersey
Municipal Securities raises special investment considerations. Changes in the
economic condition and governmental policies of the State of New Jersey and its
municipalities could adversely affect the value of the Fund.
INVESTMENT SUITABILITY
New Jersey Municipal Bond Fund may be appropriate for investors who:
|__ are New Jersey residents
|__ are looking for an investment that offers a higher level of current income
exempt from federal income taxes and New Jersey state income taxes and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Joseph R. Baxter is a Vice President of CoreStates Advisers and head of the
Tax-Advantaged unit at CoreStates Advisers. He manages Intermediate Municipal
Bond Fund, Pennsylvania Municipal Bond Fund, and New Jersey Municipal Bond Fund.
He is also directly responsible for management of the CoreStates Pennsylvania
Tax-Exempt Common Trust Fund. Brian G. Snyder, a Senior Investment Officer of
CoreStates Advisers, co-manages Intermediate Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, and New Jersey Municipal Bond Fund. Mr. Snyder also manages
several CoreStates common trust funds and individual accounts of the
Tax-Advantaged unit. Mr. Snyder has worked at CoreStates since 1985 and joined
CoreStates Advisers in 1989. (Please see page 45 for more information about the
Fund's Investment Adviser.)
28
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .00%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .13%
Total Operating Expenses After Fee Waivers(3) .13%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .38%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .88%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect anticipated
expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 1 4 7 17
expenses on a $1,000 investment,
assuming (1) a 5% annual return and
(2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of New Jersey Municipal Bond Fund. The financial highlights for
the Fund for the periods from inception through June 30, 1997 have been audited
by Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994(1)
------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.08 10.12 9.94 10.00
Net Investment Income $ 0.51 0.51 0.52 0.06
Realized and Unrealized Net Gains (Losses) on Securities $ 0.15 0.02 0.18 (0.06)
Distributions from Net Investment Income $(0.51) (0.51) (0.52) (0.06)
Distributions from Capital Gains $(0.07) (0.06) -- --
Net Asset Value, End of Period $10.16 10.08 10.12 9.94
Total Return 6.70% 5.28 7.25 0.01+
Net Assets, End of Period (000 omitted) $1,477 1,317 1,550 1,432
Ratio of Expenses to Average Net Assets 0.21% 0.37 0.42 0.43
Ratio of Net Income to Average Net Assets 5.02% 4.93 5.21 5.07
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.96% 1.12 1.17 1.35
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.27% 4.18 4.46 4.15
Portfolio Turnover Rate 19% 21 32 13
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class
Y Shares.
+ This figure has not been annualized.
(1) Commenced operations May 16, 1994. Unless otherwise noted, all ratios for
the period have been annualized.
29
<PAGE>
TREASURY RESERVE
SUMMARY
Treasury Reserve seeks to provide investors with income, liquidity and
stability of principal by investing in direct obligations of the U.S. Treasury
and repurchase agreements.
INVESTMENT OBJECTIVE
Treasury Reserve seeks current interest income, liquidity and safety of
principal.
PORTFOLIO INVESTMENTS
The Fund invests in a portfolio of direct obligations of the U.S. Treasury,
specifically:
|__ Treasury Bills
|__ Treasury Bonds and
|__ Treasury Notes.
The Fund may also invest in:
|__ separately traded interest and principal component parts of U.S. Treasury
obligations that are transferable through the Federal book-entry system,
known as Separately Traded Registered Investment and Principal Securities
("STRIPS") and
|__ repurchase agreements relating to U.S. Treasury obligations.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Treasury Reserve strives to provide a return greater than money market indices
such as the IBC Donoghue 100% Treasury and Repurchase Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Treasury Reserve may be subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
INVESTMENT SUITABILITY
Treasury Reserve may be appropriate for investors who:
|__ are unwilling to accept the credit risk associated with non-Treasury money
market funds
|__ are unable to tolerate fluctuations in the principal value of their
investments and
|__ want an investment that provides current interest income at competitive
rates of return.
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
FUND MANAGEMENT
Ronald R. Brasten is a Vice President of CoreStates Advisers and manages
Treasury Reserve . He also manages CoreFund Elite Treasury Reserve and has
investment responsibility for individually managed corporate and personal
accounts. He joined CoreStates Advisers in August 1989. (Please see page 45 for
more information about the Fund's Investment Adviser.)
30
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .21%
Total Operating Expenses After Fee Waivers(3) .51%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .70%. These fee waivers are voluntary, and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 5 16 29 64
expenses on a $1,000 investment,
assuming (1) a 5% annual return and
(2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Treasury Reserve. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994 1993 1992 1991 1990 1989(1)
----------------------------------------------------------------------------------------
For a Share Outstanding Throughout
the Period Ended June 30
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.05 0.05 0.05 0.03 0.03 0.05 0.07 0.08 0.06
Distributions from Net Investment Income $ (0.05) (0.05) (0.05) (0.03) (0.03) (0.05) (0.07) (0.08) (0.06)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Total Return 4.97% 5.20 4.98 2.91 2.96 4.73 7.11 8.38 4.66+
Net Assets, End of Period (000 omitted) $835,384 892,562 479,206 484,974 446,788 444,388 427,439 270,524 220,479
Ratio of Expenses to Average Net Assets 0.51% 0.50 0.48 0.48 0.46 0.38 0.37 0.37 0.20
Ratio of Net Income to Average Net Assets 4.86% 5.02 4.91 2.87 2.89 4.58 6.80 8.03 9.26
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 0.71% 0.77 0.85 0.86 0.85 0.82 0.82 0.84 0.84
Ratio of Net Income to Average Net Assets
(Excluding Waivers) 4.66% 4.75 4.54 2.49 2.50 4.14 6.35 7.56 8.62
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class
Y Shares.
+ This figure has not been annualized.
(1) Commenced operations November 21, 1988. Unless otherwise noted, all ratios
for the period have been annualized.
31
<PAGE>
CASH RESERVE
SUMMARY
Cash Reserve seeks to provide investors with a high level of income,
liquidity and relative stability of principal by investing in a diversified
portfolio of the highest quality money market instruments.
INVESTMENT OBJECTIVE
Cash Reserve seeks as high a level of current income as is consistent with
liquidity and relative stability of principal.
PORTFOLIO INVESTMENTS
The Fund invests in a diversified portfolio of money market instruments of
the highest quality, including:
|__ U.S. dollar-denominated government obligations
|__ bank obligations and
|__ commercial paper.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Cash Reserve strives to provide a return greater than money
market indices such as the IBC Donoghue All-Taxable Money Fund Average. (Please
see page 36 for more information about General Investment Policies and
Practices.)
RISK CONSIDERATIONS
Cash Reserve may be subject on a limited basis to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Cash Reserve may be appropriate for investors who:
|__ are unable to tolerate fluctuations in the principal value of their
investments and
|__ want an investment that provides current interest income at competitive
rates of return.
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
FUND MANAGEMENT
John Ackler is Senior Investment Officer of CoreStates Advisers and manages
Short Term Income Fund and Cash Reserve. He is also responsible for the
management of the CoreStates Liquidity Fund, as well as numerous individually
managed fixed income funds. Mr. Ackler joined CoreStates as an internal auditor
in 1992 and transferred to CoreStates Advisers in August 1993. (Please see page
45 for more information about the Fund's Investment Adviser.)
32
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .20%
Total Operating Expenses After Fee Waivers(3) .50%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .69%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 5 16 28 63
expenses on a $1,000 investment,
assuming (1) a 5% annual return
and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Cash Reserve. The financial highlights for the Fund for the
periods from inception through June 30, 1997 have been audited by Ernst & Young
LLP, independent auditors, whose report appears in CoreFunds' annual report
which accompanies the Statement of Additional Information. The annual report for
the Fund is available to shareholders at no charge by calling CoreFunds at
1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------
For a Share Outstanding Throughout
the Period Ended June 30
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.05 0.05 0.05 0.03 0.03 0.05 0.07 0.08
Distributions from Net Investment Income $ (0.05) (0.05) (0.05) (0.03) (0.03) (0.05) (0.07) (0.08)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Total Return 5.09% 5.26 5.15 3.00 2.99 4.83 7.28 8.65
Net Assets, End of Period (000 omitted) $886,251 790,211 510,341 505,273 460,832 568,672 473,187 316,290
Ratio of Expenses to Average Net Assets 0.50% 0.50 0.48 0.47 0.46 0.38 0.37 0.34
Ratio of Net Income to Average Net Assets 4.99% 5.09 5.04 2.95 2.97 4.68 6.94 8.28
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 0.70% 0.78 0.85 0.85 0.85 0.82 0.82 0.80
Ratio of Net Income to Average Net Assets
(Excluding Waivers) 4.79% 4.81 4.67 2.57 2.58 4.24 6.49 7.82
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1989 1988 1987
------------------------
For a Share Outstanding Throughout
the Period Ended June 30
------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period 1.00 1.00 1.00
Net Investment Income 0.09 0.07 0.06
Distributions from Net Investment Income (0.09) (0.07) (0.06)
Net Asset Value, End of Period 1.00 1.00 1.00
Total Return 8.87 6.70 5.85
Net Assets, End of Period (000 omitted) 186,151 82,399 35,054
Ratio of Expenses to Average Net Assets 0.37 0.55 0.54
Ratio of Net Income to Average Net Assets 8.62 6.54 5.60
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 0.90 1.14 1.01
Ratio of Net Income to Average Net Assets
(Excluding Waivers) 8.05 5.96 5.13
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class
Y Shares.
33
<PAGE>
TAX-FREE RESERVE
SUMMARY
Tax-Free Reserve seeks to provide investors with a high level of tax-free
income, liquidity and stability of principal by investing in short-term
obligations issued by, or on behalf of, state and local governments.
INVESTMENT OBJECTIVE
Tax-Free Reserve seeks as high a level of current interest income that is
exempt from federal income taxes as is consistent with liquidity and relative
stability of principal.
PORTFOLIO INVESTMENTS
The Fund invests at least 80% of its assets in tax-free securities under normal
market conditions. The interest on each security must be exempt from regular
federal income tax, in the opinion of counsel to the issuer and not produce
interest income that is treated as a preference item for AMT purposes. The Fund
invests in a diversified portfolio of short-term, tax-free obligations issued
by, or on behalf of:
|__ states
|__ municipalities
|__ territories and possessions of the U.S.
|__ the District of Columbia and
|__ their political subdivisions, agencies, instrumentalities and authorities.
Up to 20% of all assets in the Fund can be invested in taxable debt securities
for defensive purposes or when appropriate tax-exempt securities are not
available. CoreStates Advisers works to take advantage of key seasonal supply
and demand factors that govern short-term rates.
The Fund often purchases securities supported by credit enhancements from
financial institutions. Changes in the credit quality of these institutions
could adversely affect the Fund's share price.
The Fund is governed by SEC Rules which impose certain quality, maturity
and diversification requirements. The Fund's assets are valued using the
amortized cost method, which enables the Fund to maintain a stable net asset
value per share. All securities purchased by the Fund must have remaining
maturities of 13 months or less.
Tax-Free Reserve strives to provide a return greater than money market
indices such as the IBC Donoghue Tax-Free Fund Average. (Please see page 36 for
more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Tax-Free Reserve may be subject on a limited basis to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Tax-Free Reserve may be 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 taxes. Although the
Fund is managed to maintain a stable price per share of $1.00, there is no
guarantee that price will be constantly maintained.
FUND MANAGEMENT
Folu Abiona is Senior Investment Officer for CoreStates Advisers and
manages Tax-Free Reserve. Ms. Abiona also manages CoreFund Elite Tax-Free
Reserve. She joined CoreStates Advisers in 1985 and became fixed income
portfolio manager in 1990. (Please see page 45 for more information about the
Fund's Investment Adviser.)
34
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y Shares of the Fund.
CLASS Y (INSTITUTIONAL)
Shareholder Transaction Expenses none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees none
Other Expenses After Fee Waivers(2) .20%
Total Operating Expenses After Fee Waivers(3) .50%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .69%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following $ 5 16 28 63
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption at
the end of each time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class Y Shares of Tax-Free Reserve. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
CLASS Y (INSTITUTIONAL)* 1997 1996 1995 1994 1993 1992 1991(1)
-------------------------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.03 0.03 0.03 0.02 0.02 0.03 0.01
Distributions from Net Investment Income $ (0.03) (0.03) (0.03) (0.02) (0.02) (0.03) (0.01)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Total Return 3.08% 3.20 3.12 2.03 2.23 3.56 1.07+
Net Assets, End of Period (000 omitted) $119,579 104,196 62,756 79,384 72,255 80,147 42,573
Ratio of Expenses to Average Net Assets 0.50% 0.48 0.48 0.49 0.51 0.37 0.06
Ratio of Net Income to Average Net Assets 3.07% 3.14 3.09 2.00 2.20 3.39 4.20
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.70% 0.76 0.85 0.87 0.89 0.88 0.81
Ratio of Net Income to Average Net Assets (Excluding Waivers) 2.87% 2.86 2.72 1.62 1.82 2.88 3.45
</TABLE>
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class
Y Shares.
+ This figure has not been annualized.
(1) Commenced operations April 16, 1991. Unless otherwise noted, all ratios for
the period have been annualized.
35
<PAGE>
GENERAL INFORMATION
General Investment Policies and Practices
In addition to making investments as described above, the Funds may engage in a
number of additional investment practices. These practices are defined below.
The tables starting on page 39 describe which Funds engage in which practices.
ADRS, EDRS, AND GDRS
|__ ADRs are American Depositary Receipts, typically issued by a U.S. financial
institution (a 'depositary'). They evidence ownership interests in a security or
a pool of securities issued by a foreign issuer and deposited with the
depositary. Generally, ADRs are designed for trading in the U.S. securities
market.
|__ EDRs are European Depositary Receipts, typically issued by a non-U.S.
financial institution. They evidence ownership interests in a security or a pool
of securities issued by either a U.S. or foreign issuer. Generally, EDRs are
designed for trading in European securities markets.
|__ GDRs are Global Depositary Receipts. They are issued globally and evidence
a similar ownership arrangement. Generally, GDRs are designed for trading in
non-U.S. securities markets.
ASSET-BACKED SECURITIES
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 investor. The Funds will invest only in asset-backed securities which are
readily marketable and rated at the time of purchase in the two highest rating
categories assigned by a rating organization.
BANK OBLIGATIONS
Investments in domestic branches of U.S. banks, specifically:
|__ 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.
|__ 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.
EQUITY SECURITIES
The Funds may invest in public and privately issued equity securities, including
common and preferred stocks, warrants, rights to subscribe to common stock and
convertible securities. Investments in equity securities in general are subject
to market risks that may cause their prices to flucuate over time. Certain of
the Funds may invest to a significant degree in equity securities of smaller
institutions. Any investment in smaller or medium capitalization companies
involves greater risk than that customarily associated with investments in
larger, more established companies.
FOREIGN CURRENCY TRANSACTIONS
Contracts used to hedge against adverse movements in exchange rates between
currencies. Transactions may be conducted either on a cash basis or through
forward contracts. A forward contract involves an obligation to purchase or sell
a specific currency at a future date at a price set at the time of the contract.
FOREIGN SECURITIES
Securities of foreign issuers, securities issued by foreign branches of U.S.
banks and foreign banks, Canadian commercial paper and Europaper (U.S.
dollar-denominated commercial paper of foreign issuers).
There are special risks associated with international investing:
|__ Currency Risk - The possibility that changes in foreign exchange rates will
affect, favorably or unfavorably, the value of foreign securities.
|__ Volatility - Investments in foreign stock markets can be more volatile than
investments in U.S. markets. Diplomatic, political or economic developments
could affect investment in foreign countries
|__ Expense Considerations - Fixed commissions on many foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges. Expenses for
custodial arrangements of foreign securities may be somewhat greater than
typical expenses for custodial arrangements for handling U.S. securities of
equal value.
|__ Foreign Taxes - Certain foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes are recoverable, the non-recovered portion of foreign withholding taxes
will reduce the income received from the securities comprising the portfolio.
|__ Regulatory Environment - Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to U.S. domestic companies. There is generally less government
regulation of securities exchanges, brokers and listed companies abroad than in
the U.S. Foreign branches of U.S. banks, foreign banks and foreign issuers may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting and record-keeping standards than those applicable to
domestic branches of U.S. banks and U.S. domestic issuers.
36
<PAGE>
FUTURES CONTRACTS AND OPTIONS TRANSACTIONS
|__ Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specified security at a specified
future time and at a specified price.
|__ An option on a futures contract gives the purchaser the right, in exchange
for a premium, to assume a position in a futures contract at a specified
exercise price during the term of the option.
|__ A put option on a security gives the purchaser of the option the right to
sell, and the writer of the option the obligation to buy, the underlying
security at any time during the option period.
|__ A call option on a security gives the purchaser of the option the right to
buy, and the writer of the option the obligation to sell, the underlying
security at any time during the option period.
These transactions are used to:
|__ maintain cash reserves while remaining fully invested
|__ facilitate trading
|__ reduce transaction costs or
|__ seek higher investment returns when the contract is priced more
attractively than the underlying equity security or index.
The Funds may not use futures contracts or options transactions to leverage
their net assets or for speculative purposes. See `Futures and Options' in the
Statement of Additional Information.
ILLIQUID SECURITIES
Securities that cannot be sold or disposed of in seven days or less at
approximately their carrying value.
LENDING OF SECURITIES
The lending of portfolio securities to qualified banks and securities brokers
and dealers is for purposes of realizing additional income. The Fund receives
collateral consisting of cash, letters of credit issued by certain banks, or
securities issued or guaranteed by the U.S. Government or its agencies and equal
to at least 100% of the current market value of the loaned securities. Such
loans would involve risk of delay in receiving collateral, risk of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially.
Before implementing such a lending program, the Fund must first receive an
exemptive order from the Securities and Exchange Commission permitting it to use
its Custodian, CoreStates Bank, N.A., as its lending agent.
MORTGAGE-BACKED SECURITIES
Securities backed by pools of mortgages which pass principal and/or interest
payments to the investor.
Some are issued or guaranteed by U.S. Government agencies, such as:
|__ GNMA, or Government National Mortgage Association, which issues modified
pass-through securities evidencing an interest in a specific pool of mortgage
loans insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Both interest and
principal payments (including prepayments) are passed through monthly to the
investor. The full faith and credit of the United States is pledged to the
timely payment of principal and interest by GNMA.
|__ Fannie Mae, a federally chartered and stockholder-owned corporation, issues
pass-through certificates which are guaranteed as to principal and interest by
Fannie Mae.
|__ FHLMC, or Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States, issues participation certificates which
represent an interest in mortgages held in FHLMC's portfolio. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal.
Securities issued or guaranteed by Fannie Mae and FHLMC are not backed by the
full faith and credit of the United States.
Mortgaged-backed securities also include:
|__ CMOs, collateralized mortgage obligations and
|__ REMICs, real estate mortgage investment conduits, a type of CMO.
CMOs and REMICs are mortgage pass-through securities issued in multiple classes.
Each class of a CMO is issued with a specified fixed or floating coupon rate and
has a stated maturity or final distribution date. Principal prepayments on the
underlying mortgage assets may cause the CMOs to be retired substantially
earlier than their stated maturities or final distribution dates, resulting in a
loss of all or part of any premium paid.
MUNICIPAL SECURITIES
Securities issued by municipalities include:
|__ General Obligation Securities, secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
|__ Revenue Securities, payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or another specific revenue source, such as the user of
the facility being financed. Industrial development and pollution control bonds
held by the Funds are revenue securities whose credit quality is usually
directly related to the credit standing of the corporate user of the facility
involved.
|__ Moral Obligation Bonds, 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.
|__ Variable Rate Demand Obligations, tax-exempt obligations upon which
interest is payable at a floating or variable rate. The Fund 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.
37
<PAGE>
|__ Municipal Lease Obligations, issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the municipality's credit, and
their interest may become taxable if the lease is assigned. If funds are not
appropriated for the following year's lease payments, the lease may terminate,
with the possibility of default on the lease obligation and significant loss to
a Fund. Certificates of participation in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest in
the lease-purchase payments made.
OTHER INVESTMENT COMPANIES
Shares of investment companies may be purchased by the Funds to the extent
consistent with applicable law.
PUT TRANSACTIONS
The option to sell a security at a fixed price before maturity. The premium paid
reduces the underlying yield.
REPURCHASE AGREEMENTS
The purchase of securities subject to the seller's agreement to repurchase them
at a mutually agreed upon date and price. The seller must be deemed creditworthy
and maintain collateral of at least 100% of the repurchase price.
REVERSE REPURCHASE AGREEMENTS
The sale of securities subject to a Fund's agreement to repurchase them at a
mutually agreed upon date and price. The Funds must maintain collateral of at
least 100% of the repurchase price.
SHORT-TERM OBLIGATIONS
Commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit, repurchase agreements, obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, and
demand and time deposits of domestic and foreign banks and savings and loan
associations.
SWAPS
Agreements used to shift the investment exposure from one type of investment to
another, such as:
|__ interest rate swaps - one party agrees to make regular payments equal to a
floating interest rate times a 'notional principal amount,' in return for
payments equal to a fixed rate times the same amount, for a specific period of
time.
|__ currency swaps - the swap agreement provides for interest payments in
different currencies. The parties might agree to exchange the notional principal
amount as well.
|__ caps and floors - one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the other party.
|__ collars - combine elements of buying a cap and selling a floor.
Swaps can be highly volatile and may have a considerable impact on a Fund's
performance. Any obligation a Fund may have under these types of arrangements
must be covered by setting aside liquid assets.
U.S. GOVERNMENT OBLIGATIONS
Securities of the U.S. Government, including:
|__ U.S. Treasury Securities - 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.
|__ 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;
obligations supported by the discretionary authority of the U.S. Treasury to
purchase the agency's obligations; and obligations supported only by the credit
of the agency or instrumentality. 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.
|__ STRIPS - zero coupon U.S. Treasury securities, sold at a substantial
discount and redeemed at face value at maturity without interim cash payments of
interest or principal. This discount is amortized over the life of the security,
and the amortization constitutes the income earned on the security for both
accounting and tax purposes.
VARIABLE AMOUNT MASTER DEMAND NOTES
Unsecured demand notes issued by corporations, insurance companies and other
borrowers that permit the indebtedness to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Although there is no secondary market in the notes, the Funds may demand payment
of principal and accrued interest at any time.
WHEN-ISSUED SECURITIES
Securities which settle on a future date. However, the interest rate is fixed on
the purchase date and no interest accrues before settlement. The Funds must
maintain liquid assets in an amount at least equal to the value of its
commitments to purchase such securities.
38
<PAGE>
TEMPORARY INVESTMENTS
Certain of the Funds are permitted to make temporary investments in Short-Term
Obligations. Such investments may be used to:
|__ invest uncommitted cash balances
|__ maintain liquidity to meet shareholder redemptions or
|__ take a temporary defensive position against potential or serious stock
market declines.
The tables which follow describe which investments, including temporary
investments, each Fund may make.
<TABLE>
<CAPTION>
International
Equity Index Core Equity Growth Equity Special Equity Growth Balanced
<S> <C> <C> <C> <C> <C> <C>
ADRs, EDRs and GDRs -- 35% -- 35% o 45%
Asset-backed securities -- -- -- -- -- 70%
Bank obligations 10% 35% 35% 35% 35% 45%
Foreign currency transactions -- -- -- -- o --
Foreign securities -- -- -- 35% o 35%
Futures contracts -- 5%(a)/20%(b) -- 5%(a)/20%(b) 5%(a)/20%(b) --
Illiquid securities 10% 15% 10% 15% 10% 15%
Investment companies 10% 10% 10% 10% 10% 10%
Lending of securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Mortgage-backed securities -- -- -- -- -- 70%
Options transactions -- 5%(a)/20%(b) -- 5%(a)/20%(b) 5%(a)/20%(b) --
Repurchase agreements 10% 35% 35% 35% 35% 45%
Reverse repurchase agreements 10% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
U.S. Government obligations 10% 35% 35% 35% 35% 45%
Warrants 5% 5% 5% 5% 5% 5%
When-issued securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
TEMPORARY INVESTMENTS
Cash 100% 100% 100% 100% 100% 100%
Short-term obligations 100% 100% 100% 100% 100% 100%
Long-term and short-term
debt instruments, rated A or higher -- 10% 10% 10% 10% 100%
INVESTMENT RESTRICTIONS
Securities of any one issuer(c), (d) 5% 5% 5% 5% 5% 5%
Outstanding voting securities of any one issuer 10% 10% 10% 10% 10% 10%
Securities of issuers in any one industry 25% 25% 25% 25% 25% 25%
less than less than less than less than less than less than
Expected annual portfolio turnover 100% 100% 100% 100% 100% 100%(e)
</TABLE>
o Fund may invest in security without limitation.
- - Fund may not invest.
Percentages are of total assets (except Illiquid Securities, which are shown as
a percentage of net assets).
(a) Fund may not purchase futures contracts or options where premiums and margin
deposit exceed 5% of total assets.
(b) Fund may not enter into futures contracts or options where its obligations
would exceed 20% of total assets.
(c) Except securities of the U.S. Government, its agencies or instrumentalities.
(d) Except that up to 25% of the Fund's total assets may be invested without
regard to the 5% limitation.
(e) Annual portfolio turnover for the fixed income portion of Balanced Fund is
not expected to exceed 250%.
39
<PAGE>
<TABLE>
<CAPTION>
Short- Intermediate PA NJ
Short Term Intermediate Government Global Municipal Municipal Municipal
Income Bond Income Bond Bond Bond Bond Bond
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset-backed securities o 35% -- o 35% -- -- --
Bank obligations o 35% -- 35% 35% -- -- --
Foreign currency transactions -- -- -- -- o -- -- --
Foreign securities -- -- -- 35% o -- -- --
Futures contracts -- -- -- -- 5%(a)/20%(b) -- -- --
Illiquid securities 15% 10% 15% 15% 15% 15% 15% 15%
Investment companies 10% 10% 10% 10% 10% 10% 10% 10%
Lending of securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Mortgage-backed securities o 35% o o 35% -- -- --
Municipal securities -- -- -- -- -- o o o
Options transactions -- -- -- -- 5%(a)/20%(b) -- -- --
Put transactions (c) -- o -- -- o o o o
Repurchase agreements o 35% 35% 35% 35% 20% 20% 20%
Reverse repurchase agreements 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 10% 10% 10%
Swaps -- -- -- -- o -- -- --
U.S. Government obligations o o o o o 20% 20% 20%
When-issued securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 25% 25% 25%
TEMPORARY INVESTMENTS less than less than less than
Taxable obligations 100% 100% 100% 100% 100% 20% 20% 20%
Short-term obligations,
U.S. dollar and foreign 100% 100% 100% 100% 100%(g) -- -- --
INVESTMENT RESTRICTIONS
Securities of any one issuer (d), (e) 5% 5% 5% 5% -- 5% -- --
Outstanding voting securities
of any one issuer 10% 10% 10% 10% -- 10% -- --
Securities of issuers in
any one industry 25% 25% 25% 25% 25%(h) 25%(f) 25%(f) 25%(f)
less than less than less than less than less than less than less than less than
Expected annual portfolio turnover 100% 250% 150% 200% 150% 100% 100% 100%
</TABLE>
o Fund may invest in security without limitation.
- - Fund may not invest.
Percentages are of total assets (except Illiquid Securities, which are shown as
a percentage of net assets).
(a) Fund may not purchase futures contracts or options where premiums and margin
deposit exceed 5% of total assets.
(b) Fund may not enter into futures contracts or options where its obligations
would exceed 20% of total assets.
(c) Except premiums on all puts outstanding will not exceed 2% of total assets.
(d) Except securities of the U.S. Government, its agencies or instrumentalities.
(e) Except that up to 25% of the Fund's total assets may be invested without
regard to the 5% limitation.
(f) Limitation does not apply to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
(g) May also purchase short-term obligations denominated in foreign currencies.
(h) Except securities of the U.S. Government, foreign governments or
supranational agencies.
40
<PAGE>
<TABLE>
<CAPTION>
Treasury Reserve Cash Reserve Tax-Free Reserve
<S> <C> <C> <C>
Asset-backed securities -- o --
Bank obligations -- o 20%
Illiquid securities 10% 10% 10%
Investment companies 10% 10% 10%
Lending of securities 33 1/3% 33 1/3% 33 1/3%
Mortgage-backed securities -- o 20%
Municipal securities -- -- o
Put transactions (a) -- -- o
Repurchase agreements o o 20%
Reverse repurchase agreements 10% 10% 10%
U.S. Government obligations o o 20%
Variable amount master demand notes -- o --
When-issued securities -- -- 25%
TEMPORARY INVESTMENTS
Cash 100% 100% 100%
less than
Taxable obligations 100% 100% 20%
INVESTMENT RESTRICTIONS
Securities of any one issuer (b), (c) 5% 5% 5%
Securities of issuers in any one industry NA 25% 25%(d)
</TABLE>
o Fund may invest in security without limitation.
- - Fund may not invest.
Percentages are of total assets (except Illiquid Securities, which are shown as
a percentage of net assets).
(a) Except premiums on all puts outstanding will not exceed 2% of total assets.
(b) Except securities of the U.S. Government, its agencies or instrumentalities.
(c) Except that up to 25% of the Fund's total assets may be invested without
regard to the 5% limitation.
(d) Limitation does not apply to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
41
<PAGE>
Distributions
Shareholders of each Fund are entitled to any distributions from the
net investment income and capital gains earned on investments held by the Fund,
provided that they are shareholders of record on the date the distributions are
declared ('Record Date').
Class Y Shares of the Money Market Funds begin earning income on
the business day on which the purchase order for the shares is executed. They
continue to earn income through, and including, the day before the redemption
order for these shares is executed.
Class Y Shares of the Fixed Income Funds begin earning income on the business
day following the day on which the purchase order for the shares is executed and
continue to earn income through, and including, the day on which the redemption
order for these shares is executed.
Distributions are paid in the form of additional Class Y Shares of a Fund unless
a shareholder selects one of the following options on the Account Opening Form:
|__ Cash Dividend Option - To receive income distributions in cash and capital
gains distributions in additional shares of a Fund at net asset value.
|__ All Cash Option - To receive both income and capital gains distributions in
cash.
If neither option is selected on the Account Opening Form, the Transfer Agent
will automatically reinvest all income and capital gains distributions in
additional shares at the net asset value in effect at the close of business on
the reinvestment date. Distributions are automatically paid in cash (along with
any redemption proceeds) within seven business days of a shareholder closing an
account with a Fund.
The distributions from Class Y Shares are normally higher than those from Class
A, Class B or Class C Shares because of the distribution and transfer agent
expenses charged to Class A, Class B and Class C Shares.
Distributions from the Net Investment Income of:
|__ Domestic Equity Funds and Global Bond Fund are declared and paid to
shareholders on a quarterly basis.
|__ International Growth Fund are periodically declared and paid to
shareholders.
|__ Domestic Fixed Income Funds and Money Market Funds are declared daily as a
dividend and paid monthly to shareholders.
NOTE: DISTRIBUTIONS PAID SHORTLY AFTER THE PURCHASE OF SHARES BY AN INVESTOR,
ALTHOUGH IN EFFECT A RETURN OF CAPITAL, ARE TAXABLE AS ORDINARY INCOME.
Distributions of any capital gains will be made at least annually for each Fund.
Taxes
The following is only a brief summary of some of the important federal tax
considerations generally affecting the Funds and their shareholders. We have not
attempted to present a detailed explanation of the tax treatment of the Funds or
their shareholders, and this discussion is not intended as a substitute for
careful tax planning. Potential investors and shareholders in the Funds are
urged to consult their tax advisers with specific reference to their own tax
situations.
The following summary is based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
ALL FUNDS
|__ Each Fund is treated as a separate entity for federal income tax purposes
and is not combined with any other CoreFunds portfolios. Each Fund intends to
qualify for the favorable tax treatment afforded a 'regulated investment
company' under the Code.
|__ Whether paid in cash or in additional shares, distributions attributable to
a Fund's net investment income (including ordinary income and net short-term
capital gains) will be taxable to shareholders as ordinary income. This includes
any distributions attributable to taxable net investment income of Tax-Free
Reserve or Intermediate Municipal Bond Fund.
|__ Capital gains distributions of all Funds will be taxable as gain from the
sale or exchange of a capital asset held for more than one year, regardless of
how long a shareholder has held the shares.
|__ If a Fund declares distributions payable to shareholders of record
on a date in October, November or December of any year, the distributions 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.
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|__ 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
in connection with an exchange among the CoreFunds portfolios.
|__ In the opinion of counsel, distributions made by 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.
INTERNATIONAL GROWTH FUND
GLOBAL BOND FUND
International Growth Fund and Global Bond Fund will receive dividends and
interest paid by foreign issuers which are frequently subject to withholding
taxes by foreign governments. If either Fund holds equity or debt securities of
foreign corporations valued at more than 50% of total assets at the close of any
taxable year, the Fund may elect (for U.S. federal income tax purposes) to treat
each shareholder as having additional income equal to a proportionate amount of
the foreign taxes paid by the Fund and as having directly paid these foreign
taxes. If a Fund makes this decision, shareholders will be treated as having
directly earned a portion of the Fund's gross income from foreign sources.
Shareholders will be subject to U.S. federal income taxes for this additional
income from foreign sources net of the foreign taxes paid. Each Fund will make
this decision only if it deems it to be in the best interests of its
shareholders and will notify shareholders accordingly.
TREASURY RESERVE
CASH RESERVE
TAX-FREE RESERVE
Investments in STRIPS and Receipts 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 these obligations even
though the Fund has not received any interest payments on the 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 the
imputed income, which may occur at a time when the investment adviser would not
have chosen to sell the securities and which may result in a taxable gain or
loss.
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
TAX-FREE RESERVE
Each of these Funds expects to qualify to pay tax-exempt interest income
distributions to its shareholders. In general, the Fund's shareholders may
exclude tax-exempt income distributions from their gross income, unless their
specific circumstances disallow it. Intermediate Municipal Bond Fund and
Tax-Free Reserve are permitted to purchase 'private activity bonds' that are
subject to the Federal Alternative Minimum Tax (the 'AMT') consistent with their
20% limitation on taxable obligations.
Interest on indebtedness incurred or continued by a shareholder in order to
purchase or carry shares of these Funds is not deductible for federal income tax
purposes. Furthermore, these Funds may not be an appropriate investment for
persons (including corporations and other business entities) who are
'substantial users' (or persons related to 'substantial users') of facilities
financed by industrial development or private activity bonds. 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.
Corporate shareholders should note that all tax-exempt interest income
distributions are includable in the computation of 'adjusted current earnings'
for AMT purposes, regardless of when the bonds from which they are derived were
issued or whether they are derived from 'private activity bonds.' Accordingly,
corporate shareholders should consult their tax advisers regarding the impact
that holding shares of these Funds would have on their own AMT liability.
Tax-exempt interest income distributions and other distributions paid by these
Funds may be taxable to investors as dividend income under state
or local law even though a substantial portion of such distributions may be
derived from interest on tax-exempt obligations which, if received directly,
would be exempt from such income taxes.
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PENNSYLVANIA TAX CONSIDERATIONS
For purposes of the Pennsylvania Personal Income Tax and the Philadelphia School
District Investment Net Income Tax, distributions which are attributable to
interest received by Pennsylvania Municipal Bond Fund from its investments in
Pennsylvania Municipal Securities or in direct obligations of the United States,
its territories and certain of its agencies and instrumentalities ('Federal
Securities'), including obligations issued by U.S. possessions, are not taxable.
Distributions by the Fund to a Pennsylvania resident that are attributable to
most other sources may be subject to the Pennsylvania Personal Income Tax and
(for residents of Philadelphia) to the Philadelphia School District Investment
Net Income Tax.
Distributions made by Pennsylvania Municipal Bond Fund are exempt from
Pennsylvania county personal property taxes to the extent that the Fund's
portfolio consists of Pennsylvania Municipal Securities and Federal Securities,
including obligations issued by U.S. territories and possessions.
To the extent that gain on the disposition of a share represents gain realized
on Pennsylvania Municipal Securities held by Pennsylvania Municipal Bond Fund,
such gain may be subject to the Pennsylvania Personal Income Tax and the School
District Tax, except that gain realized with respect to a share held for more
than six months is not subject to the School District Tax.
NEW JERSEY TAX CONSIDERATIONS
Investors in New Jersey Municipal Bond Fund will not be subject to the New
Jersey Gross Income Tax on distributions from the Fund attributable to interest
income from (and net gain, if any, from the disposition of) New Jersey Municipal
Securities or Federal Securities held by the Fund, either when received by the
Fund or when credited or distributed to the investors, provided that the Fund
meets the requirements for a qualified investment fund by:
|__ maintaining its registration as a registered investment company
|__ investing at least 80% of the aggregate principal amount of the Fund's
investments, excluding cash and cash items, in New Jersey Municipal Securities
or Federal Securities and
|__ investing 100% of its assets in interest-bearing obligations, discount
obligations, and cash, including receivables.
For New Jersey Gross Income Tax purposes, net income or gains and
distributions derived from investments in other than New Jersey Municipal
Securities and Federal Securities, and distributions from net realized capital
gains in respect of such investments, will be taxable. Gain on the disposition
of shares of the Fund is not subject to New Jersey Gross Income Tax, provided
that the Fund meets the requirements for a qualified investment fund set forth
above.
See the Statement of Additional Information for further information regarding
taxes.
Valuation of Shares
NET ASSET VALUE
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) on
which securities or instruments held by the Fund are traded such that the Fund's
net asset value per share might be materially affected.
Equity Funds
Fixed Income Funds
The shares of these Funds will fluctuate in value as a result of changes in the
value of their portfolio investments. Shares in the Funds will realize capital
gains or losses as portfolio investments are sold above or below costs,
respectively.
The net asset value per share of these Funds is normally determined as of 4:00
p.m. (Eastern time) (the 'Valuation Time') on each business day of the Funds.
Net asset value per share is calculated by adding the value of all of the Fund's
portfolio securities and other assets, subtracting the liabilities, and dividing
by the total number of outstanding shares of the Fund at the time of the
valuation. The result (adjusted to the nearest cent) is the net asset value per
share.
Money Market Funds
The net asset value per share of each of these Funds is normally determined as
of 12:00 noon (Eastern time) on each business day. These Funds are managed to
maintain a stable price of $1.00 per share.
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PORTFOLIO PRICING
Portfolio securities that 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 that business day or, if there is no such reported sale,
the current bid price. Securities regularly traded in the over-the-counter
market for which market quotations are readily available will be valued at the
current bid price. Securities may be valued on the basis of prices provided by a
pricing service when such prices are believed to reflect the fair market value
of such securities. Other assets and securities for which no quotations are
readily available will be valued in a manner determined in good faith to reflect
their fair market value, pursuant to procedures adopted by the Board of
Directors.
International Growth Fund
Global Bond Fund
Securities listed on a foreign exchange are valued at the most recent closing
price available before the assets are valued. All prices of listed securities
are taken from the exchange where the security is primarily traded.
Money Market Funds
The assets in the Money Market Funds are valued based upon the
amortized cost method, in accordance with rules adopted under the Investment
Company Act. With 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).
Management
The business and affairs of each Fund are managed under the direction of
CoreFunds Board of Directors.
INVESTMENT ADVISER,
SUB-ADVISERS
CoreStates Advisers has overall responsibility for portfolio management for each
Fund. CoreStates Advisers is a wholly-owned subsidiary of CoreStates Bank, N.A.,
which is itself a wholly-owned subsidiary of CoreStates Financial Corp
('CoreStates Corp'). CoreStates Corp, based in Philadelphia, Pennsylvania, is
one of the 25 largest bank holding companies in the United States.
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, as well as related
investment advisory, research, trading and fund management functions. 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,
Philadelphia, Pennsylvania 19102.
As a result of the merger of CoreStates Corp and Meridian Bancorp, Inc. in April
1996, Meridian Investment Company ('MIC') is now a wholly-owned subsidiary of
CoreStates Corp and an affiliate of CoreStates Advisers. Certain employees of
MIC perform investment management and advisory functions for the Funds under the
overall authority of CoreStates Advisers.
As investment adviser, CoreStates Advisers manages the investment portfolio of
each Fund, makes decisions about and places orders for all purchases and sales
of a Fund's portfolio securities, and maintains certain records relating to
these purchases and sales. CoreStates Advisers pays all expenses incurred by it
in connection with its investment advisory activities, other than the cost of
securities (including any brokerage commissions) purchased for the Funds and the
cost of obtaining market quotations for portfolio securities held by the Funds.
CoreStates Advisers has delegated some of its portfolio management functions for
International Growth Fund to Martin Currie and Aberdeen Managers, and, for
Global Bond Fund, to Analytic, under separate Sub-Advisory Agreements between
CoreStates Advisers and Martin Currie, Aberdeen Managers and Analytic,
respectively (the "Sub-Advisers").
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Under a multiple manager structure, CoreStates Advisers has general oversight
responsibility for the investment advisory services provided to International
Growth Fund by Martin Currie and Aberdeen Managers. CoreStates Advisers is also
responsible for managing the allocation of assets between the Fund's
Sub-Advisers. Accordingly, each Sub-Adviser will be responsible for the
day-to-day investment management of all or a portion of the assets of the Fund.
However, having multiple sub-advisers responsible for investing separate
portions of the Fund's assets creates the need for coordination among
sub-advisers.
As sub-advisers to International Growth Fund and Global Bond Fund, the
Sub-Advisers manage the investment portfolio of their respective Funds, make
decisions about and place orders for the majority of the purchases and sales of
the Fund's portfolio securities, and maintain certain records relating to these
purchases and sales. The Sub-Advisers pay all expenses incurred by them in
connection with their sub-advisory activities, other than the cost of securities
(including any brokerage commissions) purchased for a Fund and the cost of
obtaining market quotations for portfolio securities held by a Fund.
Martin Currie, a New York corporation located in Edinburgh, Scotland, is a
wholly-owned subsidiary of Martin Currie, Ltd., which is owned principally by
its full-time working executives. Founded in 1881, Martin Currie, Ltd. is one of
Scotland's largest independent investment management groups. Martin Currie, was
established to provide foreign investment advisory services to U.S. taxable and
tax-exempt funds seeking diversification into international markets. Martin
Currie is located at Saltire Court, 20 Castle Terrace, Edinburgh EH 2ES,
Scotland.
Aberdeen Managers, a Delaware corporation located in Fort Lauderdale, Florida,
is wholly owned by Aberdeen Asset Management PLC, a publicly held corporation
based in the United Kingdom. A subsidiary of CoreStates Corp owns approximately
10.3% of Aberdeen Asset Management. Aberdeen Asset Management, whose assets
under management at the end of August, 1997 was $18.1 billion, was formed in
1876 and has been managing investment funds since 1986. It formed Aberdeen
Managers in 1995 to provide foreign investment advisory services in the U.S.
Aberdeen Managers is located at NationsBank Tower, 22nd Floor, Fort Lauderdale,
Florida 33394.
Analytic, formerly called Alpha Global Fixed Income Managers, Inc., is a
specialist manager of fixed income securities and cash for institutional
investors. Analytic is a wholly-owned subsidiary of United Asset Management
Corporation of Boston, Massachusetts, whose total assets under management exceed
$190 billion. Analytic is located at 25/28 Old Burlington Street, London W1X
1LB, England.
ADMINISTRATOR AND TRANSFER AGENT
SEI Fund Resources ('SFR' or the 'Administrator'), with principal offices at 530
East Swedesford Road, Wayne, Pennsylvania 19087, acts as the administrator for
each Fund. For its administrative services, SFR is entitled to receive a fee
from each Fund, computed daily and paid monthly, at the annual rate of .25% of
the Fund's average daily net assets. As Administrator, SFR generally assists in
the Funds' administration and operations.
Boston Financial Data Services ('BFDS'), an affiliate of State Street Bank and
Trust Company located at 225 Franklin Street, Boston, Massachusetts 02110,
serves as each Fund's transfer agent (the 'Transfer Agent') and dividend paying
agent.
DISTRIBUTOR
SEI Investments Distribution Co. (the 'Distributor'), with principal offices at
One Freedom Valley Drive, Oaks, Pennsylvania 19456, serves as each Fund's
distributor pursuant to a Distribution Agreement.
With respect to the Money Market Funds, the Distributor may provide promotional
incentives, from time to time and at its own expense, in the form of cash or
other compensation, to certain financial institutions whose representatives have
sold or are expected to sell significant amounts of the shares of these Funds.
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
Pennsylvania 19101, acts as wire agent for each of the Funds and custodian for
the assets of the Funds. Morgan Stanley Trust Company, One Pierreport Plaza, 8th
Floor, Brooklyn, NY 11201, acts as foreign sub-custodian for the assets of the
International Growth and Global Bond Funds. CoreStates Bank, N.A. and Morgan
Stanley Trust Company (the "Custodians") hold cash, securities and other assets
of the Funds as required by the Investment Company Act.
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.
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The Funds may calculate their performance on a total return basis for various
periods. The total return basis combines principal changes and income 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 and capital gains distributions paid
during the period.
Fixed Income Funds
Money Market Funds
In addition to quoting total return, the Fixed Income Funds and Money Market
Funds may advertise 'yield' and 'effective yield.' Both yield figures are based
on historical earnings and are not intended to indicate future performance.
The 'yield' of a Fund refers to the income generated by an investment
in the Fund over a 30-day period (seven days for Money Market Funds). (The
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 (or week, as in the case of a Money Market
Fund) over a 12-month period and is shown as a percentage of the investment.
The 'effective yield' is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The 'effective
yield' will be slightly higher than the 'yield' because of the compounding
effect of this assumed reinvestment. (See 'Yields' in the Statement of
Additional Information.)
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund and Tax-Free Reserve may also advertise their 'taxable
equivalent yield,' which is calculated by taking into account the investor's
current tax bracket. This is the yield an investor would need to earn from a
taxable investment in order to realize an 'after-tax' benefit equal to the
tax-free yield provided by a Fund.
IN GENERAL
The Funds will include performance data for Class Y and Class A, Class B or
Class C shares, as appropriate, in any advertisement or information including
performance data of the Funds. Total return and performance data concerning
Class A Shares will reflect the sales charge and distribution and incremental
transfer agent expenses borne exclusively by Class A Shares. Total return and
performance data concerning Class B Shares will reflect the contingent deferred
sales charge and distribution and incremental transfer agent expenses borne
exclusively by Class B Shares. Total return and performance data concerning
Class C Shares will reflect the distribution and incremental transfer agent
expenses borne exclusively by Class C Shares.
The performance of any investment will generally reflect market conditions,
portfolio quality and maturity, type of investment, and operating expenses. Each
Fund's performance will fluctuate and is not necessarily representative of
future results. A Fund's performance would be favorably affected by any
investment advisory fee waivers on the part of CoreStates Advisers. Shareholders
will receive unaudited semi-annual reports describing the Funds' investment
operations and annual financial statements audited by independent auditors.
How to Purchase and Redeem Shares
PURCHASE OF SHARES
Shares of the Funds are sold on a continuous basis by the Distributor. Shares
may also be purchased through CoreStates Securities Corp. Shares of the Funds
are only offered to residents of states in which the shares are eligible for
purchase.
Institutional investors may acquire Class Y Shares of a Fund for their own
account or as a record owner on behalf of fiduciary, agency or custody accounts
by placing orders with the Distributor.
We recognize receipt of an order to purchase shares by Federal Funds wire on the
business day of the wire, but only if you notify CoreFunds Investor Services at
1-800-355-CORE by 12:00 noon (Eastern Time) of your intention to wire money.
Before wiring funds, make sure that wire instructions include your account
number.
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Please wire money to:
CORESTATES PHIL
PHILADELPHIA, PA
ABA 031000011
for credit to:
COREFUNDS
A/C 0169-0541
[YOUR ACCOUNT NUMBER]
For Equity and Fixed Income Funds, federal funds must be transmitted or
delivered to the Fund's custodian by close of business on the next business day.
For Money Market Funds, federal funds must be transmitted or delivered to the
Fund's custodian by close of business on the same day.
We will execute an order on any business day at the net asset value per share
determined on that day if we receive it:
|__ before 4:00 p.m. for an Equity or Fixed Income Fund or
|__ before 12:00 noon for a Money Market Fund.
We will determine the net asset value as of 4:00 p.m. (12:00 noon for a Money
Market Fund) on that date.
If we receive an order after 4:00 p.m. on any business day for an Equity or
Fixed Income Fund, or after 12:00 noon for a Money Market Fund, we will execute
it on the next business day of the Fund.
We recognize receipt of an order when the Transfer Agent or its authorized agent
receives it. A Fund may establish special procedures to expedite receipt of
orders from institutional investors.
The minimum investment amount is $1,000,000 for the initial purchase of shares.
This minimum may be waived at the discretion of the Distributor. There is no
minimum for subsequent investments. The Distributor reserves the right to reject
any purchase order when it determines that it is not in the best interests of
the Fund and its shareholders to accept it.
Every shareholder of record will receive a confirmation of each new share
transaction with a Fund. The confirmation will also show the total number of
shares the Transfer Agent is holding in safekeeping for the account of the
shareholder. Certificates representing shares in the Funds will not be issued.
Institutions will record beneficial ownership of shares held of record on behalf
of their customers. They will reflect this ownership in the regular account
statements they provide to their customers.
REDEMPTION OF SHARES
Institutional investors may redeem all or part of the shares beneficially owned
by a customer according to instructions and limitations pertaining to the
customer's account at the institution.
Important Redemption Information:
|__ We execute redemption orders for the Fixed Income and Equity Funds at the
net asset value per share at 4:00 p.m. that day if we receive the order by 4:00
p.m. that day.
|__ We execute redemption orders for the Money Market Funds at the net asset
value per share at 12:00 noon that day if we receive the order by 12:00 noon
that day.
|__ We recognize receipt of an order when the Transfer Agent or its authorized
agent receives it.
|__ The Transfer Agent will make payment on the next business day by transfer
of federal funds.
The Funds intend to pay cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, a Fund may make payment wholly or
partly in 'readily marketable' portfolio securities at their market value equal
to the redemption price. In such cases, you may incur brokerage costs in
converting these securities to cash.
Description of Shares
In addition to the portfolios described in this Prospectus, CoreFunds has set up
Class Y Shares representing the Elite Treasury Reserve, Elite Cash Reserve,
Elite Government Reserve and Elite Tax-Free Reserve portfolios. CoreFunds offers
two classes of shares of each portfolio. In total, CoreFunds consists of
twenty-one different portfolios. CoreFunds may in the future create additional
portfolios or classes of shares within a portfolio. Class A, Class B and Class C
Shares -- Individual and Shares of the Elite Money Market Funds are offered in
separate prospectuses. This Prospectus solely relates to Class Y Shares --
Institutional.
IF YOU WISH TO OBTAIN SIMILAR INFORMATION REGARDING OTHER COREFUND PORTFOLIOS,
YOU MAY REQUEST PROSPECTUSES DESCRIBING THE PORTFOLIOS BY CONTACTING THE
DISTRIBUTOR AT 1-800-355-CORE.
Differences exist between classes of shares of some CoreFunds portfolios
pertaining to distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class.
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<PAGE>
Class A Shares are subject to a sales load and distribution and transfer agent
expenses for certain shareholder services they receive. Class B Shares are
subject to distribution and transfer agent expenses for certain shareholder
services they receive, and may be subject to a contingent deferred sales charge
upon redemption. Class C Shares are subject to similar expenses, but are not
subject to a sales load. Class A, Class B and Class C Shares also have voting
rights in connection with the Distribution Plan affecting Class A, Class B and
Class C Shares. The distribution and transfer agent expenses charged to Class A,
Class B and Class C Shares result in their having different income distributions
and performance results from Class Y Shares.
Aside from these differences, each share in each Fund represents an
equal proportionate interest in that Fund with each other share of the same
Fund. Each share in each Fund is entitled to distributions out of the income
earned on the assets belonging to the Fund, as the Board of Directors declares
at its discretion.
CoreFunds' shareholders are entitled to one vote for each full share
held, and fractional votes for fractional shares held. Shareholders 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.
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:
|__ more than 50% of the outstanding shares of a Fund or
|__ at least 67% of the shares of a Fund present at a meeting at which the
holders of more than 50% of the outstanding shares of such Fund are represented
in person or by proxy.
General Information
In accordance with the Maryland General Corporation Law, 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 that Fund.
'Assets belonging to a Fund' are defined as:
|__ the consideration received by CoreFunds upon the issuance or sale of shares
in a Fund
|__ all income, earnings, profits and proceeds derived from the investment and
|__ any proceeds from the sale, exchange or liquidation of the investments.
Assets belonging to a Fund are charged with the direct liabilities of that Fund
as well as a share of the general liabilities of CoreFunds. The general
liabilities of CoreFunds are allocated in proportion to the relative asset
values of each of CoreFunds portfolios at the time the expense or liability is
incurred. CoreFunds management charges the Funds for liabilities when they are
incurred and credits the Funds for assets when they are acquired. These
determinations are reviewed and approved annually by the Board of Directors and
are conclusive.
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SHAREHOLDER NOTES
50
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SHAREHOLDER NOTES
51
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SHAREHOLDER NOTES
52
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The CoreFund Family of Mutual Funds
COREFUNDS, INC.
DIRECTORS
Emil J. Mikity, Chairman
George H. Strong
Erin Anderson
Thomas J. Taylor
Cheryl H. Wade
OFFICERS
David G. Lee, President
James W. Jennings, Secretary
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Fund Resources
Wayne, PA 19087
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
INVESTMENT ADVISER
[LOGO]
For current performance, purchase, redemption, and other information, call
1-800-355-CORE (2673).
The CoreFund Family of Mutual Funds
EQUITY
Equity Index
Core Equity
Growth Equity
Special Equity
International Growth
BALANCED
Balanced
INCOME
Short Term Income
Short-Intermediate Bond
Government Income
Bond
Global Bond
TAX-EXEMPT INCOME
Intermediate Municipal Bond
Pennsylvania Municipal Bond
New Jersey Municipal Bond
MONEY MARKET
Treasury Reserve
Cash Reserve
Tax-Free Reserve
SEI Investments Distribution Co., Distributor
Oaks, PA 19456
1-800-355-CORE
COR-F-045-07
11/97
<PAGE>
PROSPECTUS FOR INDIVIDUAL SHARES
NOVEMBER 1, 1997
CoreFunds Investing our experience in your future
EQUITY FUNDS
BALANCED FUND
INCOME FUNDS
TAX-EXEMPT INCOME FUNDS
MONEY MARKET FUNDS
/ /
CoreFund(R)
Family of Mutual Funds
<PAGE>
INTRODUCING COREFUNDS
This Prospectus introduces you to seventeen of the mutual funds offered by
CoreFunds, Inc. ("CoreFunds"), an open-end management investment company.
CoreFunds consists of twenty-one diversified and non-diversified portfolios.
This Prospectus offers:
|__ Class A (Individual) Shares of the Equity and Balanced Funds
|__ Class A (Individual) Shares of the Fixed Income Funds
|__ Class B (Individual) Shares of the Equity and Balanced Funds and of Cash
Reserve and
|__ Class C (Individual) Shares of the Money Market Funds.
Materials relating to Class Y (Institutional) Shares of the Funds may be
obtained by calling 1-800-355-CORE or by writing to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
CoreStates Investment Advisers, Inc. ("CoreStates Advisers") serves as the
investment adviser to each Fund. The International Growth Fund and Global Bond
Fund also retain investment sub-advisers. CoreStates Advisers has extensive
experience in the management of money market, tax-free, fixed income, equity and
international investments.
You may choose to invest in any of the CoreFunds offered in this Prospectus.
Read your prospectus before you invest and keep it for future reference.
Additional information about the Funds, contained in a Statement of Additional
Information dated November 1, 1997, has been filed with the Securities and
Exchange Commission. It is incorporated in this Prospectus by reference. To
obtain a copy without charge, call 1-800-355-CORE or write to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
AN IMPORTANT WORD ABOUT MUTUAL FUNDS:
SHARES IN THE FUNDS ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR GUARANTEED
OR ENDORSED BY, CORESTATES BANK, N.A., THE PARENT CORPORATION OF EACH FUND'S
INVESTMENT ADVISER, OR ANY OF ITS AFFILIATES.
SHARES IN THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENTS IN FUND SHARES INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE CASH RESERVE, THE TREASURY RESERVE AND/OR THE TAX-FREE
RESERVE IS NOT INSURED AND IS NOT GUARANTEED BY THE U.S. GOVERNMENT, AND WE CAN
NOT ASSURE YOU THAT THESE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES. ALSO, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
WHAT YOU WILL FIND IN THIS PROSPECTUS
INFORMATION ON THE FUNDS
EQUITY FUNDS
Equity Index............................................2
Core Equity.............................................4
Growth Equity...........................................6
Special Equity..........................................8
International Growth...................................10
BALANCED FUND
Balanced...............................................12
FIXED INCOME FUNDS
Short Term Income......................................14
Short-Intermediate Bond................................16
Government Income......................................18
Bond...................................................20
Global Bond............................................22
Intermediate Municipal Bond............................24
Pennsylvania Municipal Bond............................26
New Jersey Municipal Bond..............................28
MONEY MARKET FUNDS
Treasury Reserve.......................................30
Cash Reserve...........................................32
Tax-Free Reserve.......................................34
GENERAL INFORMATION
General Investment Policies and Practices..............36
Distributions..........................................42
Taxes..................................................42
Valuation of Shares....................................44
Management.............................................45
Performance Information................................47
Description of Shares..................................47
General Information....................................48
SHAREHOLDER SERVICES GUIDE
Opening an Account and Purchasing Shares...............49
Exchanging Shares......................................53
Selling (Redeeming) Your Shares........................53
1
<PAGE>
EQUITY INDEX FUND
SUMMARY
Equity Index Fund seeks to match the performance of the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index) by investing primarily in stocks
represented in the S&P 500 Index.
INVESTMENT OBJECTIVE
Equity Index Fund seeks investment results that achieve price and yield
performance similar to the S&P 500 Index.
PORTFOLIO INVESTMENTS
The Fund invests at least 90% of its total assets in equity securities that
represent a composite of the S&P 500 Index. The S&P 500 Index consists of 500
common stocks, most of which are listed on the New York Stock Exchange. In
choosing the 500 stocks which are included in the S&P 500 Index, S&P considers
market values and industry diversification.
The Fund's investment portfolio will generally consist of common stocks of as
many issuers listed in the S&P 500 Index as is feasible. CoreStates Advisers
uses a computer model that closely monitors the industry weightings of the S&P
500 Index. Although CoreStates Advisers does not screen securities by
traditional methods of financial and market analyses, it monitors the Fund's
investments with a view toward removing stocks of companies which exhibit
extreme financial distress or which may impair the Fund's ability to achieve its
investment objective.
Equity Index Fund strives to provide a total return comparable to the S&P 500
Index. (Please see page 36 for more information about General Investment
Policies and Practices.)
Equity Index Fund is not sponsored by nor affiliated with Standard & Poor's
Corporation ("S&P").
RISK CONSIDERATIONS
Like all equity funds, Equity Index Fund is subject to two primary types of
risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Equity Index Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Lary Aasheim, CFA, a Managing Director and Director of Research of CoreStates
Advisers, is portfolio manager of Equity Index Fund. Prior to joining CoreStates
Advisers in 1990, Mr. Aasheim worked as an analyst at First Fidelity
Bank/Fidelity Bank, First Pennsylvania Bank and Bear Stearns in New York.
(Please see page 45 for more information about the Fund's Investment Adviser.)
2
<PAGE>
INVESTOR EXPENSES
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A and Class B Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 5.50%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .15%
12b-1 Fees After Fee Waivers(2) .00%
Other Expenses After Fee Waivers(3) .22%
Total Operating Expenses After Fee Waivers(4) .37%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Absent voluntary waivers, Rule 12b-1 fees would be .25% of average net
assets. Long-term shareholders may pay more than the economic equivalent of
the maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been .96%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
CLASS B (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Redemptions 5.00%
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .15%
12b-1 Fees(2) 1.00%
Other Expenses After Fee Waivers(3) .22%
Total Operating Expenses After Fee Waivers(4) 1.37%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) This fee consists of a shareholder servicing fee of .25% and an asset-based
distribution fee of .75%. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses are
estimated to be 1.71%. These fee waivers are voluntary and may be
discontinued at any time at the discretion of the service provider that is
waiving its fee.
EXAMPLE
<TABLE>
<CAPTION>
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
1 Year 3 Years
------ -------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, Class A Shares $59 $66
assuming (1) imposition of the maximum sales charge or CDSC, Class B Shares (with redemptions) $64 $73
(2) a 5% annual return and, except as noted, (3) redemption Class B Shares (without redemptions) $14 $43
at the end of each time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Equity Index Fund. The financial highlights for the Fund for
the period from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE. Class B Shares were not yet offered as of June 30,
1997. Performance of Class B Shares would be lower than the performance of Class
A Shares due to the higher distribution-related expenses charged to Class B
Shares.
1997
CLASS A (INDIVIDUAL) ----------
For a Share Outstanding Throughout the Period Ended June 30(1)
- --------------------------------------------------- ----------
Net Asset Value, Beginning of Period $ 29.62
Net Investment Income $ 0.32
Realized and Unrealized Net Gains on Securities $ 8.05
Distributions from Net Investment Income $ (0.38)
Distributions from Capital Gains $ (0.24)
Net Asset Value, End of Period $ 37.37
Total Return(2) 28.58%+
Net Assets, End of Period (000 omitted) $ 4,507
Ratio of Expenses to Average Net Assets 0.37%
Ratio of Net Income to Average Net Assets 1.51%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.69%
Ratio of Net Income to Average Net Assets (Excluding Waivers) 1.19%
Portfolio Turnover Rate 11%
Average Commission Rate Paid(3) $0.0545
- ----------
+ This figure has not been annualized.
(1 Commenced operations October 9, 1996. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load.
(3) Average commission rate paid per share for security purchases and sales
during the period.
3
<PAGE>
CORE EQUITY FUND
SUMMARY
Core Equity Fund seeks maximum total return by investing in a diversified
portfolio of common stocks.
INVESTMENT OBJECTIVE
Core Equity Fund seeks maximum total return in excess of the S&P 500 Index.
PORTFOLIO INVESTMENTS
The Fund invests principally in a diversified portfolio of common stocks
including stocks of companies with:
|__ large market capitalizations (i.e., over $5 billion)
|__ medium market capitalizations (i.e., between $1 billion and $5 billion) and
|__ small market capitalizations (i.e., under $1 billion).
Market capitalization means the total number of common shares of a company's
stock outstanding multiplied by the market price per share.
In addition, up to 20% of the Fund's total assets may be invested in:
|__ securities convertible into common stocks
|__ preferred stocks
|__ corporate bonds and notes
|__ warrants
|__ Short-Term Obligations and
|__ sponsored and unsponsored American Depositary Receipts ("ADRs").
Core Equity Fund strives to provide a total return greater than broad stock
market indices such as the S&P 500 Index. (Please see page 36 for more
information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Increased Business and Economic Sensitivity - Small and medium capitalization
companies may be more vulnerable than larger, more established organizations to
adverse business or economic developments. In particular, small capitalization
companies may have limited product lines, markets and financial resources and
may be dependent upon a relatively small management group. These securities may
be traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Also, like all equity funds, Core Equity Fund is subject to two primary types of
risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Core Equity Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Joseph E. Stocke, CFA, is a Senior Managing Director of CoreStates Advisers and
manages Core Equity and Special Equity Funds. He is also a Senior Investment
Manager/Equities with Meridian Investment Company, an affiliate of CoreStates
Advisers. He has been with Meridian since 1983. (Please see page 45 for more
information about the Fund's Investment Adviser.)
4
<PAGE>
INVESTOR EXPENSES
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A and Class B Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 5.50%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .74%
12b-1 Fees(1) .25%
Other Expenses After Fee Waivers(2) .19%
Total Operating Expenses After Fee Waivers(3) 1.18%
(1) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .28%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.27%. This fee waiver is voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect anticipated
expenses.
CLASS B (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Redemptions 5.00%
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .74%
12b-1 Fees(1) 1.00%
Other Expenses After Fee Waivers(2) .19%
Total Operating Expenses After Fee Waivers(3) 1.93%
(1) This fee consists of a shareholder servicing fee of .25% and an asset-based
distribution fee of .75%. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .28%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses are
estimated to be 2.02%. These fee waivers are voluntary and may be
discontinued at any time at the discretion of the service provider that is
waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<TABLE>
<CAPTION>
EXAMPLE
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a Class A Shares $66 $90 $116 $190
$1,000 investment, assuming (1) imposition of Class B Shares (with redemption) $70 $91 $104 $225
the maximum sales charge or CDSC, (2) a 5% Class B Shares (without redemption) $20 $61 $104 $225
annual return and, except as noted,
(3) redemption at the end of each time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Core Equity Fund. The financial highlights for the Fund for
the periods from November 1, 1995 through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
financial highlights for the Fund for the periods ended October 31, 1990 through
October 31, 1995 were audited by Coopers & Lybrand LLP, independent auditors for
the predecessor fund. The annual report for the Fund is available to
shareholders at no charge by calling CoreFunds at 1-800-355-CORE. Class B Shares
were not yet offered as of June 30, 1997. Performance of Class B Shares would be
lower than the performance of Class A Shares due to the higher
distribution-related expenses charged to Class B Shares.
<TABLE>
<CAPTION>
RETAIL PRIOR
CLASS CLASS
1997 1996 1995 1994 1993
CLASS A (INDIVIDUAL)(3)* ------------------ -------------------------
For a Share Outstanding Throughout the Period Ended June 30 October 31
- --------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.28 17.08 15.00 15.39 13.93
Net Investment Income $ 0.07 0.12 0.18 0.11 0.14
Realized and Unrealized Net Gains (Losses) on Securities $ 5.32 1.49 2.87 0.22 1.89
Distributions from Net Investment Income $ (0.07) (0.11) (0.17) (0.11) (0.14)
Distributions from Capital Gains $ (1.47) (1.30) (0.80) (0.61) (0.43)
Net Asset Value, End of Period $ 21.13 17.28 17.08 15.00 15.39
Total Return(2) 32.74% 19.11 21.94 2.21 14.90
Net Assets, End of Period (000 omitted) $ 16,043 11,178 6,591 50,128 45,677
Ratio of Expenses to Average Net Assets 1.23% 1.22 1.34 1.49 1.20
Ratio of Net Income to Average Net Assets 0.38% 0.89 1.23 0.75 0.94
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.28% 1.26 1.53 1.51 1.41
Ratio of Net Income to Average Net Assets (Excluding Waivers) 0.33% 0.85 1.04 0.73 0.73
Portfolio Turnover Rate** 79% 114 119 35 24
Average Commission Rate Paid(4) $ 0.0512 0.0636 n/a n/a n/a
<CAPTION>
1992 1991 1990(1)
-------------------------
October 31
-------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period 13.08 8.95 10.00
Net Investment Income 0.19 0.26 0.14
Realized and Unrealized Net Gains (Losses) on Securities 1.02 4.13 (1.05)
Distributions from Net Investment Income (0.19) (0.26) (0.14)
Distributions from Capital Gains (0.17) - -
Net Asset Value, End of Period 13.93 13.08 8.95
Total Return(2) 9.27 49.37 (9.22)
Net Assets, End of Period (000 omitted) 28,103 12,830 5,982
Ratio of Expenses to Average Net Assets 0.92 0.54 0.65
Ratio of Net Income to Average Net Assets 1.47 2.30 2.29
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.23 1.48 1.59
Ratio of Net Income to Average Net Assets (Excluding Waivers) 1.17 1.36 1.35
Portfolio Turnover Rate** 39 68 43
Average Commission Rate Paid(4) n/a n/a n/a
</TABLE>
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21,
1995 through October 31, 1995. For the year ended October 31, 1995, the
Financial Highlights' ratios of expenses, net investment income, total
return, and the per share investment activities and distributions reflect
this allocation. Also, on April 15, 1996, the assets of the Conestoga
Equity Fund were acquired by CoreFunds. At that time the Retail Class
Shares of the Fund were exchanged for Class A Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
(1) Commenced operations February 28, 1990. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load. Additionally, total
return for the period ended June 30, 1996 is for an eight-month period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
periods November 1 to October 31.
(4) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
5
<PAGE>
GROWTH EQUITY FUND
SUMMARY
Growth Equity Fund seeks capital growth and an increasing flow of dividends by
investing primarily in common stocks.
INVESTMENT OBJECTIVE
Growth Equity Fund seeks capital growth and an increasing flow of dividends.
PORTFOLIO INVESTMENTS
The Fund invests in a diversified portfolio of equity securities which Core-
States Advisers believe show the potential for growth of earnings over time,
including:
|__ common stocks
|__ preferred stocks
|__ convertible securities and
|__ other equity securities of companies.
Growth Equity Fund strives to provide a return greater than stock market indices
such as the Russell 1000 Growth Index, the S&P 500 Index and the Lipper Growth
Fund Index. (Please see page 36 for more information about General Investment
Policies and Practices.)
RISK CONSIDERATIONS
Increased Business and Economic Sensitivity - Small and medium capitalization
companies may be more vulnerable than larger, more established organizations to
adverse business or economic developments. In particular, small capitalization
companies may have limited product lines, markets and financial resources and
may be dependent upon a relatively small management group. These securities may
be traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Also, like all equity funds, the Growth Equity Fund is subject to two primary
types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance, during a specific
period, may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Growth Equity Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Steve Dalton is a Managing Director of CoreStates Advisers and manages Growth
Equity and Balanced Funds. Mr. Dalton has been a senior portfolio manager of
balanced portfolios since 1986 and a member of the CoreStates Advisers' Equity
Policy Committee since 1990. (Please see page 45 for more information about the
Fund's Investment Adviser.)
6
<PAGE>
INVESTOR EXPENSES
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A and Class B Shares of the Fund.
The information contained in the tables should not be considered a
representation of past or future expenses. Actual expenses may be more or less
than those shown.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 5.50%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .75%
12b-1 Fees(1) .25%
Other Expenses After Fee Waivers(2) .21%
Total Operating Expenses After Fee Waivers(3) 1.21%
(1) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.30%. This fee waiver is voluntary and may be discontinued at any time
at the discretion of the service provider that is waiving its fee.
CLASS B (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Redemptions 5.00%
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .75%
12b-1 Fees(1) 1.00%
Other Expenses After Fee Waivers(2) .21%
Total Operating Expenses After Fee Waivers(3) 1.96%
(1) This fee consists of a shareholder servicing fee of .25% and an asset-based
distribution fee of .75%. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses are
estimated to be 2.05%. These fee waivers are voluntary and may be
discontinued at any time at the discretion of the service provider that is
waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 Class A Shares $ 67 $ 91 $ 118 $ 194
investment, assuming (1) imposition of the Class B Shares (with redemption) $ 70 $ 92 $ 116 $ 229
maximum sales charge or CDSC, (2) a 5% annual Class B Shares (without redemption) $ 20 $ 62 $ 106 $ 229
return and, except as noted, (3) redemption at
the end of each time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Growth Equity Fund. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE. Class B Shares were not yet offered as of June 30,
1997. Performance of Class B Shares would be lower than the performance of Class
A Shares due to the higher distribution-related expenses charged to Class B
Shares.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS A (INDIVIDUAL)* ------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.17 11.17 9.10 9.95 9.80
Net Investment Income $ 0.01 0.05 0.06 0.04 0.03
Realized and Unrealized Net Gains (Losses) on Securities $ 2.79 3.35 2.07 (0.85) 0.15
Distributions from Net Investment Income $ (0.01) (0.05) (0.06) (0.04) (0.03)
Distributions from Capital Gains $ (1.57) (0.35) - - -
Net Asset Value, End of Period $ 15.39 14.17 11.17 9.10 9.95
Total Return(2) 21.29% 31.00 23.44 (8.13) 1.80+
Net Assets, End of Period (000 omitted) $ 4,693 3,162 2,043 1,730 5,224
Ratio of Expenses to Average Net Assets 1.21% 1.14 1.01 0.94 0.80
Ratio of Net Income to Average Net Assets 0.04% 0.40 0.59 0.23 0.39
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.31% 1.30 1.35 1.36 1.48
Ratio of Net Income (Loss) to Average Net Assets (Excluding Waivers) (0.06)% 0.23 0.25 (0.19) (0.29)
Portfolio Turnover Rate 74% 81 113 127 103
Average Commission Rate Paid(3) $0.0451 0.0601 n/a n/a n/a
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class
A Shares.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load.
(3) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
7
<PAGE>
SPECIAL EQUITY FUND
SUMMARY
Special Equity Fund seeks capital growth by investing principally in a
diversified portfolio of common stocks.
INVESTMENT OBJECTIVE
Special Equity Fund seeks capital growth.
PORTFOLIO INVESTMENTS
The Fund invests principally in a diversified portfolio of common stocks of
domestic companies that CoreStates Advisers expect will experience growth in
earnings and price including stocks of companies with:
|__ small market capitalizations (i.e., under $1 billion)
|__ medium market capitalizations and (i.e., between $1 billion and $5 billion)
and
|__ large market capitalizations (i.e., over $5 billion).
Market capitalization means the total number of common shares of a company's
stock outstanding multiplied by the market price per share.
In addition, up to 35% of the Fund's total assets may be invested in:
|__ preferred stocks
|__ securities convertible into common stock
|__ corporate bonds and notes
|__ warrants
|__ Short-Term Obligations and
|__ sponsored and unsponsored ADRs, European Depositary Receipts ("EDRs") and
Global Depositary Receipts ("GDRs").
Special Equity Fund strives to provide a return greater than stock market
indices such as the Russell 3000 Equal Weighted Index. (Please see page 36 for
more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Increased Business and Economic Sensitivity - Small and medium capitalization
companies may be more vulnerable than larger, more established organizations to
adverse business or economic developments. In particular, small capitalization
companies may have limited product lines, markets and financial resources and
may be dependent upon a relatively small management group. These securities may
be traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Also, like all equity funds, Special Equity Fund is subject to two other primary
types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
Special Equity Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that common stocks can provide and
|__ are able to tolerate fluctuations in the principal value of their
investment.
FUND MANAGEMENT
Joseph E. Stocke, CFA, is a Senior Managing Director of CoreStates Advisers and
manages Core Equity and Special Equity Funds. He is also a Senior Investment
Manager/Equities with Meridian Investment Company, an affiliate of CoreStates
Advisers. He has been with Meridian since 1983. (Please see page 45 for more
information about the Fund's Investment Adviser.)
8
<PAGE>
INVESTOR EXPENSES
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A and Class B Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 5.50%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .83%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .22%
Total Operating Expenses After Fee Waivers(4) 1.30%
(1) Absent voluntary waivers, investment advisory fees would be 1.50% of
average net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 2.06%. This fee waiver is voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect a reduction in fee
waivers and expense reimbursements.
CLASS B (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Redemptions 5.00%
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .83%
12b-1 Fees(2) 1.00%
Other Expenses After Fee Waivers(3) .22%
Total Operating Expenses After Fee Waivers(4) 2.05%
(1) Absent voluntary waivers, investment advisory fees would be 1.50% of
average net assets.
(2) This fee consists of a shareholder servicing fee of .25% and an asset-based
distribution fee of .75%. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses are
estimated to be 2.81%. These fee waivers are voluntary and may be
discontinued at any time at the discretion of the service provider that is
waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 Class A Shares $68 $94 $122 $203
investment, assuming (1) imposition of the Class B Shares (with redemption) $71 $94 $120 $238
maximum sales charge or CDSC, (2) a 5% annual Class B Shares (without redemption) $21 $64 $110 $238
return and, except as noted, (3) redemption at
the end of each time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Special Equity Fund. The financial highlights for the Fund for
the periods from November 1, 1995 through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
financial highlights for the Fund for the periods ended October 31, 1994 through
October 31, 1995 were audited by Coopers & Lybrand LLP, independent auditors for
the predecessor fund. The annual report for the Fund is available to
shareholders at no charge by calling CoreFunds at 1-800-355-CORE. Class B Shares
were not yet offered as of June 30, 1997. Performance of Class B Shares would be
lower than the performance of Class A Shares due to the higher
distribution-related expenses charged to Class B Shares.
<TABLE>
<CAPTION>
RETAIL PRIOR
CLASS CLASS(1)
1997 1996 1995 1994
CLASS A (INDIVIDUAL(3)* ------------------------- ------ --------
For a Share Outstanding Throughout the Period Ended June 30 October 31
- --------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.85 11.42 9.37 10.00
Net Investment Income $ -- 0.08 0.12 0.06
Realized and Unrealized Net Gains (Losses) on Securities $ 1.81 2.11 2.12 (0.63)
Distributions from Net Investment Income $ (0.02) (0.07) (0.12) (0.06)
Distributions from Capital Gains $ (2.39) (1.69) (0.07) --
Net Asset Value, End of Period $ 11.25 11.85 11.42 9.37
Total Return(2) 17.73% 22.14 24.44 (5.72)
Net Assets, End of Period (000 omitted) $ 2,347 1,144 734 10,069
Ratio of Expenses to Average Net Assets 1.14% 0.37 0.27 0.15
Ratio of Net Income to Average Net Assets (0.12)% 0.91 1.29 1.06
Ratio of Expenses to Average Net Assets (Excluding Waivers) 2.07% 1.82 2.24 2.10
Ratio of Net Loss to Average Net Assets (Excluding Waivers) (1.05)% (0.55) (0.68) (0.89)
Portfolio Turnover Rate** 74% 72 129 39
Average Commission Rate Paid(4) $0.0257 0.0539 n/a n/a
</TABLE>
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21,
1995 through October 31, 1995. For the year ended October 31, 1995, the
Financial Highlights' ratios of expenses, net investment income, total
return, and the per share investment activities and distributions reflect
this allocation. Also, on April 22, 1996, the assets of the Conestoga
Special Equity Fund were acquired by CoreFunds. At that time the Retail
Class Shares of the Fund were exchanged for Class A Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
(1) Commenced operations March 15, 1994. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return does not reflect applicable sales load. Additionally, total
return for the period ended June 30, 1996 is for an eight-month period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
period November 1 to October 31.
(4) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
9
<PAGE>
INTERNATIONAL GROWTH FUND
SUMMARY
International Growth Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies located outside the United States.
INVESTMENT OBJECTIVE
International Growth Fund seeks long-term capital appreciation, consistent with
reasonable risk, by investing primarily in appreciation-oriented equity
securities of companies located outside the United States.
PORTFOLIO INVESTMENTS
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of companies located in at least three different
countries. Companies are located in a country if they are headquartered or doing
business primarily in that country.
The Fund invests in appreciation-oriented equity securities of companies located
outside the United States, including:
Australia Hong Kong Singapore Germany
Canada Japan Sweden Netherlands
France Mexico Switzerland United Kingdom
"Appreciation-oriented" securities are equity securities of companies that the
Fund's Adviser and Sub-Advisers believe have the greatest potential for
long-term growth.
Most foreign equity securities are purchased on stock exchanges or in
over-the-counter markets located in the countries in which the principal offices
of the issuers are located.
International Growth Fund strives to provide a return greater than stock market
indices such as the Morgan Stanley Capital International EAFE Index. (Please see
page 36 for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
There are special risks associated with international investing. See 'Foreign
Securities' on page 36.
Also, like all equity funds, International Growth Fund is subject to two primary
types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
INVESTMENT SUITABILITY
International Growth Fund may be appropriate for investors who:
|__ are seeking long-term capital growth
|__ do not need to earn current income
|__ are willing to hold an investment over a long time period in anticipation
of the returns that foreign stocks can provide
|__ are able to tolerate fluctuations in the principal value of their
investment and
|__ are aware of the unique risks of international investing, including
exposure to currency fluctuations.
FUND MANAGEMENT
CoreStates Advisers has delegated day-to-day portfolio management functions to
Martin Currie, Inc. ("Martin Currie") and Aberdeen Fund Managers, Inc.
("Aberdeen Managers") (the "Sub-Advisers").
Michael J. Gibson, a Vice President of Martin Currie, is the lead director of
the investment team responsible for managing a portion of International Growth
Fund. Mr. Gibson has 25 years of portfolio investment experience in
international stock markets. He joined Martin Currie in 1983.
Bev Hendry, Chief Executive Officer of Aberdeen Managers, is the lead director
of the investment team responsible for managing a portion of International
Growth Fund. He joined Aberdeen's parent in 1987. (Please see page 45 for more
information about the Fund's Investment Adviser and Sub-Advisers.)
10
<PAGE>
INVESTOR EXPENSES
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A and Class B Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 5.50%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .80%
12b-1 Fees(1) .25%
Other Expenses After Fee Waivers(2) .36%
Total Operating Expenses After Fee Waivers(3) 1.41%
(1) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .45%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been 1.50%. This fee waiver is voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect anticipated
expenses.
CLASS B (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Redemptions 5.00%
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees .80%
12b-1 Fees(1) 1.00%
Other Expenses After Fee Waivers(2) .36%
Total Operating Expenses After Fee Waivers(3) 2.16%
(1) This fee consists of a shareholder servicing fee of .25% and an asset-based
distribution fee of .75%. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .45%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses are
estimated to be 2.25%. These fee waivers are voluntary and may be
discontinued at any time at the discretion of the service provider that is
waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 Class A Shares $69 $97 $128 $215
investment, assuming (1) imposition of the Class B Shares (with redemption) $72 $98 $126 $249
maximum sales charge or CDSC, (2) a 5% annual Class B Shares (without redemption) $22 $68 $116 $249
return and, except as noted, (3) redemption at
the end of each time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of International Growth Fund. The financial highlights for the
Fund for the periods from inception through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE. Class B Shares were not yet offered as of June 30,
1997. Performance of Class B Shares would be lower than the performance of Class
A Shares due to the higher distribution-related expenses charged to Class B
Shares.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS A (INDIVIDUAL)* ------- ----- ----- ----- -------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.96 12.27 13.17 11.71 10.07
Net Investment Income $ 0.09 0.11 0.09 0.06 0.05
Realized and Unrealized Net Gains (Losses) on Securities $ 1.85 1.89 (0.17) 1.82 1.59
Distributions from Net Investment Income $ (0.34) (0.25) (0.02) (0.11) -
Distributions from Capital Gains $ (0.86) (0.06) (0.80) (0.31) -
Net Asset Value, End of Period $ 14.70 13.96 12.27 13.17 11.71
Total Return(2) 15.09% 16.54 (0.48) 16.08 16.29+
Net Assets, End of Period (000 omitted) $ 2,431 2,138 1,943 2,019 344
Ratio of Expenses to Average Net Assets 1.45% 1.39 1.30 1.24 1.15
Ratio of Net Income to Average Net Assets 0.57% 0.80 0.73 0.05 1.51
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.54% 1.50 1.44 1.43 1.44
Ratio of Net Income (Loss) to Average Net Assets (Excluding Waivers) 0.48% 0.69 0.59 (0.14) 1.22
Portfolio Turnover Rate** 59% 41 59 67 59
Average Commission Rate Paid(3) $0.0080 0.0270 n/a n/a n/a
</TABLE>
* On April 15, 1996, the assets of the Conestoga International Equity Fund
were acquired by CoreFunds. At that time, the Retail Class Shares of the
Fund were exchanged for Class A Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load.
(3) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
11
<PAGE>
BALANCED FUND
SUMMARY
Balanced Fund seeks to provide total return while preserving capital by
investing in a combination of common stocks and fixed income securities.
INVESTMENT OBJECTIVE
Balanced Fund seeks to provide total return while preserving capital.
PORTFOLIO INVESTMENTS
The Fund invests in a combination of:
|__ common stocks
|__ convertible securities
|__ fixed income securities and
|__ Short-Term Obligations.
Under normal conditions, the Fund will invest a minimum of 25% of its assets in
senior fixed income securities and between 30% and 75% of its assets in common
stocks. Balanced Fund may also invest in U.S. dollar denominated securities of
foreign issuers (including ADRs).
In managing Balanced Fund, CoreStates Advisers combines separate equity, fixed
income and asset allocation strategies. Long-term growth is pursued through
equity holdings, and current income through fixed income securities and common
stock dividends. The asset allocation strategy shifts the stock / fixed income /
money market instrument mix based on its judgment of the relative attractiveness
of these markets and securities.
Balanced Fund strives to provide a return greater than indices such as the
Lipper Balanced Fund Average. (Please see page 36 for more information about
General Investment Policies and Practices.)
RISK CONSIDERATIONS
Because Balanced Fund invests in both stocks and fixed income securities, it is
subject to five primary types of risk:
Market Risk - The possibility that stock prices in general will decline over
short, or even extended, periods of time. This is because stock markets tend to
be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
Fund Risk - The possibility that the Fund's performance during a specific period
may not meet or exceed that of the stock market as a whole.
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. It is also known as Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities may suffer
substantial declines in credit quality and market value due to corporate
restructurings. While event risk may be high for certain corporate securities
held by the Fund, event risk in the aggregate should be low because of the
Fund's diversified holdings.
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Balanced Fund may be appropriate for investors who:
|__ seek to capture interest income from bonds
|__ seek the capital appreciation potential of stocks and
|__ want to reduce risk through diversification among securities and asset
types.
FUND MANAGEMENT
Steve Dalton is a Managing Director of CoreStates Advisers and manages Growth
Equity and Balanced Funds. Mr. Dalton has been a senior port-folio manager of
balanced portfolios since 1986 and a member of the CoreStates Advisers' Equity
Policy Committee since 1990. (Please see page 45 for more information about the
Fund's Investment Adviser.)
12
<PAGE>
INVESTOR EXPENSES
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A and Class B Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 5.50%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .58%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) 1.03%
(1) Absent voluntary waivers, investment advisory fees would be .70% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.24%. This fee waiver is voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
CLASS B (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Redemptions 5.00%
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .58%
12b-1 Fees(2) 1.00%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) 1.78%
(1) Absent voluntary waivers, investment advisory fees would be .70% of average
net assets.
(2) This fee consists of a shareholder servicing fee of .25% and an asset-based
distribution fee of .75%. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses are
estimated to be 1.99%. These fee waivers are voluntary and may be
discontinued at any time at the discretion of the service provider that is
waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 Class A Shares $65 $86 $109 $174
investment, assuming (1) imposition of the Class B Shares (with redemption) $68 $86 $106 $209
maximum sales charge or CDSC, (2) a 5% annual Class B Shares (without redemption) $18 $56 $ 96 $209
return and, except as noted, (3) redemption at
the end of each time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Balanced Fund. The financial highlights for the Fund for the
periods from inception through June 30, 1997 have been audited by Ernst & Young
LLP, independent auditors, whose report appears in CoreFunds' annual report
which accompanies the Statement of Additional Information. The annual report for
the Fund is available to shareholders at no charge by calling CoreFunds at
1-800-355-CORE. Class B Shares were not offered as of June 30, 1997. Performance
of Class B Shares would be lower than the performance of Class A Shares due to
the higher distribution-related expenses charged to Class B Shares.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS A (INDIVIDUAL)* ------- ------ ----- ----- -------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.59 11.06 9.89 10.38 10.00
Net Investment Income $ 0.32 0.30 0.34 0.31 0.16
Realized and Unrealized Net Gains (Losses) on Securities $ 1.61 1.68 1.19 (0.49) 0.38
Distributions from Net Investment Income $ (0.32) (0.30) (0.33) (0.31) (0.16)
Distributions from Capital Gains $ (0.68) (0.15) (0.03) - -
Net Asset Value, End of Period $ 13.52 12.59 11.06 9.89 10.38
Total Return(2) 16.15% 18.13 15.84 (1.86) 2.50+
Net Assets, End of Period (000 omitted) $ 4,198 3,188 2,344 2,222 701
Ratio of Expenses to Average Net Assets 1.03% 1.06 0.98 0.87 0.55
Ratio of Net Income to Average Net Assets 2.54% 2.53 3.27 3.21 5.76
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.25% 1.27 1.32 1.33 1.48
Ratio of Net Income to Average Net Assets (Excluding Waivers) 2.32% 2.32 2.93 2.75 4.83
Portfolio Turnover Rate** 54% 74 46 56 21
Average Commission Rate Paid(3) $0.0033 0.0621 n/a n/a n/a
</TABLE>
* On April 15, 1996, the assets of the Conestoga Balanced Fund were acquired
by CoreFunds. At that time, the Retail Class Shares of the Fund were
exchanged for Class A Shares.
** For the year ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations March 16, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return does not reflect applicable sales load.
(3) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
13
<PAGE>
SHORT TERM INCOME FUND
SUMMARY
Short Term Income Fund seeks to provide investors with consistent income and
principal stability by investing in a portfolio of investment grade debt
securities.
INVESTMENT OBJECTIVE
Short Term Income Fund seeks consistent current income with relative stability
of principal.
PORTFOLIO INVESTMENTS
The Fund invests principally in investment grade debt securities including:
|__ corporate bonds, debentures and notes
|__ equipment lease and trust certificates
|__ asset-backed and mortgage-backed securities and
|__ obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
If a security held by the Fund is downgraded below the minimum required ratings,
CoreStates Advisers will reassess the creditworthiness of the security.
The Fund may invest up to 35% of its total assets in U.S. dollar denominated
international debt securities for which the primary trading market is the U.S.
("Yankee Bonds"). Normally, the Fund's portfolio securities will have maximum
expected or remaining maturities of three years or less. The Fund's normal
average dollar-weighted portfolio maturity is about one year.
Short Term Income Fund strives to provide a return greater than bond indices
such as the Merrill Lynch 1-Year Treasury Bill Index. (Please see page 36 for
more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Short Term Income Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will
be prepaid (or 'called') by the issuer prior to maturity during periods of
falling interest rates. This would require the Fund to invest the resulting
proceeds elsewhere, at generally lower interest rates. This is also known as
Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities
may suffer substantial declines in credit quality and market value due to
corporate restructurings. While event risk may be high for certain corporate
securities held by the Fund, event risk in the aggregate should be low because
of the Fund's diversified holdings.
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Short Term Income Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money market
fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
John Ackler is Senior Investment Officer of CoreStates Advisers and manages
Short Term Income Fund and Cash Reserve. He is also responsible for the
management of the CoreStates Liquidity Fund, as well as numerous individually
managed fixed income funds. Mr. Ackler joined CoreStates as an internal auditor
in 1992 and transferred to CoreStates Advisers in August 1993. (Please see page
45 for more information about the Fund's Investment Adviser.)
14
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 3.25%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .25%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .22%
Total Operating Expenses After Fee Waivers(4) .72%
(1) Absent voluntary waivers, investment advisory fees would be .74% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .31%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.30%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect anticipated
expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $40 55 71 119
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Short Term Income Fund. The financial highlights for the Fund
for the periods from November 1, 1995 through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
financial highlights for the Fund for the period ended October 31, 1995 were
audited by Coopers & Lybrand LLP, independent auditors for the predecessor fund.
The annual report for the Fund is available to shareholders at no charge by
calling CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
RETAIL
CLASS
CLASS A (INDIVIDUAL)(3)* 1997 1996 1995
------ ----- ------
For a Share Outstanding Throughout the Period Ended June 30 October 31(1)
- --------------------------------------------------- ----------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.93 10.04 10.01
Net Investment Income $ 0.51 0.35 0.23
Realized and Unrealized Net Gains (Losses) on Securities $ 0.03 (0.10) 0.02
Distributions from Net Investment Income $(0.51) (0.35) (0.22)
Distributions from Capital Gains $ -- (0.01) --
Net Asset Value, End of Period $ 9.96 9.93 10.04
Total Return(2) 5.59% 2.55 2.57+
Net Assets, End of Period (000 omitted) $ 493 1 11
Ratio of Expenses to Average Net Assets 0.73% 0.76 0.88
Ratio of Net Income to Average Net Assets 5.18% 5.05 5.05
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.32% 1.25 1.33
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.59% 4.56 4.60
Portfolio Turnover Rate** 99% 102 40
</TABLE>
* On April 22, 1996, the assets of the Conestoga Short-Term Income Fund were
acquired by CoreFunds. At that time the Retail Class Shares of the Fund
were exchanged for Class A Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations May 17, 1995. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return does not reflect applicable sales load. Additionally, total
return for the period ended June 30, 1996 is for an eight-month period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. The prior year is for the
period from inception to October 31.
15
<PAGE>
SHORT-INTERMEDIATE BOND FUND
SUMMARY
Short-Intermediate Bond Fund seeks to provide investors with income by investing
in a diversified portfolio of fixed income securities with maturities averaging
from two to five years.
INVESTMENT OBJECTIVE
Short-Intermediate Bond Fund seeks a moderate level of current income consistent
with conservation of capital.
PORTFOLIO INVESTMENTS
The Fund intends to invest at least 65% of its total assets in bonds under
normal market conditions. The Fund maintains a maximum average maturity of no
more than five years. By maintaining this maturity range, CoreStates Advisers
expects the Fund's net asset value to be relatively stable while providing
higher income than money market funds.
The Fund invests primarily in a portfolio of intermediate term, investment
grade, fixed income obligations with an expected average weighted maturity of
two to five years including:
|__ corporate debt securities (bonds and commercial paper)
|__ securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
If a security held by the Fund is downgraded below the minimum required ratings,
CoreStates Advisers will reassess the creditworthiness of the security.
Short-Intermediate Bond Fund strives to provide a return greater than bond
indices such as the Merrill Lynch 1-3 Year Treasury Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Short-Intermediate Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will
be prepaid (or 'called') by the issuer prior to maturity during periods of
falling interest rates. This would require the Fund to invest the resulting
proceeds elsewhere, at generally lower interest rates. This is also known as
Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities may suffer
substantial declines in credit quality and market value due to corporate
restructurings. While event risk may be high for certain corporate securities
held by the Fund, event risk in the aggregate should be low because of the
Fund's diversified holdings.
INVESTMENT SUITABILITY
Short-Intermediate Bond Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money market
fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Daniel R. Taylor is an Investment Officer of CoreStates Advisers and the
portfolio manager of the Short-Intermediate Bond Fund. He has been employed by
CoreStates for a number of years in various capacities, including Commercial
Lending Credit Analyst. (Please see page 45 for more information about the
Fund's Investment Adviser.)
16
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 3.25%
Maximum Sales Load Imposed on Redemptions none
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .29%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) .74%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.04%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $40 55 72 121
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Short-Intermediate Bond Fund. The financial highlights for the
Fund for the periods from inception through June 30, 1997 have been audited by
Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS A (INDIVIDUAL)* ------ ----- ----- ----- -------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.76 9.84 9.63 10.18 10.01
Net Investment Income $ 0.56 0.54 0.54 0.41 0.20
Realized and Unrealized Net Gains (Losses) on Securities $ 0.07 (0.08) 0.20 (0.53) 0.17
Distributions from Net Investment Income $(0.56) (0.54) (0.53) (0.41) (0.20)
Distributions from Capital Gains $ - - - (0.02) -
Net Asset Value, End of Period $ 9.83 9.76 9.84 9.63 10.18
Total Return(2) 6.64% 4.79 7.95 (0.56) 3.95+
Net Assets, End of Period (000 omitted) $2,752 3,062 1,961 9,365 5,752
Ratio of Expenses to Average Net Assets 0.74% 0.81 0.85 0.83 0.75
Ratio of Net Income to Average Net Assets 5.73% 5.51 5.27 4.05 3.78
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.05% 1.06 1.09 1.11 1.19
Ratio of Net Income to Average Net Assets (Excluding Waivers) 5.42% 5.27 5.03 3.77 3.34
Portfolio Turnover Rate** 158% 257 405 299 188
</TABLE>
* On April 15, 1996, the assets of the Conestoga Intermediate Income Fund
were acquired by CoreFunds. At that time the Retail Class Shares of the
Fund were exchanged for Class A Shares.
** For the year ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load.
17
<PAGE>
GOVERNMENT INCOME FUND
SUMMARY
Government Income Fund seeks to provide investors with income, as well as
preservation of principal investment and liquidity by investing in a portfolio
of U.S. Government guaranteed securities.
INVESTMENT OBJECTIVE
Government Income Fund seeks current income while preserving principal value and
maintaining liquidity.
PORTFOLIO INVESTMENTS
The Fund invests exclusively in:
|__ U.S. Treasury securities
|__ mortgage-backed securities issued or guaranteed by U.S. Government agencies
and
|__ repurchase agreements involving any of these obligations.
The Fund's average maturity is generally about six to ten years.
Government Income Fund strives to provide a return greater than bond indices
such as the Salomon Brothers Broad Investment Grade Bond Index. (Please see page
36 for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Government Income Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or "called") by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Government Income Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money market
fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
William T. Lawrence, a Vice President of CoreStates Advisers, is the portfolio
manager for Government Income Fund and Bond Fund. He joined CoreStates Advisers
in 1991. Prior to that, he was Vice President, Fixed Income Sales, for First
Boston Corp. (Please see page 45 for more information about the Fund's
Investment Adviser.)
18
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 3.25%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .47%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .23%
Total Operating Expenses After Fee Waivers(4) .95%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .32%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.07%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $42 62 83 115
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Government Income Fund. The financial highlights for the Fund
for the periods from inception through June 30, 1997 have been audited by Ernst
& Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS A (INDIVIDUAL)* ------ ----- ----- ----- -------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.62 9.84 9.51 10.17 10.00
Net Investment Income $ 0.60 0.58 0.61 0.47 0.07
Realized and Unrealized Net Gains (Losses) on Securities $ 0.14 (0.22) 0.33 (0.62) 0.17
Distributions from Net Investment Income $(0.60) (0.58) (0.61) (0.47) (0.07)
Distributions from Capital Gains $ - - - (0.04) -
Net Asset Value, End of Period $ 9.76 9.62 9.84 9.51 10.17
Total Return(2) 7.88% 3.73 10.23 (1.57) 1.71+
Net Assets, End of Period (000 omitted) $1,660 1,287 1,374 1,536 201
Ratio of Expenses to Average Net Assets 0.95% 0.88 0.85 0.75 0.63
Ratio of Net Income to Average Net Assets 6.15% 5.93 6.25 4.68 5.35
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.10% 1.14 1.24 1.25 1.29
Ratio of Net Income to Average Net Assets (Excluding Waivers) 6.00% 5.67 5.86 4.18 4.69
Portfolio Turnover Rate 120% 131 368 157 93
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class
A Shares.
+ This figure has not been annualized.
(1) Commenced operations May 3, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return does not reflect applicable sales load.
19
<PAGE>
BOND FUND
SUMMARY
Bond Fund seeks to provide investors with maximum long-term total return by
investing in a diversified portfolio of debt securities.
INVESTMENT OBJECTIVE
Bond Fund seeks to maximize long-term total return.
PORTFOLIO INVESTMENTS
The Fund normally invests at least 80% of its total assets in investment grade
debt securities of all types including:
|__ domestic and foreign bonds, debentures and notes
|__ equipment lease and trust certificates
|__ asset-backed and mortgage-backed securities and
|__ obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
If a security held by the Fund is downgraded below investment grade, CoreStates
Advisers will reassess the creditworthiness of the security.
The Fund also may invest in:
|__ first mortgage loans and participation certificates
|__ pools of mortgages issued or guaranteed by the U.S. Government, its
agencies or instrumentalities
|__ preferred stocks
|__ convertible debt securities
|__ common stock obtained upon the conversion or exchange of convertible
securities and
|__ Short-Term Obligations.
Securities in which the Fund invests may have warrants or options attached. The
Fund anticipates investing no more than 5% of its net assets in debt securities
rated below investment grade.
Bond Fund strives to provide a return greater than bond indices such as the
Lehman Aggregate Bond Index. (Please see page 36 for more information about
General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or "called") by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Event Risk - The possibility that corporate fixed income securities may suffer
substantial declines in credit quality and market value due to corporate
restructurings. While event risk may be high for certain corporate securities
held by the Fund, event risk in the aggregate should be low because of the
Fund's diversified holdings.
Special Risk Factors - The risk that mortgage-backed and asset-backed securities
may be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
INVESTMENT SUITABILITY
Bond Fund may be appropriate for investors who:
|__ are looking for a higher level of current income relative to a money market
fund and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
William T. Lawrence, a Vice President of CoreStates Advisers, is the portfolio
manager for the Bond Fund and the Government Income Fund. He joined CoreStates
Advisers in 1991. Prior to that, he was Vice President, Fixed Income Sales, for
First Boston Corp. (Please see page 45 for more information about the Fund's
Investment Adviser.)
20
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 4.75%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .35%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .21%
Total Operating Expenses After Fee Waivers(4) .81%
(1) Absent voluntary waivers, investment advisory fees would be .74% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.29%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $55 72 90 143
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Bond Fund. The financial highlights for the Fund for the
periods from November 1, 1995 through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The financial
highlights for the Fund for the periods ended October 31, 1990 through October
31, 1995 were audited by Coopers & Lybrand LLP, independent auditors for the
predecessor fund. The annual report for the Fund is available to shareholders at
no charge by calling CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
RETAIL PRIOR
CLASS CLASS
1997 1996 1995 1994 1993 1992 1991 1990(1)
CLASS A (INDIVIDUAL)(3)* ------ ----- ------ ----- ----- ----- ----- -------
For a Share Outstanding Throughout the Period Ended June 30 October 31
- --------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.15 10.56 9.81 11.18 10.89 10.65 9.96 10.00
Net Investment Income $ 0.62 0.44 0.60 0.53 0.56 0.70 0.78 0.50
Realized and Unrealized Net Gains (Losses) on Securities $ 0.09 (0.33) 0.72 (1.04) 0.54 0.32 0.69 (0.04)
Distributions from Net Investment Income $(0.62) (0.44) (0.57) (0.52) (0.56) (0.68) (0.78) (0.50)
Distributions from Capital Gains $ -- (0.08) -- (0.34) (0.25) (0.10) -- --
Net Asset Value, End of Period $10.24 10.15 10.56 9.81 11.18 10.89 10.65 9.96
Total Return(2) 7.15% 0.98 13.83 (4.75) 10.63 9.82 15.16 4.64+
Net Assets, End of Period (000 omitted) $1,622 1,273 1,373 23,377 27,346 15,180 7,255 4,593
Ratio of Expenses to Average Net Assets 0.81% 0.80 0.97 1.01 0.88 0.46 0.47 0.68
Ratio of Net Income to Average Net Assets 6.05% 6.02 6.02 5.07 5.16 6.78 7.71 7.75
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.29% 1.22 1.44 1.60 1.49 1.24 1.41 1.62
Ratio of Net Income to Average Net Assets
(Excluding Waivers) 5.57% 5.61 5.55 4.48 4.55 6.01 6.78 6.81
Portfolio Turnover Rate** 210% 190 352 232 158 99 47 23
</TABLE>
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21,
1995 through October 31, 1995. For the year ended October 31, 1995, the
Financial Highlights' ratios of expenses, net investment income, total
return, and the per share investment activities and distributions reflect
this allocation. Also, on April 22, 1996, the assets of the Conestoga Bond
Fund were acquired by CoreFunds. At that time the Retail Class Shares of
the Fund were exchanged for Class A Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations February 28, 1990. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load. Additionally, total
return for the period ended June 30, 1996 is for an eight-month period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
period from November 1 to October 31.
21
<PAGE>
GLOBAL BOND FUND
SUMMARY
Global Bond Fund seeks to provide investors with capital appreciation and income
by investing in a portfolio of U.S. and foreign fixed income securities.
INVESTMENT OBJECTIVE
Global Bond Fund seeks capital appreciation and current income.
PORTFOLIO INVESTMENTS
The Fund invests primarily in U.S. government and corporate debt
securities and fixed income securities of foreign issuers denominated in U.S.
dollars and other currencies. Under normal circumstances, the Fund will invest
at least 65% of its total assets in investment grade fixed income securities,
including:
|__ debt obligations of foreign or domestic government entities
|__ corporate obligations and
|__ obligations of supranational agencies, including the International Bank of
Reconstruction and Development, the InterAmerican Development Bank, and the
Asian Development Bank.
If a security held by the Fund is downgraded below the minimum required ratings,
CoreStates Advisers will reassess the creditworthiness of the security. There
are no restrictions on the average maturity of the Fund or the maturity of any
single instrument.
The Fund will invest in securities of issuers, governments or agencies located
in at least three of the following countries:
Australia Finland Japan Spain
Austria France Luxembourg Sweden
Belgium Germany Netherlands Switzerland
Canada Ireland New Zealand United Kingdom
Denmark Italy Norway United States
Issuers are located in a country if they are headquartered or doing business
primarily in that country.
The Fund may invest up to 5% of its assets in debt obligations that are
denominated in the currencies of developing countries and that are of comparable
quality, as determined by the Adviser and Sub-Adviser, AnalyticoTSA
International, Inc. ('Analytic').
Global Bond Fund strives to provide a return greater than bond indices such as
the J.P. Morgan Global Government Bond Index. (Please see page 36 for more
information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
There are special risks associated with international investing. See `Foreign
Securities' information on page 36.
Also, like all fixed income funds, Global Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Global Bond Fund may be appropriate for investors who are:
|__ looking for capital appreciation and current income
|__ seeking enhanced overall returns by virtue of international diversification
|__ able to hold their investment over a long time period in anticipation of
the returns that foreign securities can provide
|__ able to tolerate fluctuations in the principal value of their investment
and
|__ aware of the unique risks of international investing, including their
exposure to currency fluctuations.
FUND MANAGEMENT
CoreStates Advisers has delegated some of its portfolio management functions to
Analytic (the "Sub-Adviser").
George McNeill is Managing Director of Analytic and the portfolio manager for
Global Bond Fund. He has over 35 years of experience in managing fixed income
portfolios. He served as the senior investment officer for Gillett Brothers
(1977-1981), Reserve Asset Managers (1981-1989), and Axe-Houghton, Ltd.
(1989-1996). Together with United Asset Management Corporation of Boston, Mr.
McNeill founded Alpha Global in 1996 which then merged with Analytic. (Please
see page 45 for more information about the Fund's Investment Adviser and
Sub-Adviser.)
22
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 4.75%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .50%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .34%
Total Operating Expenses After Fee Waivers(4) 1.09%
(1) Absent voluntary waivers, investment advisory fees would be .60% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .43%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.28%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect anticipated expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $58 81 105 174
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Global Bond Fund. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent
auditors, whose report appears in CoreFunds' annual report which accompanies the
Statement of Additional Information. The annual report for the Fund is available
to shareholders at no charge by calling CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994(1)
CLASS A (INDIVIDUAL)* ------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.68 9.61 9.04 10.00
Net Investment Income $ 0.42 0.61 0.61 0.19
Realized and Unrealized Net Gains (Losses) on Securities $ 0.14 0.12 0.24 (1.11)
Distributions from Net Investment Income $ (0.72) (0.66) (0.28) (0.04)
Distributions from Capital Gains $ -- -- -- --
Net Asset Value, End of Period $ 9.52 9.68 9.61 9.04
Total Return(2) $ 5.92% 7.74 9.57 (9.22)+
Net Assets, End of Period (000 omitted) $ 182 152 170 167
Ratio of Expenses to Average Net Assets 1.10% 0.96 0.89 0.98
Ratio of Net Income to Average Net Assets 4.89% 5.56 6.59 4.79
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.28% 1.20 1.28 1.37
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.71% 5.32 6.20 4.40
Portfolio Turnover Rate 90% 67 133 161
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class A
Shares.
+ This figure has not been annualized.
(1) Commenced operations December 15, 1993. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load.
23
<PAGE>
INTERMEDIATE MUNICIPAL BOND FUND
SUMMARY
Intermediate Municipal Bond Fund seeks to provide investors with federal
tax-free income, as well as preservation of principal investment by investing in
a portfolio of high quality, municipal securities with intermediate term
maturities.
INVESTMENT OBJECTIVE
Intermediate Municipal Bond Fund seeks the highest level of income exempt from
federal income taxes that can be obtained, consistent with the preservation of
capital.
PORTFOLIO INVESTMENTS
The Fund invests in a diversified portfolio of high quality (i.e., rated in one
of the top two rating categories), intermediate term municipal securities.
Substantially all of the Fund's assets are invested in intermediate term
municipal obligations, including those issued by, or on behalf of:
|__ states
|__ municipalities
|__ territories and possessions of the U.S.
|__ the District of Columbia and
|__ their political subdivisions, agencies, instrumentalities and authorities.
If a security held by the Fund is downgraded below the minimum required ratings,
CoreStates Advisers will reassess the creditworthiness of the security.
Under normal circumstances, at least 80% of the Fund's assets are invested in
municipal securities the interest on which is exempt from regular federal income
taxes in the opinion of counsel to the issuer. Up to 20% of the Fund's assets
can be invested in taxable obligations for defensive purposes or when
appropriate tax-exempt securities are not available.
Intermediate Municipal Bond Fund strives to provide a return greater than bond
indices such as the Lehman Brothers 7-Year Municipal Bond Index. (Please see
page 36 for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Intermediate Municipal Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Intermediate Municipal Bond Fund may be appropriate for investors who:
|__ are looking for an investment that offers a higher level of current income
exempt from federal income taxes and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Joseph R. Baxter is a Vice President of CoreStates Advisers and head of the
Tax-Advantaged unit at CoreStates Advisers. He manages Intermediate Municipal
Bond Fund, Pennsylvania Municipal Bond Fund, and New Jersey Municipal Bond Fund.
He is also directly responsible for management of the CoreStates Pennsylvania
Tax-Exempt Common Trust Fund. Brian G. Snyder, a Senior Investment Officer of
CoreStates Advisers, co-manages Intermediate Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, and New Jersey Municipal Bond Fund. Mr. Snyder also manages
several CoreStates common trust funds and individual accounts of the
Tax-Advantaged unit. Mr. Snyder has worked at CoreStates since 1985 and joined
CoreStates Advisers in 1989. (Please see page 45 for more information about the
Fund's Investment Adviser.)
24
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 3.25%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .07%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .48%
Total Operating Expenses After Fee Waivers(4) .80%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .57%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.32%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $40 57 75 128
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Intermediate Municipal Bond Fund. The financial highlights for
the Fund for the periods from inception through June 30, 1997 have been audited
by Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS A (INDIVIDUAL)* --------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.92 9.83 9.67 10.08 10.00
Net Investment Income $ 0.39 0.35 0.35 0.37 0.03
Realized and Unrealized Net Gains (Losses) on Securities $ 0.13 0.09 0.16 (0.41) 0.08
Distributions from Net Investment Income $ (0.39) (0.35) (0.35) (0.37) (0.03)
Distributions from Capital Gains $ -- -- -- -- --
Net Asset Value, End of Period $ 10.05 9.92 9.83 9.67 10.08
Total Return(2) 5.36% 4.48 5.42 (0.52) 1.19+
Net Assets, End of Period (000 omitted) $ 959 1,015 1,027 1,311 166
Ratio of Expenses to Average Net Assets 0.80% 1.08 1.08 0.88 0.81
Ratio of Net Income to Average Net Assets 3.92% 3.47 3.65 3.66 2.51
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.23% 1.61 1.52 1.42 1.68
Ratio of Net Income to Average Net Assets (Excluding Waivers) 3.49% 2.94 3.21 3.12 1.64
Portfolio Turnover Rate 22% 10 9 43 10
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class A
Shares.
+ This figure has not been annualized.
(1) Commenced operations May 3, 1993. Unless otherwise noted, all ratios for the
period have been annualized.
(2) Total return does not reflect applicable sales load.
25
<PAGE>
PENNSYLVANIA MUNICIPAL BOND FUND
SUMMARY
Pennsylvania Municipal Bond Fund seeks to provide investors with income free of
federal and Pennsylvania income taxes, as well as preservation of principal
investment by investing in a portfolio of high grade municipal securities.
INVESTMENT OBJECTIVE
Pennsylvania Municipal Bond Fund seeks current income exempt from federal and
Pennsylvania income taxation with preservation of capital.
PORTFOLIO INVESTMENTS
The Fund invests primarily in municipal securities, including:
|__ municipal bonds rated in one of the three highest ratings categories and
|__ municipal notes rated in one of the two highest ratings categories.
Under normal circumstances, at least 80% of the Fund's assets will be invested
in municipal securities the interest on which is exempt from regular federal
income tax. At least 65% of the Fund's assets will be invested in municipal
securities, the interest on which is exempt from Pennsylvania personal income
tax ('Pennsylvania Municipal Securities'). There are no restrictions on the
average maturity of the Fund or the maturity of a single instrument, and the
Fund will generally invest more than 25% of its net assets in municipal
securities whose issuers are located in Pennsylvania.
The Fund may invest up to 20% of its assets in municipal bonds rated BBB by S&P
or Baa by Moody's Investors Services, Inc. (`Moody's'). If a security held by
the Fund is downgraded below the minimum required ratings, CoreStates Advisers
will reassess the creditworthiness of the security. The Fund will not hold
securities rated below BB.
The Fund may also invest up to 20% of its assets in taxable obligations,
including:
|__ commercial paper
|__ unrated securities of comparable quality, as determined by CoreStates
Advisers and
|__ securities subject to the Federal Alternative Minimum Tax ("AMT").
Pennsylvania Municipal Bond Fund strives to provide a return greater than bond
indices such as the Lehman Brothers Pennsylvania Bond Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, Pennsylvania Municipal Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Special Risk Factors - The Fund's concentration of investments in Pennsylvania
Municipal Securities raises special investment considerations. Changes in the
economic condition and governmental policies of the Commonwealth of Pennsylvania
and its municipalities could adversely affect the value of the Fund.
INVESTMENT SUITABILITY
Pennsylvania Municipal Bond Fund may be appropriate for investors who:
|__ are Pennsylvania residents
|__ are looking for an investment that offers a higher level of current
income exempt from federal income taxes and Pennsylvania state income taxes
and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Joseph R. Baxter is a Vice President of CoreStates Advisers and head of the
Tax-Advantaged unit at CoreStates Advisers. He manages Intermediate Municipal
Bond Fund, Pennsylvania Municipal Bond Fund, and New Jersey Municipal Bond Fund.
He is also directly responsible for management of the CoreStates Pennsylvania
Tax-Exempt Common Trust Fund. Brian G. Snyder, a Senior Investment Officer of
CoreStates Advisers, co-manages Intermediate Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, and New Jersey Municipal Bond Fund. Mr. Snyder also manages
several CoreStates common trust funds and individual accounts of the
Tax-Advantaged unit. Mr. Snyder has worked at CoreStates since 1985 and joined
CoreStates Advisers in 1989. (Please see page 45 for more information about the
Fund's Investment Adviser.)
26
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 4.75%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .00%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .08%
Total Operating Expenses After Fee Waivers(4) .33%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .33%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.08%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $51 58 65 87
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of Pennsylvania Municipal Bond Fund. The financial highlights for
the Fund for the periods from inception through June 30, 1997 have been audited
by Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994(1)
CLASS A (INDIVIDUAL)* ----------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.22 10.16 9.95 10.00
Net Investment Income $ 0.51 0.52 0.49 0.06
Realized and Unrealized Net Gains (Losses) on Securities $ 0.25 0.06 0.21 (0.05)
Distributions from Net Investment Income $ (0.51) (0.52) (0.49) (0.06)
Distributions from Capital Gains $ -- -- -- --
Net Asset Value, End of Period $ 10.47 10.22 10.16 9.95
Total Return(2) 7.65% 5.76 7.25 0.09+
Net Assets, End of Period (000 omitted) $ 2,004 994 317 163
Ratio of Expenses to Average Net Assets 0.33% 0.46 0.64 0.67
Ratio of Net Income to Average Net Assets 4.99% 4.93 4.95 4.84
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.08% 1.21 1.39 1.42
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.24% 4.18 4.20 4.09
Portfolio Turnover Rate** 39% 92 18 3
</TABLE>
* On April 15, 1996, the assets of the Conestoga Pennsylvania Tax-Free Bond
Fund were acquired by CoreFunds. At that time, the Retail Class Shares of
the Fund were exchanged for Class A Shares.
** For the year ended June 30, 1996, transactions relating to the merger were
excluded from the calculation of the Portfolio Turnover Rate.
+ This figure has not been annualized.
(1) Commenced operations May 16, 1994. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return does not reflect applicable sales load.
27
<PAGE>
NEW JERSEY MUNICIPAL BOND FUND
SUMMARY
New Jersey Bond Fund seeks to provide investors with income free of federal and
New Jersey income taxes, as well as preservation of principal investment by
investing in a portfolio of high grade municipal securities.
INVESTMENT OBJECTIVE
New Jersey Municipal Bond Fund seeks current income exempt from federal and New
Jersey income taxation with preservation of capital.
PORTFOLIO INVESTMENTS
The Fund invests primarily in municipal securities, including:
|__ municipal bonds rated in one of the three highest ratings categories and
|__ municipal notes rated in one of the two highest ratings categories.
Under normal circumstances, at least 80% of this Fund's assets will be invested
in municipal securities the interest on which is exempt from regular federal
income tax. At least 65% of the Fund's assets will be invested in municipal
securities, the interest on which is exempt from New Jersey personal income tax
('New Jersey Municipal Securities'). There are no restrictions on the average
maturity of the Fund or the maturity of a single instrument, and the Fund will
generally invest more than 25% of its net assets in municipal securities whose
issuers are located in New Jersey.
The Fund may invest up to 20% of its assets in municipal bonds rated BBB by S&P
or Baa by Moody's. If a security held by the Fund is downgraded below the
minimum required ratings, CoreStates Advisers will reassess the creditworthiness
of the security. The Fund will not hold securities rated below BB.
The Fund may also invest up to 20% of its assets in taxable obligations,
including:
|__ commercial paper
|__ unrated securities of comparable quality, as determined by CoreStates
Advisers and
|__ securities subject to the Federal Alternative Minimum Tax ("AMT")
New Jersey Municipal Bond Fund strives to provide a return greater than bond
indices such as the Lehman Brothers New Jersey Bond Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Like all fixed income funds, New Jersey Municipal Bond Fund is subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
The Fund may also be subject to:
Special Risk Factors - The Fund's concentration of investments in New Jersey
Municipal Securities raises special investment considerations. Changes in the
economic condition and governmental policies of the State of New Jersey and its
municipalities could adversely affect the value of the Fund.
INVESTMENT SUITABILITY
New Jersey Municipal Bond Fund may be appropriate for investors who:
|__ are New Jersey residents
|__ are looking for an investment that offers a higher level of current income
exempt from federal income taxes and New Jersey state income taxes and
|__ want low to moderate share price fluctuations.
FUND MANAGEMENT
Joseph R. Baxter is a Vice President of CoreStates Advisers and head of the
Tax-Advantaged unit at CoreStates Advisers. He manages Interme-diate Municipal
Bond Fund, Pennsylvania Municipal Bond Fund, and New Jersey Municipal Bond Fund.
He is also directly responsible for management of the CoreStates Pennsylvania
Tax-Exempt Common Trust Fund. Brian G. Snyder, a Senior Investment Officer of
CoreStates Advisers, co-manages Intermediate Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, and New Jersey Municipal Bond Fund. Mr. Snyder also manages
several CoreStates common trust funds and individual accounts of the
Tax-Advantaged unit. Mr. Snyder has worked at CoreStates since 1985 and joined
CoreStates Advisers in 1989. (Please see page 45 for more information about the
Fund's Investment Adviser.)
28
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class A Shares of the Fund.
CLASS A (INDIVIDUAL)
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 4.75%
Maximum Sales Load Imposed on Redemptions None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers1 .00%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .13%
Total Operating Expenses After Fee Waivers(4) .38%
(1) Absent voluntary waivers, investment advisory fees would be .50% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .38%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.13%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
Total Operating Expenses have been restated to reflect anticipated expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $51 59 68 93
$1,000 investment, assuming (1) imposition
of the maximum sales charge and (2) a 5%
annual return.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class A Shares of New Jersey Municipal Bond Fund. The financial highlights for
the Fund for the periods from inception through June 30, 1997 have been audited
by Ernst & Young LLP, independent auditors, whose report appears in CoreFunds'
annual report which accompanies the Statement of Additional Information. The
annual report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994(1)
CLASS A (INDIVIDUAL)* ---------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.07 10.12 9.95 10.00
Net Investment Income $ 0.48 0.48 0.49 0.06
Realized and Unrealized Net Gains (Losses) on Securities $ 0.15 0.01 0.17 (0.05)
Distributions from Net Investment Income $ (0.48) (0.48) (0.49) (0.06)
Distributions from Capital Gains $ (0.07) (0.06) -- --
Net Asset Value, End of Period $ 10.15 10.07 10.12 9.95
Total Return(2) 6.44% 4.93 6.84 0.08+
Net Assets, End of Period (000 omitted) $ 398 304 24 2
Ratio of Expenses to Average Net Assets 0.45% 0.60 0.68 0.68
Ratio of Net Income to Average Net Assets 4.81% 4.65 4.97 4.82
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.20% 1.35 1.44 1.60
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.06% 3.90 4.21 3.90
Portfolio Turnover Rate 19% 21 32 13
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class A
Shares.
+ This figure has not been annualized.
(1) Commenced operations May 16, 1994. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Total return does not reflect applicable sales load.
29
<PAGE>
TREASURY RESERVE
SUMMARY
Treasury Reserve seeks to provide investors with income, liquidity and stability
of principal by investing in direct obligations of the U.S. Treasury and
repurchase agreements.
INVESTMENT OBJECTIVE
Treasury Reserve seeks current interest income, liquidity and safety of
principal.
PORTFOLIO INVESTMENTS
The Fund invests in a portfolio of direct obligations of the U.S. Treasury,
specifically:
|__ Treasury Bills
|__ Treasury Bonds and
|__ Treasury Notes.
The Fund may also invest in:
|__ separately traded interest and principal component parts of U.S. Treasury
obligations that are transferable through the Federal book-entry system,
known as Separately Traded Registered Investment and Principal Securities
("STRIPS") and
|__ repurchase agreements relating to U.S. Treasury obligations.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Treasury Reserve strives to provide a return greater than money market indices
such as the IBC Donoghue 100% Treasury and Repurchase Index. (Please see page 36
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Treasury Reserve may be subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
INVESTMENT SUITABILITY
Treasury Reserve may be appropriate for investors who:
|__ are unwilling to accept the credit risk associated with non-Treasury money
market funds
|__ are unable to tolerate fluctuations in the principal value of their
investments and
|__ want an investment that provides current interest income at competitive
rates of return.
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
FUND MANAGEMENT
Ronald R. Brasten is a Vice President of CoreStates Advisers and manages
Treasury Reserve. He also manages CoreFund Elite Treasury Reserve and has
investment responsibility for individually managed corporate and personal
accounts. He joined CoreStates Advisers in August 1989. (Please see page 45 for
more information about the Fund's Investment Adviser.)
30
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class C Shares of the Fund.
CLASS C (INDIVIDUAL)
Shareholder Transaction Expenses None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .21%
Total Operating Expenses After Fee Waivers(4) .76%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been .95%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee. 31
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
You would pay the following expenses on a $8 24 42 94
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class C Shares of Treasury Reserve. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS C (INDIVIDUAL)* -----------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.05 0.05 0.05 0.03 0.01
Distributions from Net Investment Income $ (0.05) (0.05) (0.05) (0.03) (0.01)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00
Total Return 4.71% 4.94 4.72 2.65 1.21+
Net Assets, End of Period (000 omitted) $12,146 19,386 21,612 7,573 7,672
Ratio of Expenses to Average Net Assets 0.76% 0.75 0.73 0.73 0.75
Ratio of Net Income to Average Net Assets 4.61% 4.81 4.81 2.62 2.46
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.96% 1.03 1.10 1.11 1.14
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.41% 4.53 4.44 2.24 2.07
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class C
Shares.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
31
<PAGE>
CASH RESERVE
SUMMARY
Cash Reserve seeks to provide investors with a high level of income, liquidity
and relative stability of principal by investing in a diversified portfolio of
the highest quality money market instruments.
INVESTMENT OBJECTIVE
Cash Reserve seeks as high a level of current income as is consistent with
liquidity and relative stability of principal.
PORTFOLIO INVESTMENTS
The Fund invests in a diversified portfolio of money market instruments
of the highest quality, including:
|__ U.S. dollar-denominated government obligations
|__ bank obligations and
|__ commercial paper.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Cash Reserve strives to provide a return greater than money market indices such
as the IBC Donoghue All-Taxable Money Fund Average. (Please see page 36 for more
information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Cash Reserve may be subject on a limited basis to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Cash Reserve may be appropriate for investors who:
|__ are unable to tolerate fluctuations in the principal value of their
investments and
|__ want an investment that provides current interest income at
competitive rates of return.
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
FUND MANAGEMENT
John Ackler is Senior Investment Officer of CoreStates Advisers and manages
Short Term Income Fund and Cash Reserve. He is also responsible for the
management of the CoreStates Liquidity Fund, as well as numerous individually
managed fixed income funds. Mr. Ackler joined CoreStates as an internal auditor
in 1992 and transferred to CoreStates Advisers in August 1993. (Please see page
45 for more information about the Fund's Investment Adviser.)
32
<PAGE>
INVESTOR EXPENSES
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 B and Class C Shares of the Fund.
CLASS B (INDIVIDUAL)
Shareholder Transaction Expenses None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees(2) 1.00%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) 1.50%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) This fee consists of a shareholder servicing fee of .25% and an asset-based
distribution fee of .75%. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end charge permitted by the Conduct
Rules of the National Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been 1.69% This fee waiver is voluntary and may be discontinued at any time
at the discretion of the service provider that is waiving its fee.
CLASS C (INDIVIDUAL)
Shareholder Transaction Expenses None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) .75%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the Conduct Rules of the
National Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses are
estimated to be .94%. These fee waivers are voluntary and may be
discontinued at any time at the discretion of the service provider that is
waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses Class B Shares $15 $ 47 $ 82 $179
on a $1,000 investment, assuming Class C Shares $ 8 $ 24 $ 42 $ 93
(1) a 5% annual return and (2)
redemption at the end of each time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class C Shares of Cash Reserve. The financial highlights for the Fund for the
periods from inception through June 30, 1997 have been audited by Ernst & Young
LLP, independent auditors, whose report appears in CoreFunds' annual report
which accompanies the Statement of Additional Information. The annual report for
the Fund is available to shareholders at no charge by calling CoreFunds at
1-800-355-CORE. Class B Shares were not yet offered as of June 30, 1997.
Performance of Class B Shares would be lower than the performance of Class C
Shares due to the higher distribution-related expenses charged to Class B
Shares.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS C (INDIVIDUAL)* --------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.05 0.05 0.05 0.03 0.01
Distributions from Net Investment Income $ (0.05) (0.05) (0.05) (0.03) (0.01)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00
Total Return 4.83% 5.00 4.89 2.74 1.23+
Net Assets, End of Period (000 omitted) $27,693 19,736 17,583 11,451 15,330
Ratio of Expenses to Average Net Assets 0.75% 0.75 0.73 0.72 0.76
Ratio of Net Income to Average Net Assets 4.74% 4.86 4.86 2.70 2.52
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.95% 1.03 1.10 1.10 1.15
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.54% 4.58 4.49 2.32 2.13
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class C
Shares.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
33
<PAGE>
TAX-FREE RESERVE
SUMMARY
Tax-Free Reserve seeks to provide investors with a high level of tax-free
income, liquidity and stability of principal by investing in short-term
obligations issued by, or on behalf of, state and local governments.
INVESTMENT OBJECTIVE
Tax-Free Reserve seeks as high a level of current interest income that is exempt
from federal income taxes as is consistent with liquidity and relative stability
of principal.
PORTFOLIO INVESTMENTS
The Fund invests at least 80% of its assets in tax-free securities under normal
market conditions. The interest on each security must be exempt from regular
federal income tax, in the opinion of counsel to the issuer and not produce
interest income that is treated as a preference item for AMT purposes. The Fund
invests in a diversified portfolio of short-term, tax-free obligations issued
by, or on behalf of:
|__ states
|__ municipalities
|__ territories and possessions of the U.S.
|__ the District of Columbia and
|__ their political subdivisions, agencies, instrumentalities and authorities.
Up to 20% of all assets in the Fund can be invested in taxable debt securities
for defensive purposes or when appropriate tax-exempt securities are not
available. CoreStates Advisers works to take advantage of key seasonal supply
and demand factors that govern short-term rates.
The Fund often purchases securities supported by credit enhancements from
financial institutions. Changes in the credit quality of these institutions
could adversely affect the Fund's share price.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Tax-Free Reserve strives to provide a return greater than money market indices
such as the IBC Donoghue Tax-Free Fund Average. (Please see page 36 for more
information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Tax-Free Reserve may be subject on a limited basis to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Tax-Free Reserve may be 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 taxes. Although the
Fund is managed to maintain a stable price per share of $1.00, there is no
guarantee that price will be constantly maintained.
FUND MANAGEMENT
Folu Abiona is Senior Investment Officer for CoreStates Advisers and manages
Tax-Free Reserve. Ms. Abiona also manages CoreFund Elite Tax-Free Reserve. She
joined CoreStates Advisers in 1985 and became fixed income portfolio manager in
1990. (Please see page 45 for more information about the Fund's Investment
Adviser.)
34
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class C Shares of the Fund.
CLASS C (INDIVIDUAL)
Shareholder Transaction Expenses None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) .75%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been .94%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $ 8 24 42 93
$1,000 investment, assuming (1) a 5% annual
retrn, and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class C Shares of Tax-Free Reserve. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS C (INDIVIDUAL)* ---------------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.03 0.03 0.03 0.02 0.01
Distributions from Net Investment Income $(0.03) (0.03) (0.03) (0.02) (0.01)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00
Total Return 2.83% 2.95 2.86 1.78 0.85+
Net Assets, End of Period (000 omitted) $3,202 2,850 1,524 2,708 1,795
Ratio of Expenses to Average Net Assets 0.75% 0.73 0.73 0.74 0.76
Ratio of Net Income to Average Net Assets 2.82% 2.94 2.80 1.75 1.71
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.95% 1.02 1.10 1.12 1.14
Ratio of Net Income to Average Net Assets (Excluding Waivers) 2.62% 2.65 2.43 1.37 1.33
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class C
Shares.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
35
<PAGE>
GENERAL INFORMATION
General Investment Policies and Practices
In addition to making investments as described above, the Funds may engage in a
number of additional investment practices. These practices are defined below.
The tables starting on page 39 describe which Funds engage in which practices.
ADRS, EDRS, AND GDRS
|__ ADRs are American Depositary Receipts, typically issued by a U.S.
financial institution (a 'depositary'). They evidence ownership interests in a
security or a pool of securities issued by a foreign issuer and deposited with
the depositary. Generally, ADRs are designed for trading in the U.S. securities
market.
|__ EDRs are European Depositary Receipts, typically issued by a non-U.S.
financial institution. They evidence ownership interests in a security or a pool
of securities issued by either a U.S. or foreign issuer. Generally, EDRs are
designed for trading in European securities markets.
|__ GDRs are Global Depositary Receipts. They are issued globally and
evidence a similar ownership arrangement. Generally, GDRs are designed for
trading in non-U.S. securities markets.
ASSET-BACKED SECURITIES
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 investor. The Funds will invest only in asset-backed securities which are
readily marketable and rated at the time of purchase in the two highest rating
categories assigned by a rating organization.
BANK OBLIGATIONS
Investments in domestic branches of U.S. banks, specifically:
|__ 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.
|__ 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.
EQUITY SECURITIES
The Funds may invest in public and privately issued equity securities, including
common and preferred stocks, warrants, rights to subscribe to common stock and
convertible securities. Investments in equity securities in general are subject
to market risks that may cause their prices to flucuate over time. Certain of
the Funds may invest to a significant degree in equity securities of smaller
institutions. Any investment in smaller or medium capitalization companies
involves greater risk than that customarily associated with investments in
larger, more established companies.
FOREIGN CURRENCY TRANSACTIONS
Contracts used to hedge against adverse movements in exchange rates between
currencies. Transactions may be conducted either on a cash basis or through
forward contracts. A forward contract involves an obligation to purchase or sell
a specific currency at a future date at a price set at the time of the contract.
FOREIGN SECURITIES
Securities of foreign issuers, securities issued by foreign branches of
U.S. banks and foreign banks, Canadian commercial paper and Europaper (U.S.
dollar-denominated commercial paper of foreign issuers).
There are special risks associated with international investing:
|__ Currency Risk - The possibility that changes in foreign exchange rates
will affect, favorably or unfavorably, the value of foreign securities.
|__ Volatility - Investments in foreign stock markets can be more volatile
than investments in U.S. markets. Diplomatic, political or economic developments
could affect investment in foreign countries.
|__ Expense Considerations - Fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Expenses for custodial arrangements of foreign securities may be somewhat
greater than typical expenses for custodial arrangements for handling U.S.
securities of equal value.
|__ Foreign Taxes - Certain foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a portion of
these taxes are recoverable, the non-recovered portion of foreign withholding
taxes will reduce the income received from the securities comprising the
portfolio.
|__ Regulatory Environment - Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to U.S. domestic companies. There is generally less government
regulation of securities exchanges, brokers and listed companies abroad than in
the U.S. Foreign branches of U.S. banks, foreign banks and foreign issuers may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting and record-keeping standards than those applicable to
domestic branches of U.S. banks and U.S. domestic issuers.
36
<PAGE>
FUTURES CONTRACTS AND OPTIONS TRANSACTIONS
|__ Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of a specified security at a specified
future time and at a specified price.
|__ An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option.
|__ A put option gives the purchaser of the option the right to sell, and
the writer of the option the obligation to buy, the underlying security at any
time during the option period.
|__ A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period.
These transactions are used to:
|__ maintain cash reserves while remaining fully invested
|__ facilitate trading
|__ reduce transaction costs or
|__ seek higher investment returns when the contract is priced more
attractively than the underlying equity security or index.
The Funds may not use futures contracts or options transactions to leverage
their net assets or for speculative purposes. See 'Futures and Options' in the
Statement of Additional Information.
ILLIQUID SECURITIES
Securities that cannot be sold or disposed of in seven days or less at
approximately their carrying value.
LENDING OF SECURITIES
The lending of portfolio securities to qualified banks and securities brokers
and dealers for purposes of realizing additional income. A Fund receives
collateral consisting of cash, letters of credit issued by certain banks, or
securities issued or guaranteed by the U.S. Government or its agencies and equal
to at least 100% of the current market value of the loaned securities. Such
loans would involve risk of delay in receiving collateral, risk of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially.
Before implementing such a lending program, the Funds must first receive an
exemptive order from the Securities and Exchange Commission permitting it to use
its Custodian, CoreStates Bank, N.A., as its lending agent.
MORTGAGE-BACKED SECURITIES
Securities backed by pools of mortgages which pass principal and/or interest
payments to the investor.
Some are issued or guaranteed by U.S. Government agencies, such as:
|__ GNMA, or Government National Mortgage Association, which issues
modified pass-through securities evidencing an interest in a specific pool of
mortgage loans insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Both interest and
principal payments (including prepayments) are passed through monthly to the
investor. The full faith and credit of the United States is pledged to the
timely payment of principal and interest by GNMA.
|__ Fannie Mae, a federally chartered and stockholder-owned corporation,
issues pass-through certificates which are guaranteed as to principal and
interest by Fannie Mae.
|__ FHLMC, or Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States, issues participation certificates which
represent an interest in mortgages held in FHLMC's portfolio. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal.
Securities issued or guaranteed by Fannie Mae and FHLMC are not backed by the
full faith and credit of the United States.
Mortgaged-backed securities also include:
|__ CMOs, collateralized mortgage obligations and
|__ REMICs, real estate mortgage investment conduits, a type of CMO.
CMOs and REMICs are mortgage pass-through securities issued in multiple classes.
Each class of a CMO is issued with a specified fixed or floating coupon rate and
has a stated maturity or final distribution date. Principal prepayments on the
underlying mortgage assets may cause the CMOs to be retired substantially
earlier than their stated maturities or final distribution dates, resulting in a
loss of all or part of any premium paid.
MUNICIPAL SECURITIES
Securities issued by municipalities include:
|__ General Obligation Securities, secured by the issuer's pledge of its
full faith, credit, and taxing power for the payment of principal and interest.
|__ Revenue Securities, payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or another specific revenue source, such as the user of
the facility being financed. Industrial development and pollution control bonds
held by the Funds are revenue securities whose credit quality is usually
directly related to the credit standing of the corporate user of the facility
involved.
|__ Moral Obligation Bonds, 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.
|__ Variable Rate Demand Obligations, tax-exempt obligations upon which
interest is payable at a floating or variable rate. A Fund 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.
37
<PAGE>
|__ Municipal Lease Obligations, issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the municipality's credit, and
their interest may become taxable if the lease is assigned. If funds are not
appropriated for the following year's lease payments, the lease may terminate,
with the possibility of default on the lease obligation and significant loss to
a Fund. Certificates of participation in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest in
the lease-purchase payments made.
OTHER INVESTMENT COMPANIES
Shares of investment companies may be purchased by the Funds to the extent
consistent with applicable law.
PUT TRANSACTIONS
The option to sell a security at a fixed price before maturity. The premium
paid reduces the underlying yield.
REPURCHASE AGREEMENTS
The purchase of securities subject to the seller's agreement to repurchase them
at a mutually agreed upon date and price. The seller must be deemed creditworthy
and maintain collateral of at least 100% of the repurchase price.
REVERSE REPURCHASE AGREEMENTS
The sale of securities subject to a Fund's agreement to repurchase them at a
mutually agreed upon date and price. The Funds must maintain collateral of at
least 100% of the repurchase price.
SHORT-TERM OBLIGATIONS
Commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit, repurchase agreements, obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, and
demand and time deposits of domestic and foreign banks and savings and loan
associations.
SWAPS
Agreements used to shift the investment exposure from one type of investment to
another, such as:
|__ interest rate swaps - one party agrees to make regular payments equal
to a floating interest rate times a 'notional principal amount,' in return for
payments equal to a fixed rate times the same amount, for a specific period of
time.
|__ currency swaps - the swap agreement provides for interest payments in
different currencies. The parties might agree to exchange the notional principal
amount as well.
|__ caps and floors - one party agrees to make payments only under
specified circumstances, usually in return for payment of a fee by the other
party.
|__ collars - combine elements of buying a cap and selling a floor.
Swaps can be highly volatile and may have a considerable impact on a Fund's
performance. Any obligation a Fund may have under these types of arrangements
must be covered by setting aside liquid assets.
U.S. GOVERNMENT OBLIGATIONS
Securities of the U.S. Government, including:
|__ U.S. Treasury Securities - 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.
|__ 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;
obligations supported by the discretionary authority of the U.S. Treasury to
purchase the agency's obligations; and obligations supported only by the credit
of the agency or instrumentality. 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.
|__ STRIPS - zero coupon U.S. Treasury securities, sold at a substantial
discount and redeemed at face value at maturity without interim cash payments of
interest or principal. This discount is amortized over the life of the security,
and the amortization constitutes the income earned on the security for both
accounting and tax purposes.
VARIABLE AMOUNT MASTER DEMAND NOTES
Unsecured demand notes issued by corporations, insurance companies and other
borrowers that permit the indebtedness to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Although there is no secondary market in the notes, the Funds may demand payment
of principal and accrued interest at any time.
WHEN-ISSUED SECURITIES
Securities which settle on a future date. However, the interest rate is fixed on
the purchase date and no interest accrues before settlement. A Fund must
maintain liquid assets in an amount at least equal to the value of its
commitments to purchase such securities.
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<PAGE>
TEMPORARY INVESTMENTS
Certain of the Funds are permitted to make temporary investments in Short-Term
Obligations. Such investments may be used to:
|__ invest uncommitted cash balances
|__ maintain liquidity to meet shareholder redemptions or
|__ take a temporary defensive position against potential or serious stock
market declines.
The tables which follow describe which investments, including temporary
investments, each Fund may make:
<TABLE>
<CAPTION>
International
Equity Index Core Equity Growth Equity Special Equity Growth Balanced
------------ ----------- ------------- -------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
ADRs, EDRs and GDRs -- 35% -- 35% o 45%
Asset-backed securities -- -- -- -- -- 70%
Bank obligations 10% 35% 35% 35% 35% 45%
Foreign currency transactions -- -- -- -- o --
Foreign securities -- -- -- 35% o 35%
Futures contracts -- 5%(a)/20%(b) -- 5%(a)/20%(b) 5%(a)/20%(b) --
Illiquid securities 10% 15% 10% 15% 10% 15%
Investment companies 10% 10% 10% 10% 10% 10%
Lending of securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Mortgage-backed securities -- -- -- -- -- 70%
Options transactions -- 5%(a)/20%(b) -- 5%(a)/20%(b) 5%(a)/20%(b) --
Repurchase agreements 10% 35% 35% 35% 35% 45%
Reverse repurchase agreements 10% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
U.S. Government obligations 10% 35% 35% 35% 35% 45%
Warrants 5% 5% 5% 5% 5% 5%
When-issued securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
TEMPORARY INVESTMENTS
Cash 100% 100% 100% 100% 100% 100%
Short-term obligations 100% 100% 100% 100% 100% 100%
Long-term and short-term
debt instruments, rated A or higher -- 10% 10% 10% 10% 100%
INVESTMENT RESTRICTIONS
Securities of any one issuer(c), (d) 5% 5% 5% 5% 5% 5%
Outstanding voting securities of any one issuer 10% 10% 10% 10% 10% 10%
Securities of issuers in any one industry 25% 25% 25% 25% 25% 25%
less than less than less than less than less than less than
Expected annual portfolio turnover 100% 100% 100% 100% 100% 100%(e)
</TABLE>
o Fund may invest in security without limitation.
- -- Fund may not invest.
Percentages are of total assets (except Illiquid Securities, which are shown as
a percentage of net assets).
(a) Fund may not purchase futures contracts or options where premiums and
margin deposit exceed 5% of total assets.
(b) Fund may not enter into futures contracts or options where its obligations
would exceed 20% of total assets.
(c) Except securities of the U.S. Government, its agencies or
instrumentalities.
(d) Except that up to 25% of the Fund's total assets may be invested without
regard to the 5% limitation.
(e) Annual portfolio turnover for the fixed income portion of Balanced Fund is
not expected to exceed 250%.
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<PAGE>
<TABLE>
<CAPTION>
Short- Intermediate PA NJ
Short Term Intermediate Government Global Municipal Municipal Municipal
Income Bond Income Bond Bond Bond Bond Bond
---------- ------------ ---------- ---- ------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset-backed securities o 35% -- o 35% -- -- --
Bank obligations o 35% -- 35% 35% -- -- --
Foreign currency transactions -- -- -- -- o -- -- --
Foreign securities -- -- -- 35% o -- -- --
Futures contracts -- -- -- -- 5%(a)/20%(b) -- -- --
Illiquid securities 15% 10% 15% 15% 15% 15% 15% 15%
Investment companies 10% 10% 10% 10% 10% 10% 10% 10%
Lending of securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Mortgage-backed securities o 35% o o 35% -- -- --
Municipal securities -- -- -- -- -- o o o
Options transactions -- -- -- -- 5%(a)/20%(b) -- -- --
Put transactions (c) -- o -- -- o o o o
Repurchase agreements o 35% 35% 35% 35% 20% 20% 20%
Reverse repurchase agreements 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 10% 10% 10%
Swaps -- -- -- -- o -- -- --
U.S. Government obligations o o o o o 20% 20% 20%
When-issued securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 25% 25% 25%
TEMPORARY INVESTMENTS less than less than less than
Taxable obligations 100% 100% 100% 100% 100% 20% 20% 20%
Short-term obligations,
U.S. dollar and foreign 100% 100% 100% 100% 100%(g) -- -- --
INVESTMENT RESTRICTIONS
Securities of any one issuer (d), (e) 5% 5% 5% 5% -- 5% -- --
Outstanding voting securities
of any one issuer 10% 10% 10% 10% -- 10% -- --
Securities of issuers in
any one industry 25% 25% 25% 25% 25%(h) 25%(f) 25%(f) 25%(f)
less than less than less than less than less than less than less than less than
Expected annual portfolio turnover 100% 250% 150% 200% 150% 100% 100% 100%
</TABLE>
o Fund may invest in security without limitation.
- -- Fund may not invest.
Percentages are of total assets (except Illiquid Securities, which are shown as
a percentage of net assets).
(a) Fund may not purchase futures contracts or options where premiums and
margin deposit exceed 5% of total assets.
(b) Fund may not enter into futures contracts or options where its
obligations would exceed 20% of total assets.
(c) Except premiums on all puts outstanding will not exceed 2% of total assets.
(d) Except securities of the U.S. Government, its agencies or
instrumentalities.
(e) Except that up to 25% of the Fund's total assets may be invested without
regard to the 5% limitation.
(f) Limitation does not apply to investments in tax-exempt securities issued
by governments or political subdivisions of governments.
(g) May also purchase short term obligations denominated in foreign currencies.
(h) Except securities of the U.S. Government, foreign governments, and
supranational agencies.
40
<PAGE>
<TABLE>
<CAPTION>
Treasury Reserve Cash Reserve Tax-Free Reserve
---------------- ------------ ----------------
<S> <C> <C> <C>
Asset-backed securities -- o --
Bank obligations -- o 20%
Illiquid securities 10% 10% 10%
Investment companies 10% 10% 10%
Lending of securities 33 1/3% 33 1/3% 33 1/3%
Mortgage-backed securities -- o 20%
Municipal securities -- -- o
Put transactions (a) -- -- o
Repurchase agreements o o 20%
Reverse repurchase agreements 10% 10% 10%
U.S. Government obligations o o 20%
Variable amount master demand notes -- o --
When-issued securities -- -- 25%
TEMPORARY INVESTMENTS
Cash 100% 100% 100%
less than
Taxable obligations 100% 100% 20%
INVESTMENT RESTRICTIONS
Securities of any one issuer (b), (c) 5% 5% 5%
Securities of issuers in any one industry NA 25% 25%(d)
</TABLE>
o Fund may invest in security without limitation.
- -- Fund may not invest.
Percentages are of total assets (except Illiquid Securities, which are shown
as a percentage of net assets).
(a) Except premiums on all puts outstanding will not exceed 2% of total assets.
(b) Except securities of the U.S. Government, its agencies or
instrumentalities.
(c) Except that up to 25% of the Fund's total assets may be invested without
regard to the 5% limitation.
(d) Limitation does not apply to investments in tax-exempt securities issued
by governments or political subdivisions of governments.
41
<PAGE>
Distributions
Shareholders of each Fund are entitled to any distributions from the
net investment income and capital gains earned on investments held by a Fund,
provided that they are shareholders of record on the date the distributions are
declared ('Record Date').
Class B and Class C Shares of the Money Market Funds begin earning income on the
business day on which the purchase order for the shares is executed. They
continue to earn income through, and including, the day before the redemption
order for these shares is executed.
Class A Shares of the Fixed Income Funds begin earning income on the business
day following the day on which the purchase order for the shares is executed and
continue to earn income through, and including, the day on which the redemption
order for these shares is executed.
Distributions are paid in the form of additional Class A, Class B and Class C
Shares of a Fund unless a shareholder selects one of the following options on
the Account Opening Form:
|__ Cash Dividend Option - To receive income distributions in cash and capital
gains distributions in additional shares of the Fund at net asset value.
|__ All Cash Option - To receive both income and capital gains distributions in
cash.
If neither option is selected on the Account Opening Form, the Transfer Agent
will automatically reinvest all income and capital gains distributions in
additional shares at the net asset value in effect at the close of business on
the reinvestment date. Distributions are automatically paid in cash (along with
any redemption proceeds) within seven business days of a shareholder closing an
account with the Funds.
The distributions from Class Y Shares are normally higher than those from Class
A, Class B or Class C Shares because of the distribution and transfer agent
expenses charged to Class A, Class B and Class C Shares.
Distributions from the Net Investment Income of:
|__ Domestic Equity Funds and Global Bond Fund are declared and paid to
shareholders on a quarterly basis.
|__ International Growth Fund are periodically declared and paid to
shareholders.
|__ Domestic Fixed Income Funds and Money Market Funds are declared daily as a
dividend and paid monthly to shareholders.
NOTE: DISTRIBUTIONS PAID SHORTLY AFTER THE PURCHASE OF SHARES BY AN
INVESTOR, ALTHOUGH IN EFFECT A RETURN OF CAPITAL, ARE TAXABLE AS ORDINARY
INCOME.
Distributions of any capital gains will be made at least annually for each Fund.
Taxes
The following is only a brief summary of some of the important federal tax
considerations generally affecting the Funds and their shareholders. We have not
attempted to present a detailed explanation of the tax treatment of the Funds or
their shareholders, and this discussion is not intended as a substitute for
careful tax planning. Potential investors and shareholders in the Funds are
urged to consult their tax advisers with specific reference to their own tax
situations.
The following summary is based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
ALL FUNDS
|__ Each Fund is treated as a separate entity for federal income tax purposes
and is not combined with any other CoreFunds portfolios. Each Fund intends to
qualify for the favorable tax treatment afforded a 'regulated investment
company' under the Code.
|__ Whether paid in cash or in additional shares, distributions attributable to
a Fund's net investment income (including ordinary income and net short-term
capital gains) will be taxable to shareholders as ordinary income. This includes
any distributions attributable to taxable net investment income of Tax-Free
Reserve or Intermediate Municipal Bond Fund.
|__ Capital gains distributions of all Funds will be taxable as gain from the
sale or exchange of a capital asset held for more than one year, regardless of
how long a shareholder has held the shares.
|__ If a Fund declares distributions payable to shareholders of record
on a date in October, November or December of any year, the distributions 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.
42
<PAGE>
|__ 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 in connection with an exchange among the CoreFunds portfolios.
|__ In the opinion of counsel, distributions made by 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.
INTERNATIONAL GROWTH FUND
GLOBAL BOND FUND
International Growth Fund and Global Bond Fund will receive dividends and
interest paid by foreign issuers which are frequently subject to withholding
taxes by foreign governments. If either Fund holds equity or debt securities of
foreign corporations valued at more than 50% of total assets at the close of any
taxable year, such Fund may elect (for U.S. federal income tax purposes) to
treat each shareholder as having additional income equal to a proportionate
amount of the foreign taxes paid by the Fund and as having directly paid these
foreign taxes. If a Fund makes this decision, shareholders will be treated as
having directly earned a portion of the Fund's gross income from foreign
sources. Shareholders will be subject to U.S. federal income taxes for this
additional income from foreign sources net of the foreign taxes paid. The Funds
will make this decision only if it deems it to be in the best interests of its
shareholders and will notify shareholders accordingly.
TREASURY RESERVE
CASH RESERVE
TAX-FREE RESERVE
Investments in STRIPS and Receipts 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 these obligations even
though the Fund has not received any interest payments on the 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 the
imputed income, which may occur at a time when the investment adviser would not
have chosen to sell the securities and which may result in a taxable gain or
loss.
INTERMEDIATE MUNICIPAL BOND FUND
PENNSYLVANIA MUNICIPAL BOND FUND
NEW JERSEY MUNICIPAL BOND FUND
TAX-FREE RESERVE
Each of these Funds expects to qualify to pay tax-exempt interest income
distributions to its shareholders. In general, the Funds' shareholders may
exclude tax-exempt income distributions from their gross income, unless their
specific circumstances disallow it. Intermediate Municipal Bond Fund and
Tax-Free Reserve are permitted to purchase 'private activity bonds' that are
subject to the Federal Alternative Minimum Tax (the 'AMT') consistent with their
20% limitation on taxable obligations.
Interest on indebtedness incurred or continued by a shareholder in order to
purchase or carry shares of these Funds is not deductible for federal income tax
purposes. Furthermore, these Funds may not be an appropriate investment for
persons (including corporations and other business entities) who are
'substantial users' (or persons related to 'substantial users') of facilities
financed by industrial development or private activity bonds. 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.
Corporate shareholders should note that all tax-exempt interest income
distributions are includable in the computation of 'adjusted current earnings'
for AMT purposes, regardless of when the bonds from which they are derived were
issued or whether they are derived from 'private activity bonds.' Accordingly,
corporate shareholders should consult their tax advisers regarding the impact
that holding shares of these Funds would have on their own AMT liability.
Tax-exempt interest income distributions and other distributions paid by these
Funds may be taxable to investors as dividend income under state
or local law even though a substantial portion of such distributions may be
derived from interest on tax-exempt obligations which, if received directly,
would be exempt from such income taxes.
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<PAGE>
PENNSYLVANIA TAX CONSIDERATIONS
For purposes of the Pennsylvania Personal Income Tax and the Philadelphia School
District Investment Net Income Tax, distributions which are attributable to
interest received by Pennsylvania Municipal Bond Fund from its investments in
Pennsylvania Municipal Securities or in direct obligations of the United States,
its territories and certain of its agencies and instrumentalities ('Federal
Securities'), including obligations issued by U.S. possessions, are not taxable.
Distributions by the Fund to a Pennsylvania resident that are attributable to
most other sources may be subject to the Pennsylvania Personal Income Tax and
(for residents of Philadelphia) to the Philadelphia School District Investment
Net Income Tax.
Distributions made by Pennsylvania Municipal Bond Fund are exempt from
Pennsylvania county personal property taxes to the extent that the Fund's
portfolio consists of Pennsylvania Municipal Securities and Federal Securities,
including obligations issued by U.S. territories and possessions.
To the extent that gain on the disposition of a share represents gain realized
on Pennsylvania Municipal Securities held by Pennsylvania Municipal Bond Fund,
such gain may be subject to the Pennsylvania Personal Income Tax and the School
District Tax, except that gain realized with respect to a share held for more
than six months is not subject to the School District Tax.
NEW JERSEY TAX CONSIDERATIONS
Investors in New Jersey Municipal Bond Fund will not be subject to the New
Jersey Gross Income Tax on distributions from the Fund attributable to interest
income from (and net gain, if any, from the disposition of) New Jersey Municipal
Securities or Federal Securities held by the Fund, either when received by the
Fund or when credited or distributed to the investors, provided that the Fund
meets the requirements for a qualified investment fund by:
|__ maintaining its registration as a registered investment company
|__ investing at least 80% of the aggregate principal amount of the Fund's
investments, excluding cash and cash items, in New Jersey Municipal Securities
or Federal Securities and
|__ investing 100% of its assets in interest-bearing obligations, discount
obligations, and cash, including receivables.
For New Jersey Gross Income Tax purposes, net income or gains and distributions
derived from investments in other than New Jersey Municipal Securities and
Federal Securities, and distributions from net realized capital gains in respect
of such investments, will be taxable. Gain on the disposition of shares of the
Fund is not subject to New Jersey Gross Income Tax, provided that the Fund meets
the requirements for a qualified investment fund set forth above.
Valuation of Shares
NET ASSET VALUE
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) on
which securities or instruments held by the Fund are traded such that the Fund's
net asset value per share might be materially affected.
Equity Funds
Fixed Income Funds
The shares of these Funds will fluctuate in value as a result of changes in the
value of their portfolio investments. Shares in the Funds will realize capital
gains or losses as portfolio investments are sold above or below costs,
respectively.
The net asset value per share of these Funds is normally determined as of 4:00
p.m. (Eastern time) (the 'Valuation Time') on each business day of the Funds.
Net asset value per share is calculated by adding the value of all of a Fund's
portfolio securities and other assets, subtracting the liabilities, and dividing
by the total number of outstanding shares of the Fund at the time of the
valuation. The result (adjusted to the nearest cent) is the net asset value per
share.
Money Market Funds
The net asset value per share of each of these Funds is normally determined as
of 12:00 noon (Eastern time) on each business day. These Funds are managed to
maintain a stable price of $1.00 per share.
44
<PAGE>
PORTFOLIO PRICING
Portfolio securities that 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 that business day or, if there is no such reported sale,
the current bid price. Securities regularly traded in the over-the-counter
market for which market quotations are readily available will be valued at the
current bid price. Securities may be valued on the basis of prices provided by a
pricing service when such prices are believed to reflect the fair market value
of such securities. Other assets and securities for which no quotations are
readily available will be valued in a manner determined in good faith to reflect
their fair market value, pursuant to procedures adopted by the Board of
Directors.
International Growth Fund
Global Bond Fund
Securities listed on a foreign exchange are valued at the most recent closing
price available before the assets are valued. All prices of listed securities
are taken from the exchange where the security is primarily traded.
Money Market Funds
The assets in the Money Market Funds are valued based upon the
amortized cost method, in accordance with rules adopted under the Investment
Company Act. With 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).
Management
The business and affairs of each Fund are managed under the direction of
CoreFunds' Board of Directors.
INVESTMENT ADVISER,
SUB-ADVISERS
CoreStates Advisers has overall responsibility for portfolio management for each
Fund. CoreStates Advisers is a wholly-owned subsidiary of CoreStates Bank, N.A.,
which is itself a wholly-owned subsidiary of CoreStates Financial Corp
('CoreStates Corp'). CoreStates Corp, based in Philadelphia, Pennsylvania, is
one of the 25 largest bank holding companies in the United States.
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, as well as related
investment advisory, research, trading and fund management functions. 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,
Philadelphia, Pennsylvania 19102.
As a result of the merger of CoreStates Corp and Meridian Bancorp, Inc. in April
1996, Meridian Investment Company ('MIC') is now a wholly-owned subsidiary of
CoreStates Corp and an affiliate of CoreStates Advisers. Certain employees of
MIC perform investment management and advisory functions for the Funds under the
overall authority of CoreStates Advisers.
As investment adviser, CoreStates Advisers manages the investment portfolio of
each Fund, makes decisions about and places orders for all purchases and sales
of a Fund's portfolio securities, and maintains certain records relating to
these purchases and sales. CoreStates Advisers pays all expenses incurred by it
in connection with its investment advisory activities, other than the cost of
securities (including any brokerage commissions) purchased for the Funds and the
cost of obtaining market quotations for portfolio securities held by the Funds.
CoreStates Advisers has delegated day-to-day portfolio management functions for
International Growth Fund to Martin Currie and Aberdeen Managers, and, for
Global Bond Fund, to Analytic, under separate Sub-Advisory Agreements between
CoreStates Advisers and Martin Currie, Aberdeen Managers and Analytic,
respectively (the "Sub-Advisers").
Under a multiple manager structure, CoreStates Advisers has general oversight
responsibility for the investment advisory services provided to International
Growth Fund by Martin Currie and Aberdeen Managers. CoreStates Advisers is also
responsible for managing the allocation of assets between the Fund's
Sub-Advisers. Accordingly, each Sub-Adviser will be responsible for the
day-to-day investment management of all or a portion of the assets of the Fund.
However, having multiple sub-advisers responsible for investing separate
portions of the Fund's assets creates the need for coordination among
sub-advisers.
45
<PAGE>
As sub-advisers to International Growth Fund and Global Bond Fund, the
Sub-Advisers manage the investment portfolio of their respective Funds, make
decisions about and place orders for the majority of the purchases and sales of
a Fund's portfolio securities, and maintain certain records relating to these
purchases and sales. The Sub-Advisers pay all expenses incurred by them in
connection with their sub-advisory activities, other than the cost of securities
(including any brokerage commissions) purchased for a Fund and the cost of
obtaining market quotations for portfolio securities held by a Fund.
Martin Currie, a New York corporation located in Edinburgh, Scotland, is a
wholly-owned subsidiary of Martin Currie, Ltd., which is owned principally by
its full-time working executives. Founded in 1881, Martin Currie, Ltd. is one of
Scotland's largest independent investment management groups. Martin Currie was
established to provide foreign investment advisory services to U.S. taxable and
tax-exempt funds seeking diversification into international markets. Martin
Currie is located at Saltire Court, 20 Castle Terrace, Edinburgh EH 2ES,
Scotland.
Aberdeen Managers, a Delaware corporation located in Fort Lauderdale, Florida,
is wholly owned by Aberdeen Asset Management PLC, a publicly held corporation
based in the United Kingdom. A subsidiary of CoreStates Corp owns approximately
10.3% of Aberdeen Asset Management. Aberdeen Asset Management, whose assets
under management at the end of August, 1997 was $18.1 billion, was formed in
1876 and has been managing investment funds since 1986. It formed Aberdeen
Managers in 1995 to provide foreign investment advisory services in the U.S.
Aberdeen Managers is located at NationsBank Tower, 22nd Floor, Fort Lauderdale,
Florida 33394.
Analytic, formerly called Alpha Global Fixed Income Managers, Inc., is a
specialist manager of fixed income securities and cash for institutional
investors. Analytic is a wholly-owned subsidiary of United Asset Management
Corporation of Boston, Massachusetts, whose total assets under management exceed
$190 billion. Analytic is located at 25/28 Old Burlington Street, London W1X
1LB, England.
ADMINISTRATOR AND TRANSFER AGENT
SEI Fund Resources ('SFR' or the 'Administrator'), with principal offices at 530
East Swedesford Road, Wayne, Pennsylvania 19087, acts as the administrator for
each Fund. For its administrative services, SFR is entitled to receive a fee
from each Fund, computed daily and paid monthly, at the annual rate of .25% of
the Fund's average daily net assets. As Administrator, SFR generally assists in
the Funds' administration and operations.
Boston Financial Data Services ('BFDS'), an affiliate of State Street Bank and
Trust Company located at 225 Franklin Street, Boston, Massachusetts 02110,
serves as each Fund's transfer agent (the 'Transfer Agent') and dividend paying
agent.
DISTRIBUTOR
SEI Investments Distribution Co. (the 'Distributor'), with principal offices at
One Freedom Valley Drive, Oaks, Pennsylvania 19456, serves as each Fund's
distributor pursuant to a Distribution Agreement. Class A, Class B and Class C
Shares are also subject to separate distribution plans (the 'Distribution
Plans') approved by the Board of Directors. The Distribution Plan for Class A
and Class C Shares provides that CoreFunds will pay the Distributor an annual
fee, calculated on an average daily net basis and paid monthly, of up to .25% of
the average daily net assets of Class A or Class C Shares of each Fund. The
Class B Distribution Plan provides that CoreFunds will pay the Distributor an
annual fee, calculated on an average daily net basis and paid monthly, of up to
1.00% of the average daily net assets of the Class B Shares of each Fund. The
Distributor may use up to .75% of this fee as compensation for its
distribution-related services and may use up to .25% of this fee to compensate
participating broker/dealers and shareholder servicing agents for performing
shareholder services. CoreStates Bank, N.A., has entered into a Shareholder
Servicing Agreement with the Distributor.
The services provided by participating broker/dealers or shareholder servicing
agents may include:
|__ establishing and maintaining customer accounts and records
|__ aggregating and processing purchase and redemption requests from
customers
|__ placing net purchase and redemption orders with the Distributor
|__ automatically investing customer account cash balances
|__ providing periodic statements to customers
|__ arranging for bank wires
|__ answering routine customer inquiries concerning their investments
|__ assisting customers in changing distribution options, account
designations and addresses
|__ performing sub-accounting functions
|__ processing distribution payments on behalf of customers
|__ forwarding certain shareholder communications from the Funds to
customers and
|__ providing other similar services.
With respect to the Money Market Funds, the Distributor may provide promotional
incentives, from time to time and at its own expense, in the form of cash or
other compensation, to certain financial institutions whose representatives have
sold or are expected to sell significant amounts of the shares of these Funds.
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<PAGE>
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
Pennsylvania 19101, acts as wire agent for the Funds and custodian for the
assets of the Funds, except as noted below. Morgan Stanley Trust Company, One
Pierreport Plaza, 8th Floor, Brooklyn, NY 11201, acts as foreign sub-custodian
for the assets of the International Growth and Global Bond Funds. CoreStates
Bank, N.A. and Morgan Stanley Trust Company (the "Custodians") hold cash,
securities and other assets of the Funds as required by the Investment Company
Act.
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 and income
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 and capital gains distributions
paid during the period.
Fixed Income Funds
Money Market Funds
In addition to quoting total return, the Fixed Income Funds and Money Market
Funds may advertise 'yield' and 'effective yield.' Both yield figures are based
on historical earnings and are not intended to indicate future performance.
The 'yield' of a Fund refers to the income generated by an investment
in the Fund over a 30-day period (7 days for the Money Market Funds). (The
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 (or week, as in the case of a Money Market
Fund) over a 12-month period and is shown as a percentage of the investment.
The 'effective yield' is calculated similarly but, when annualized, the income
earned by an investment in a Fund is assumed to be reinvested. The 'effective
yield' will be slightly higher than the 'yield' because of the compounding
effect of this assumed reinvestment. (See 'Yields' in the Statement of
Additional Information.)
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund and Tax-Free Reserve may also advertise their 'taxable
equivalent yield,' which is calculated by taking into account the investor's
current tax bracket. This is the yield an investor would need to earn from a
taxable investment in order to realize an 'after-tax' benefit equal to the
tax-free yield provided by a Fund.
IN GENERAL
The Funds will include performance data for Class A, Class B or Class C shares,
as appropriate, in any advertisement or information including performance data
of the Funds. Total return and performance data concerning Class A Shares will
reflect the sales charge and distribution and incremental transfer agent
expenses borne exclusively by Class A Shares. Total return and performance data
concerning Class B Shares will reflect the contingent deferred sales charge and
distribution and incremental transfer agent expenses borne exclusively by Class
B Shares. Total return and performance data concerning Class C Shares will
reflect the distribution and incremental transfer agent expenses borne
exclusively by Class C Shares.
The performance of any investment will generally reflect market conditions,
portfolio quality and maturity, type of investment, and operating expenses. Each
Fund's performance will fluctuate and is not necessarily representative of
future results. A Fund's performance would be favorably affected by any
investment advisory fee waivers on the part of CoreStates Advisers. Shareholders
will receive unaudited semi-annual reports describing the Funds' investment
operations and annual financial statements audited by independent auditors.
Description of Shares
In addition to the portfolios described in this Prospectus, CoreFunds has set up
Class C Shares representing the Elite Treasury Reserve, Elite Cash Reserve,
Elite Government Reserve and Elite Tax-Free Reserve portfolios. CoreFunds offers
up to three classes of shares of each portfolio. In total, CoreFunds consists of
twenty-one different portfolios. CoreFunds may in the future create additional
portfolios or classes of shares within a portfolio. Class Y Shares --
Institutional and Shares of the Elite Money Market Funds are offered in separate
prospectuses. This Prospectus solely relates to Class A, Class B and Class C
Shares -- Individual.
IF YOU WISH TO OBTAIN SIMILAR INFORMATION REGARDING OTHER COREFUND
PORTFOLIOS, YOU MAY REQUEST PROSPECTUSES DESCRIBING THE PORTFOLIOS BY CONTACTING
THE DISTRIBUTOR AT 1-800-355-CORE.
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<PAGE>
Differences exist between classes of shares of some CoreFunds portfolios because
of distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class.
Class A Shares are subject to a sales load and distribution and transfer agent
expenses for certain related shareholder services. Class B Shares are subject to
a contingent deferred sales charge and distribution and transfer agent expenses
for certain related shareholder services. Class C Shares are subject to similar
expenses, but are not subject to a sales load. Class A, Class B and Class C
Shares also have voting rights in connection with the Distribution Plan
affecting Class A, Class B and Class C Shares. The different distribution and
transfer agent expenses charged to Class A, Class B and Class C Shares result in
their having different income distributions and performance results from Class Y
Shares.
Aside from these differences, each share in each Fund represents an
equal proportionate interest in that Fund with each other share of the same
Fund. Each share in each Fund is entitled to distributions out of the income
earned on the assets belonging to the Fund, as the Board of Directors declares
at its discretion.
CoreFunds' shareholders are entitled to one vote for each full share
held, and fractional votes for fractional shares held. Shareholders 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.
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:
|__ more than 50% of the outstanding shares of a Fund or
|__ at least 67% of the shares of a Fund present at a meeting at which the
holders of more than 50% of the outstanding shares of such Fund are represented
in person or by proxy.
General Information
In accordance with the Maryland General Corporation Law, 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 that Fund.
'Assets belonging to a Fund' are defined as:
|__ the consideration received by CoreFunds upon the issuance or sale of
shares in a Fund
|__ all income, earnings, profits and proceeds derived from the investment
and
|__ any proceeds from the sale, exchange or liquidation of the investments.
Assets belonging to a Fund are charged with the direct liabilities of that Fund
as well as a share of the general liabilities of CoreFunds. The general
liabilities of CoreFunds are allocated in proportion to the relative asset
values of each of CoreFunds portfolios at the time the expense or liability is
incurred. CoreFunds management charges the Funds for liabilities when they are
incurred and credits the Funds for assets when they are acquired. These
determinations are reviewed and approved annually by the Board of Directors and
are conclusive.
48
<PAGE>
SHAREHOLDER SERVICES GUIDE
OPENING AN ACCOUNT
AND PURCHASING SHARES
To open a new account, either by mail or by wire, simply complete and return an
Account Opening Form with at least the $500 minimum initial investment required
by each Fund. Shares of the Funds are only offered to residents of states in
which the shares are eligible for purchase.
You may pay a sales charge when you purchase. Please see the Sales Charge charts
beginning on page 51.
From time to time, CoreFunds may waive each Fund's sales charge for those
investors purchasing shares through advertisements placed in newspapers and
magazines. The advertisements will detail the procedure for purchasing Fund
shares without the imposition of the sales charge during the offer.
If you need assistance with the Account Opening Form or have any questions about
the Funds, please call 1-800-355-CORE. We will be happy to help you.
All purchases made by check should be in U.S. dollars. Please make the check
payable to CoreFunds, Inc. (Fund name), or, in the case of a retirement account,
the custodian or trustee for the account. WE WILL NOT ACCEPT THIRD-PARTY CHECKS
UNDER ANY CIRCUMSTANCE.
Initial Purchases of Fund Shares by Check
Mail the Account Opening Form and payment for at least the $500 minimum initial
investment to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
Adding to an Existing Account
Mail your check with the return stub from your confirmation or monthly statement
to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
Purchasing Fund Shares by Wire
Before wiring funds, make sure that wire instructions include your account
number. We will recognize receipt of an order to purchase shares by Federal
Funds wire on the business day of the wire, but only if you notify CoreFunds
Investor Services at 1-800-355-CORE by 12:00 noon (Eastern Time) of your
intention to wire money.
Please wire money to:
CORESTATES PHIL
PHILADELPHIA, PA
ABA 031000011
for credit to:
COREFUNDS
A/C 0169-0541
[YOUR ACCOUNT NUMBER]
Automatic Investment Plan (AIP)
You may arrange for automatic periodic investments in a Fund through deductions
from your checking account by Automated Clearing House ('ACH'). To do so,
complete the appropriate section on the Account Opening Form, or on the Account
Change Form if you are already a shareholder. THERE IS A $50 PER MONTH MINIMUM
INVESTMENT REQUIREMENT FOR AIPs. You may obtain an Account Opening Form or
Account Change Form by calling 1-800-355-CORE.
Systematic Withdrawal Plan (SWP)
A SWP enables you to receive regular distributions from your account.
To begin the Plan, your account must have a current value of $5,000 or more. You
may elect to receive automatic payments of $50 or more by check or ACH on a
monthly, quarterly, semi-annual or annual basis.
We normally process automatic withdrawals on the 25th day of the month. If that
is not a business day, we process automatic withdrawals on the previous business
day and pay promptly after that. To arrange a SWP, complete the appropriate
section on the Account Opening Form or the Account Change Form. You may obtain
either of these forms by calling 1-800-355-CORE.
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<PAGE>
Please be aware that if your withdrawals exceed your income, you will deplete
the invested principal in your account. Your original investment could be
exhausted entirely, depending upon the frequency and amounts of the withdrawal
payments and/or any fluctuations in the net asset value per share. To
participate in the SWP, you must have your dividends automatically reinvested.
You may change or cancel the SWP at any time, by writing to CoreFunds Investor
Services or the Transfer Agent.
Because automatic withdrawals of Class B Shares may be subject to a contingent
deferred sales charge, it may not be in the best interest of Class B
shareholders to participate in the SWP.
Execution of Orders
We will execute an order on any business day at the net asset value per share
determined on that day if we receive it:
|__ before 4:00 p.m. for an Equity or Fixed Income Fund or
|__ before 12:00 noon for a Money Market Fund.
We will determine the net asset value as of 4:00 p.m. (12:00 noon for a Money
Market Fund) on that date.
If we receive an order after 4:00 p.m. on any business day for an Equity
or Fixed Income Fund, or after 12:00 noon for a Money Market Fund, we will
execute it on the next business day of the Fund.
We recognize receipt of an order when the Transfer Agent or its authorized agent
receives it. A Fund may establish special procedures to expedite receipt of
orders from institutional investors. The Distributor reserves the right to
reject any purchase order when it determines that it is not in the best
interests of a Fund and its shareholders to accept it.
Sales Charge Options
You may purchase shares of the Funds at a price equal to their net asset value
per share plus a sales charge which, at your election, may be imposed either:
|__ at the time of the purchase (the Class A "initial sales charge
alternative"), or
|__ on a contingent deferred basis (the Class B "deferred sales charge
alternative").
Each Class represents a Fund's interest in the portfolio of investments. The
Classes have the same rights and are identical in all respects except that:
|__ Class A Shares are sold subject to a front-end sales charge and bear the
distribution and services fees resulting from such sales arrangement,
|__ Class B Shares bear the expenses of the deferred sales charge arrangement
and distribution and service fees resulting from such arrangement,
|__ each Class has exclusive voting rights with respect to approvals of any
Rule 12b-1 distribution plan related to that specific Class (although Class
B shareholders may vote on any distribution fees imposed on Class A Shares
since Class B Shares eventually convert into Class A Shares),
|__ only Class B Shares carry a conversion feature and
|__ each Class has different exchange privileges.
Sales personnel of broker-dealers selling Fund Shares, and other persons
entitled to receive compensation for selling such Shares, may receive differing
compensation for selling Class A or Class B Shares.
The alternative purchase arrangement permits you to choose the method of
purchasing shares that is more beneficial to you. The amount of your purchase,
the length of time you expect to hold the shares, and whether you wish to
receive dividends in cash or additional shares will all be factors in
determining which sales charge option is best for you. You should consider
whether the accumulated fees and contingent deferred sales charges on Class B
Shares prior to conversion would be less than the initial sales charge and fees
on Class A Shares, as well as the different yields of each Class. Class A Shares
will normally be more beneficial to you if you qualify for reduced sales charges
(as described on page 51).
The Directors have determined that there is currently no conflict of interest
between Class A and Class B Shares. On an ongoing basis, the Directors, in
exercising their fiduciary duties under the Investment Company Act and state
laws, will seek to ensure that no such conflict arises.
50
<PAGE>
Sales Charges -- Class A Shares
Class A Shares of the Equity Funds and Balanced Fund
The sales charges for these Funds are as follows:
<TABLE>
<CAPTION>
Sales Charge
Sales Charge as a
as a Percentage of
Percentage of Net Amount Broker-Dealer
Amount of Transaction Offering Price Invested Reallowance
--------------------- -------------- ------------- -------------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.25%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000 1.75% 1.78% 1.25%
$1,000,000 and over 0% 0% 0%
</TABLE>
Class A Shares of the Bond, Pennsylvania Municipal Bond, New Jersey
Municipal Bond and Global Bond Funds
The sales charges for these Funds are as follows:
<TABLE>
<CAPTION>
Sales Charge
Sales Charge as a
as a Percentage of
Percentage of Net Amount Broker-Dealer
Amount of Transaction Offering Price Invested Reallowance
--------------------- -------------- ------------- -------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but less than $100,000 4.25% 4.44% 3.75%
$100,000 but less than $250,000 3.25% 3.36% 2.75%
$250,000 but less than $500,000 2.25% 2.30% 1.75%
$500,000 but less than $1,000,000 1.75% 1.78% 1.25%
$1,000,000 and over 0% 0% 0%
</TABLE>
Class A Shares of the Short Term Income, Short-Intermediate Bond,
Government Income and Intermediate Municipal Bond Funds
The sales charges for these Funds are as follows:
<TABLE>
<CAPTION>
Sales Charge
Sales Charge as a
as a Percentage of
Percentage of Net Amount Broker-Dealer
Amount of Transaction Offering Price Invested Reallowance
--------------------- -------------- ------------- -------------
<S> <C> <C> <C>
Less than $50,000 3.25% 3.36% 2.75%
$50,000 but less than $100,000 3.00% 3.09% 2.50%
$100,000 but less than $250,000 2.75% 2.83% 2.25%
$250,000 but less than $500,000 2.00% 2.04% 1.50%
$500,000 but less than $1,000,000 1.25% 1.27% 0.75%
$1,000,000 and over 0% 0% 0%
</TABLE>
The Reallowances shown above apply to sales through financial institutions. The
Distributor may use its own funds to compensate financial institutions in
additional amounts. The Distributor may also provide promotional incentives at
its own expense, in the form of cash or other compensation. The Distributor may
pay these incentives to financial institutions whose representatives have sold
or are expected to sell significant amounts of the shares of a Fund. Brokers,
dealers, or financial institutions that receive a reallowance of 100% of the
sales charge may be considered underwriters for purposes of the federal
securities laws. With respect to purchases of Class A shares of $1,000,000 or
more, payment equal to as much as 1.00% of the purchase price may be paid to
financial intermediaries through which sales are made.
The Funds exempt the following classes of shareholders from paying any sales
charge on Class A Shares:
|__ employees and retirees (including members of their families and significant
others) of CoreStates Corp, Martin Currie, Analytic, Aberdeen Managers and
their affiliates and those persons engaged in the sale and distribution of
CoreFunds
|__ employees and retirees of the Administrator and Distributor
|__ directors and officers of CoreFunds
|__ EdVantage customers
|__ Individual Retirement Account rollovers from qualified employee benefit
plans, Keogh plans and Simplified Employee Benefit Plans where CoreStates
Corp or its affiliate serves as trustee or investment manager
|__ any retirement plan qualified under Section 401(a) of the Code or any other
non-qualified benefit plan
|__ any participant-directed retirement plan qualified under Section 401(a) of
the Code or any participant-directed non-qualified defined compensation
plan described in Section 457 of the Code and
|__ persons purchasing shares directly through a payroll deduction program
administered by CoreStates Corp or its affiliates.
In addition, the Funds will waive the initial sales charge for:
|__ investors who are transferring shares from another investment company which
has a contractual broker/dealer agreement with CoreFunds for which they
have already paid a sales charge since October 26, 1992
|__ customers converting from CoreStates Personal Financial Services Asset
Allocation Program (CorePath) to Class A and Class C Shares of a Fund
|__ shareholders who have purchased shares of a mutual fund through an asset
allocation program offered by a company which has been acquired by
CoreStates Financial Corp, and who wish to transfer those shares to Class A
and Class C Shares of a Fund
51
<PAGE>
|__ Shareholders who have purchased shares through a bank where the bank has
entered into a shareholder servicing agreement with the Distributor and
|__ participants in retirement plans administered by CoreStates Bank, N.A.,
where there are more than 125 employees in the plan.
Subsequent investments in the Funds by these investors will be subject
to the applicable sales charge. The Distributor may, in its own discretion,
waive sales charges on future purchases of Fund shares for certain classes of
investors.
The sales charge will not apply to purchases made through reinvested
dividends and distributions. The sales charge also will not apply to exchanges
between portfolios of CoreFunds, to the extent that a shareholder has credit for
previously paid sales charges on purchases of any of the portfolios of
CoreFunds.
Right of Accumulation
If you purchase additional Class A and Class C Shares, you may obtain a "Right
of Accumulation". This right allows you to combine the current purchase of Class
A and Class C Shares with the total market value or net investment (whichever is
higher) of all shares you hold of any portfolio of CoreFunds which assesses a
sales charge in order to reduce your sales charge.
To obtain the reduced sales charge through a Right of Accumulation, you must
provide the Distributor, either directly or through your investment
representative, with sufficient information to verify that you have this right.
CoreFunds may amend or terminate this Right of Accumulation at any time. Please
contact your investment representative or call CoreFunds Investor Services at
1-800-355-CORE if you wish to exercise your Right of Accumulation.
Letter of Intent
You may also obtain the reduced sales charge shown above by executing
a "Letter of Intent" which states that your intention is to invest at least
$50,000 within a 13-month period in Class A and Class C Shares. You will make
each purchase under a Letter of Intent at the offering price applicable at the
time of the purchase, up to the full amount indicated on the Letter of Intent.
The Letter of Intent may apply to purchases made up to ninety days before the
date of the Letter.
Any redemptions you make during the 13-month period will be subtracted from the
amount of your purchases in determining whether you have met the terms of the
Letter of Intent. During the term of the Letter of Intent, the Transfer Agent
will hold Class A and Class C Shares representing 5% of the specified amount in
escrow for payment of a higher sales charge if you do not purchase the full
amount specified. The escrowed shares will be released when you have purchased
the full amount specified. If you do not purchase the full amount specified
within the 13-month period, you will be required to pay an amount equal to the
difference in the dollar amount of sales charge actually paid and the amount of
sales charge that you would have had to pay on your aggregate purchases if the
total of such purchases had been made at a single time. See "Terms and
Conditions" included in the Letter of Intent. If you wish to enter into a Letter
of Intent in conjunction with an investment in Class A and Class C shares, you
should complete the appropriate section of the Account Opening Form, contact
your investment representative or call CoreFunds Investor Services at
1-800-355-CORE.
Contingent Deferred Sales Charge -- Class B Shares
If you redeem your Class B Shares within five years of purchase, you will pay a
contingent deferred sales charge at the rates described below. You will not be
required to pay the contingent deferred sales charge on exchanges of your Class
B Shares for Class B Shares of any other Fund. You will be required to pay a
contingent deferred sales charge on the redemption of Class B Shares of Cash
Reserve only if you obtained Shares of the Fund by exchange from an Equity or
Balanced Fund. The charge is based on the lower of two costs: current market
value or purchase price. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price or on shares purchased by
reinvestment of dividends or capital gain distributions.
Contingent Deferred Sales
Charge as a Percentage
Year Since of Dollar Amount
Purchase Subject to Charge
---------- -------------------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth None
Seventh Convert to Class A Shares
In determining whether a particular redemption is subject to a contingent
deferred sales charge, it is assumed that the redemption is:
52
<PAGE>
|__ first of any Class A Shares in the shareholder's account,
|__ second of Class B Shares held for over five years or Class B Shares
acquired from the reinvestment of dividends or other distributions, and
|__ third of Class B Shares held longest during the five-year period.
This method should result in the lowest possible sales charge.
The contingent deferred sales charge is waived on redemption of shares (i)
following the death or disability (as defined in the Internal Revenue Code) of a
shareholder, or (ii) to the extent that the redemption represents a minimum
required distribution from an individual retirement account or other retirement
plan to a shareholder who has reached the age of 70-1/2. A shareholder, or his
or her representative, must notify the Transfer Agent prior to the time of
redemption if the shareholder is eligible for this waiver.
With respect to purchases of Class B Shares, payment equal to as much as 4.00%
of the purchase price may be paid to financial intermediaries through which
sales are made.
Automatic Conversion
Six years after the beginning of the month in which the shares were issued,
Class B Shares will automatically convert to Class A Shares and will no longer
be subject to the higher fees charged to Class B Shares. This conversion will be
made on the basis of the relative net asset values of the two Classes.
Reinstatement Privilege
Within 90 days of a redemption, a shareholder may reinvest into the same
Class of Shares of each Fund at the current net asset value. Shareholders who
have already paid a contingent deferred sales charge on Shares redeemed and then
reinvested will receive credit for the contingent deferred sales charge paid.
The contingent deferred sales charge schedule on reinvested shares will be
calculated as of the initial purchase date. Each shareholder or its investment
representative is responsible for sending a letter with payment stating that the
shareholder would like to make use of this reinstatement privilege.
EXCHANGING SHARES
Purchasing by Exchange
You may open an account or purchase additional shares by making an exchange from
an existing CoreFunds account. Call CoreFunds Investor Services at
1-800-355-CORE to purchase by exchange.
As a shareholder of record, you may exchange Class A, B or C Shares of a Fund
for shares in the same Class of any of CoreFunds' other individual portfolios.
Direct your exchange requests to CoreFunds Investor Services at 1-800-355-CORE.
You may place exchange orders by telephone. Neither the Fund nor the Transfer
Agent will be responsible for any loss, liability, cost or expense for acting
upon wire instructions or upon telephone instructions that it reasonably
believes to be genuine. The Fund and the Transfer Agent will each employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine.
Redeeming Shares by Exchange
You may sell shares of the Fund by making an exchange into shares of the same
class of another CoreFunds portfolio.
Systematic Exchange Program
Shares of the Fund also may be exchanged through automatic monthly deductions
from an investor's account for the same class of shares of another Fund. Under
the Systematic Exchange Program, an investor initially purchases Class C or B
Shares of a Money Market Fund in an amount equal to the total amount of the
investment the investor wishes to make in the same class of shares of another
Fund. On a monthly basis, a specified dollar amount of the Money Market Fund
shares is exchanged for shares of the same class of a specified Fund. Exchanges
between Class B Shares are not subject to the CDSC. Exchanges among Class A
Shares will be subject to any applicable sales charges, but will also be
eligible for any applicable sales charge waivers. The Systematic Exchange
Program of investing a fixed dollar amount at regular intervals over time in a
Fund may have the effect of reducing the average cost per share of the shares of
the Fund acquired. This effect may also be achieved through the Automatic
Investment Plan. A Shareholder may apply for participation in the Systematic
Exchange Program through the Distributor or his or her investment professional.
Shares purchased through the Systematic Exchange Program are subject to the
conditions listed under "Exchanging Shares," but those shares are not subject to
minimum investment limitations. Exchanges are considered taxable events for
Shareholders. If a Shareholder redeems, rather than exchanges, Class B Shares of
a non-Money Market Fund, the affected shares will be subject to the applicable
CDSC.
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<PAGE>
Important Exchange Information
Before you make an exchange, you should consider the following:
|__ You may not exchange into a series of a portfolio for which you would not
have been eligible initially.
|__ If you exchange into any portfolio which imposes a sales charge, you may be
subject to that sales charge, if it is applicable and you have not
previously paid a sales charge.
|__ You should consider the investment objective, policies and restrictions of
the Fund into which you are making an exchange, as set forth in the
applicable prospectus. You may obtain a copy of the prospectus for any of
the CoreFunds portfolios by calling 1-800-355-CORE.
|__ Any exchange must satisfy the requirements for the minimum initial
investment amount of the Fund involved, except for exchanges made in
connection with the Systematic Exchange Program.
|__ The Funds reserve the right to reject any exchange request and to modify or
terminate the exchange privilege at any time, upon sixty days' written
notice to Shareholders.
|__ The Funds may limit the amount or frequency of exchanges, and may establish
other restrictions to ensure that the exchanges do not disadvantage any
Fund or its shareholders.
|__ For purposes of calculating the Class B Shares' contingent deferred sales
charge payable upon redemption, the holding period of Class B Shares of the
"old" Fund and the holding period for Class B Shares of the "new" Fund are
aggregated.
SELLING (REDEEMING) YOUR SHARES
You may withdraw any portion of the funds in your account by redeeming shares at
any time. You may make your request in writing or by telephone. Your redemption
proceeds (the value of your shares reduced by any applicable contingent deferred
sales charge) can be sent to you by mail, wire, or ACH.
Payment for the redemption of shares purchased by check may not be made until a
Fund can verify that the payment for the purchase has been, or will be,
collected. This may take up to ten calendar days after the date of purchase. The
Funds intend to pay cash for all shares redeemed, but under abnormal conditions
which make payment in cash unwise, a Fund may make payment wholly or partly in
'readily marketable' portfolio securities at their market value equal to the
redemption price. In such cases, you may incur brokerage costs in converting
these securities to cash.
Redeeming Your Shares By Mail
The Transfer Agent or its authorized agent must receive a written request for
redemption in order to constitute a valid tender for redemption by mail. Mail
requests to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
The Transfer Agent may require that the signature on the written request be
guaranteed by a commercial bank or by a member firm of a domestic stock
exchange. Signature guarantees will be required if:
|__ your redemption request exceeds $25,000
|__ you direct the redemption proceeds to be sent to a name and/or
address that differs from the registered name or address of record or
|__ you request a transfer of registration.
Otherwise, the Transfer Agent may accept written redemption requests by mail
without a signature guarantee.
Redeeming Your Shares By Telephone
To redeem your shares by telephone, you must provide the information requested
on the Account Opening Form. You may request telephone redemption by calling
CoreFunds Investor Services at 1-800-355-CORE. We will normally transmit payment
for telephone redemptions on the next business day following receipt of a valid
request for redemption. You may have the proceeds sent to you either by mail or
wire.
In the interest of security, you may not close your account by telephone.
Receiving Your Payment By Wire
As a shareholder of record, you may have your telephone redemption
proceeds paid by a direct wire to a domestic commercial bank account previously
designated by you on the Account Opening Form. The Transfer Agent may deduct its
wire fee from the proceeds for wire redemptions. As of the date of this
Prospectus, this fee is $10.00 for each wire redemption. There is no minimum for
telephone redemptions paid by wire.
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<PAGE>
Receiving Your Payment By Mail
You may have your redemption proceeds paid by a check mailed to the name and
address in which your account is registered with a Fund. There is no minimum for
telephone redemptions paid by check.
Checkwriting Privileges For Money Market Funds -- Class C Shares
CoreFunds will provide checks to Class C shareholders of the Money Market Funds
without charge. Direct your request to CoreFunds Investor Services at
1-800-355-CORE. These checks will clear through CoreStates Bank of Delaware,
N.A., a subsidiary of CoreStates Bank, N.A. (the 'Clearing Bank'). You will be
required to sign signature cards and will be subject to any applicable rules and
regulations of the Clearing Bank relating to check redemption privileges. You
may make checks drawn on the Money Market Funds payable to the order of any
payee in an amount of $250 or more.
Banks, corporations, trusts and other organizations should contact the Funds
before submitting signature cards, since we may require corporate resolutions or
other supporting documents before the checkwriting privilege may be used. When a
check is presented to the Clearing Bank for payment, and a Fund accepts the
check, the Clearing Bank has the Fund redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check, at the net
asset value next determined after presentation. The Clearing Bank will return
checks if there are insufficient shares to meet the withdrawal amount.
If you wish to use this method of redemption, you should check the appropriate
box in the Account Opening Form, fill out the signature card available from
CoreFunds Investor Services, and mail the complete Form and signature card to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
There is no charge for the clearance of any checks, although the Clearing Bank
will impose its customary overdraft fee in connection with returning any checks
where there are insufficient shares to meet the withdrawal amount. As of the
date of this Prospectus, the overdraft fee is $30.00.
The Clearing Bank will not ordinarily return canceled checks to you, although
you may obtain copies of canceled checks drawn on the Funds by requesting them
in writing from CoreFunds Investor Services.
Important Redemption Information
We execute redemption orders for the Fixed Income and Equity Funds at the net
asset value per share (less any applicable contingent deferred sales charge on
Class B Shares) at 4:00 p.m. that day if we receive the order by 4:00 p.m. that
day.
We execute redemption orders for the Money Market Funds at the net asset value
per share at 12:00 noon that day if we receive the order by 12:00 noon that day.
If you redeem Class B Shares of Cash Reserve obtained by exchange from an Equity
or Balanced Fund, we will deduct the applicable contingent deferred sales charge
from your redemption proceeds.
We recognize receipt of an order when the Transfer Agent or its authorized agent
receives it.
The Transfer Agent will pay shareholders for redeemed shares within seven
business days after receiving the request for redemption, except that, on shares
that were purchased by check, redemption proceeds may be withheld for up to
fifteen days until the check has cleared.
Minimum Account Balance Requirement
Because of the relatively high cost of handling small investments, the Funds
reserve the right to redeem your shares at net asset value, less any applicable
contingent deferred sales charge, if your account value decreases to less than
$500. You will not be subject to involuntary redemption if the value of your
account falls below $500 solely because of market action. Before a Fund redeems
your shares and sends you the proceeds, the Fund will give you notice that the
value of the shares in your account is less than the minimum amount and you will
have sixty days to make an additional investment to increase the value of your
account to at least $500.
55
<PAGE>
For more information on opening a new account, making changes to existing
accounts, purchasing, exchanging or redeeming shares, or other investor
services, please call:
1-800-355-CORE (2673)
MONDAY THROUGH FRIDAY
BETWEEN 8:30 A.M. AND 8:00 P.M.
Or write to us at:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
EQUITY FUNDS
Equity Index (659)
Core Equity (742)
Growth Equity (747)
Special Equity (665)
International Growth (744)
BALANCED FUND
Balanced (751)
FIXED INCOME FUNDS
Short Term Income (663)
Short-Intermediate Bond (740)
Government Income (749)
Bond (661)
Global Bond (755)
TAX-EXEMPT INCOME FUNDS
Intermediate Municipal Bond (753)
Pennsylvania Municipal Bond (757)
New Jersey Municipal Bond (759)
MONEY MARKET FUNDS
Treasury Reserve (733)
Cash Reserve (731)
Tax-Free Reserve (737)
56
<PAGE>
The CoreFund Family of Mutual Funds
COREFUNDS, INC.
DIRECTORS
Emil J. Mikity, Chairman
George H. Strong
Erin Anderson
Thomas J. Taylor
Cheryl H. Wade
OFFICERS
David G. Lee, President
James W. Jennings, Secretary
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Fund Resources
Wayne, PA 19087
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
INVESTMENT ADVISER
[LOGO]
For current performance, purchase, redemption, and other information, call
1-800-355-CORE (2673).
The CoreFund Family of Mutual Funds
EQUITY
Equity Index
Core Equity
Growth Equity
Special Equity
International Growth
BALANCED
Balanced
INCOME
Short Term Income
Short-Intermediate Bond
Government Income
Bond
Global Bond
TAX-EXEMPT INCOME
Intermediate Municipal Bond
Pennsylvania Municipal Bond
New Jersey Municipal Bond
MONEY MARKET
Treasury Reserve
Cash Reserve
Tax-Free Reserve
SEI Investments Distribution Co., Distributor
Oaks, PA 19456
1-800-355-CORE
COR-F-046-07
11/97
<PAGE>
COREFUNDS SWEEP
PROSPECTUS FOR INDIVIDUAL SHARES
NOVEMBER 1, 1997
CoreFunds Investing our experience in your future
MONEY MARKET FUNDS
[COREFUND LOGO]
<PAGE>
INTRODUCING COREFUNDS
This Prospectus introduces you to three of the mutual funds offered by
CoreFunds, Inc. ("CoreFunds"), an open-end management investment company.
CoreFunds consists of in twenty-one diversified and non-diversified portfolios.
This Prospectus offers:
|__ Class C (Individual) Shares of the Money Market Funds.
This Prospectus is provided only to CoreFunds sweep customers of CoreStates
Bank, N.A. Please call 1-800-222-0246 if you have any questions regarding the
CoreFunds sweep feature on your account, or consult your CoreFunds Sweep
Agreement.
CoreStates Investment Advisers, Inc. ("CoreStates Advisers") serves as the
investment adviser to each Fund. CoreStates Advisers has extensive experience in
the management of money market, tax-free, fixed income, equity and international
investments.
You may choose to invest in any of the CoreFunds offered in this Prospectus.
Read your prospectus before you invest and keep it for future reference.
Additional information about the Funds, contained in a Statement of Additional
Information dated November 1, 1997, has been filed with the Securities and
Exchange Commission ("SEC"). It is incorporated in this Prospectus by reference.
To obtain a copy without charge, or to obtain information about any other fund
in the CoreFund family of mutual funds, call 1-800-355-CORE or write to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
AN IMPORTANT WORD ABOUT MUTUAL FUNDS:
SHARES IN THE FUNDS ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR GUARANTEED
OR ENDORSED BY, CORESTATES BANK, N.A., THE PARENT CORPORATION OF EACH FUND'S
INVESTMENT ADVISER, OR ANY OF ITS AFFILIATES.
SHARES IN THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENTS IN FUND SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE CASH RESERVE, TREASURY RESERVE AND/OR TAX-FREE RESERVE
IS NOT INSURED AND IS NOT GUARANTEED BY THE U.S. GOVERNMENT, AND WE CAN NOT
ASSURE YOU THAT THESE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES. ALSO, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
WHAT YOU WILL FIND IN THIS PROSPECTUS
INFORMATION ON THE FUNDS
MONEY MARKET FUNDS
Treasury Reserve........................................2
Cash Reserve............................................4
Tax-Free Reserve........................................6
GENERAL INFORMATION
General Investment Policies and Practices...............8
Distributions..........................................10
Taxes..................................................10
Valuation of Shares....................................11
Management.............................................12
Performance Information................................13
Description of Shares..................................13
General Information....................................14
SHAREHOLDER SERVICES GUIDE
Opening an Account and Purchasing Shares...............15
Selling (Redeeming) Your Shares........................15
1
<PAGE>
TREASURY RESERVE
SUMMARY
Treasury Reserve seeks to provide investors with income, liquidity and stability
of principal by investing in direct obligations of the U.S. Treasury and
repurchase agreements.
INVESTMENT OBJECTIVE
Treasury Reserve seeks current interest income, liquidity and safety of
principal.
PORTFOLIO INVESTMENTS
The Fund invests in a portfolio of direct obligations of the U.S. Treasury,
specifically:
|__ Treasury Bills
|__ Treasury Bonds and
|__ Treasury Notes.
The Fund may also invest in:
|__ separately traded interest and principal component parts of U.S. Treasury
obligations that are transferable through the Federal book-entry system,
known as Separately Traded Registered Investment and Principal Securities
("STRIPS") and
|__ repurchase agreements relating to U.S. Treasury obligations.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Treasury Reserve strives to provide a return greater than money market indices
such as the IBC Donoghue 100% Treasury and Repurchase Index. (Please see page 8
for more information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Treasury Reserve may be subject to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
INVESTMENT SUITABILITY
Treasury Reserve may be appropriate for investors who:
|__ are unwilling to accept the credit risk associated with non-Treasury money
market funds
|__ are unable to tolerate fluctuations in the principal value of their
investments and
|__ want an investment that provides current interest income at competitive
rates of return.
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
FUND MANAGEMENT
Ronald R. Brasten is a Vice President of CoreStates Advisers and manages
Treasury Reserve. He also manages CoreFund Elite Treasury Reserve and has
investment responsibility for individually managed corporate and personal
accounts. He joined CoreStates Advisers in August 1989. (Please see page 12 for
more information about the Fund's Investment Adviser.)
2
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class C Shares of the Fund.
CLASS C (INDIVIDUAL)
Shareholder Transaction Expenses None
Annual Fund Operating Expenses
(as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .21%
Total Operating Expenses After Fee Waivers(4) .76%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been .95%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $8 24 42 94
$1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class C Shares of Treasury Reserve. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS C (INDIVIDUAL)* ----------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.05 0.05 0.05 0.03 0.01
Distributions from Net Investment Income $ (0.05) (0.05) (0.05) (0.03) (0.01)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00
Total Return 4.71% 4.94 4.72 2.65 1.21+
Net Assets, End of Period (000 omitted) $12,146 19,386 21,612 7,573 7,672
Ratio of Expenses to Average Net Assets 0.76% 0.75 0.73 0.73 0.75
Ratio of Net Income to Average Net Assets 4.61% 4.81 4.81 2.62 2.46
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.96% 1.03 1.10 1.11 1.14
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.41% 4.53 4.44 2.24 2.07
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class C
Shares.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
3
<PAGE>
CASH RESERVE
SUMMARY
Cash Reserve seeks to provide investors with a high level of income, liquidity
and relative stability of principal by investing in a diversified portfolio of
the highest quality money market instruments.
INVESTMENT OBJECTIVE
Cash Reserve seeks as high a level of current income as is consistent with
liquidity and relative stability of principal.
PORTFOLIO INVESTMENTS
The Fund invests in a diversified portfolio of money market instruments of the
highest quality, including:
|__ U.S. dollar-denominated government obligations
|__ bank obligations and
|__ commercial paper.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Cash Reserve strives to provide a return greater than money market indices such
as the IBC Donoghue All-Taxable Money Fund Average. (Please see page 8 for more
information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Cash Reserve may be subject on a limited basis to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer will be unable to make timely
payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Cash Reserve may be appropriate for investors who:
|__ are unable to tolerate fluctuations in the principal value of their
investments and
|__ want an investment that provides current interest income at competitive
rates of return.
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
FUND MANAGEMENT
John Ackler is Senior Investment Officer of CoreStates Advisers and manages
Short Term Income Fund and Cash Reserve. He is also responsible for the
management of the CoreStates Liquidity Fund, as well as numerous individually
managed fixed income funds. Mr. Ackler joined CoreStates as an internal auditor
in 1992 and transferred to CoreStates Advisers in August 1993. (Please see page
12 for more information about the Fund's Investment Adviser.)
4
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class C Shares of the Fund.
CLASS C (INDIVIDUAL)
Shareholder Transaction Expenses None
Annual Fund Operating Expenses
(as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) .75%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been .94% This fee waiver is voluntary and may be discontinued at any time
at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses $8 $24 $42 $93
on a $1,000 investment, assuming (1)
a 5% annual return and (2) redemption
at the end of each time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class C Shares of Cash Reserve. The financial highlights for the Fund for the
periods from inception through June 30, 1997 have been audited by Ernst & Young
LLP, independent auditors, whose report appears in CoreFunds' annual report
which accompanies the Statement of Additional Information. The annual report for
the Fund is available to shareholders at no charge by calling CoreFunds at
1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS C (INDIVIDUAL)* -----------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.05 0.05 0.05 0.03 0.01
Distributions from Net Investment Income $ (0.05) (0.05) (0.05) (0.03) (0.01)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00
Total Return 4.83% 5.00 4.89 2.74 1.23+
Net Assets, End of Period (000 omitted) $ 27,693 19,736 17,583 11,451 15,330
Ratio of Expenses to Average Net Assets 0.75% 0.75 0.73 0.72 0.76
Ratio of Net Income to Average Net Assets 4.74% 4.86 4.86 2.70 2.52
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.95% 1.03 1.10 1.10 1.15
Ratio of Net Income to Average Net Assets (Excluding Waivers) 4.54% 4.58 4.49 2.32 2.13
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class C
Shares.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
5
<PAGE>
TAX-FREE RESERVE
SUMMARY
Tax-Free Reserve seeks to provide investors with a high level of tax-free
income, liquidity and stability of principal by investing in short-term
obligations issued by, or on behalf of, state and local governments.
INVESTMENT OBJECTIVE
Tax-Free Reserve seeks as high a level of current interest income that is exempt
from federal income taxes as is consistent with liquidity and relative stability
of principal.
PORTFOLIO INVESTMENTS
The Fund invests at least 80% of its assets in tax-free securities under normal
market conditions. The interest on each security must be exempt from regular
federal income tax, in the opinion of counsel to the issuer and not produce
interest income that is treated as a preference item for AMT purposes. The Fund
invests in a diversified portfolio of short-term, tax-free obligations issued
by, or on behalf of:
|__ states
|__ municipalities
|__ territories and possessions of the U.S.
|__ the District of Columbia and
|__ their political subdivisions, agencies, instrumentalities and authorities.
Up to 20% of all assets in the Fund can be invested in taxable debt securities
for defensive purposes or when appropriate tax-exempt securities are not
available. CoreStates Advisers works to take advantage of key seasonal supply
and demand factors that govern short-term rates.
The Fund often purchases securities supported by credit enhancements from
financial institutions. Changes in the credit quality of these institutions
could adversely affect the Fund's share price.
The Fund is governed by SEC Rules which impose certain quality, maturity and
diversification requirements. The Fund's assets are valued using the amortized
cost method, which enables the Fund to maintain a stable net asset value per
share. All securities purchased by the Fund must have remaining maturities of 13
months or less.
Tax-Free Reserve strives to provide a return greater than money market indices
such as the IBC Donoghue Tax-Free Fund Average. (Please see page 8 for more
information about General Investment Policies and Practices.)
RISK CONSIDERATIONS
Tax-Free Reserve may be subject on a limited basis to:
Interest Rate Risk - The potential for a decline in the price of fixed income
securities due to rising interest rates. This risk will be greater for long-term
securities than for short-term securities.
Credit Risk - The possibility that an issuer (or its guarantor) will be unable
to make timely payments of either principal or interest.
Call Risk - The possibility that securities with high interest rates will be
prepaid (or 'called') by the issuer prior to maturity during periods of falling
interest rates. This would require the Fund to invest the resulting proceeds
elsewhere, at generally lower interest rates. This is also known as Income Risk.
INVESTMENT SUITABILITY
Tax-Free Reserve may be 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 taxes. Although the
Fund is managed to maintain a stable price per share of $1.00, there is no
guarantee that price will be constantly maintained.
FUND MANAGEMENT
Folu Abiona is Senior Investment Officer for CoreStates Advisers and manages
Tax-Free Reserve. Ms. Abiona also manages CoreFund Elite Tax-Free Reserve. She
joined CoreStates Advisers in 1985 and became fixed income portfolio manager in
1990. (Please see page 12 for more information about the Fund's Investment
Adviser.)
6
<PAGE>
INVESTOR EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class C Shares of the Fund.
CLASS C (INDIVIDUAL)
Shareholder Transaction Expenses None
Annual Fund Operating Expenses
(as a percentage of net assets)
Investment Advisory Fees After Fee Waivers(1) .30%
12b-1 Fees(2) .25%
Other Expenses After Fee Waivers(3) .20%
Total Operating Expenses After Fee Waivers(4) .75%
(1) Absent voluntary waivers, investment advisory fees would be .40% of average
net assets.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end charge permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc.
(3) Absent voluntary waivers by the Administrator, Other Expenses would be .29%
of average net assets.
(4) Absent the fee waivers described above, Total Operating Expenses would have
been .94%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of the service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses on a $8 24 42 93
$1,000 investment, assuming (1) a 5% annual
return, and (2) redemption at the end of
each time period.
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Class C Shares of Tax-Free Reserve. The financial highlights for the Fund for
the periods from inception through June 30, 1997 have been audited by Ernst &
Young LLP, independent auditors, whose report appears in CoreFunds' annual
report which accompanies the Statement of Additional Information. The annual
report for the Fund is available to shareholders at no charge by calling
CoreFunds at 1-800-355-CORE.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
CLASS C (INDIVIDUAL)* -------------------------------------------------
For a Share Outstanding Throughout the Period Ended June 30
- --------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 1.00 1.00 1.00 1.00
Net Investment Income $ 0.03 0.03 0.03 0.02 0.01
Distributions from Net Investment Income $ (0.03) (0.03) (0.03) (0.02) (0.01)
Net Asset Value, End of Period $ 1.00 1.00 1.00 1.00 1.00
Total Return 2.83% 2.95 2.86 1.78 0.85+
Net Assets, End of Period (000 omitted) $ 3,202 2,850 1,524 2,708 1,795
Ratio of Expenses to Average Net Assets 0.75% 0.73 0.73 0.74 0.76
Ratio of Net Income to Average Net Assets 2.82% 2.94 2.80 1.75 1.71
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.95% 1.02 1.10 1.12 1.14
Ratio of Net Income to Average Net Assets (Excluding Waivers) 2.62% 2.65 2.43 1.37 1.33
</TABLE>
* On April 22, 1996, the Series B Shares of the Fund were redesignated Class C
Shares.
+ This figure has not been annualized.
(1) Commenced operations January 4, 1993. Unless otherwise noted, all ratios for
the period have been annualized.
7
<PAGE>
GENERAL INFORMATION
General Investment Policies and Practices
In addition to making investments as described above, the Funds may engage in a
number of additional investment practices. These practices are defined below.
The table on page 10 describes which Funds engage in which practices.
ASSET-BACKED SECURITIES
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 investor. The Funds will invest only in asset-backed securities which are
readily marketable and rated at the time of purchase in the two highest rating
categories assigned by a rating organization.
BANK OBLIGATIONS
Investments in domestic branches of U.S. banks, specifically:
|__ 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.
|__ 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.
ILLIQUID SECURITIES
Securities that cannot be sold or disposed of in seven days or less at
approximately their carrying value.
LENDING OF SECURITIES
The lending of portfolio securities to qualified banks and securities brokers
and dealers for purposes of realizing additional income. The Fund receives
collateral consisting of cash, letters of credit issued by certain banks, or
securities issued or guaranteed by the U.S. Government or its agencies and equal
to at least 100% of the current market value of the loaned securities. Such
loans would involve risk of delay in receiving collateral, risk of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially.
Before implementing such a lending program, the Fund must first receive an
exemptive order from the Securities and Exchange Commission permitting it to use
its Custodian, CoreStates Bank, N.A., as its lending agent.
MORTGAGE-BACKED SECURITIES
Securities backed by pools of mortgages which pass principal and/or interest
payments to the investor. Some are issued or guaranteed by U.S. Government
agencies, such as:
|__ GNMA, or Government National Mortgage Association, which issues modified
pass-through securities evidencing an interest in a specific pool of mortgage
loans insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Both interest and
principal payments (including prepayments) are passed through monthly to the
investor. The full faith and credit of the United States is pledged to the
timely payment of principal and interest by GNMA.
|__ Fannie Mae, a federally chartered and stockholder-owned corporation, issues
pass-through certificates which are guaranteed as to principal and interest by
Fannie Mae.
|__ FHLMC, or Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States, issues participation certificates which
represent an interest in mortgages held in FHLMC's portfolio. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal.
Securities issued or guaranteed by Fannie Mae and FHLMC are not backed by the
full faith and credit of the United States.
Mortgaged-backed securities also include:
|__ CMOs, collateralized mortgage obligations and
|__ REMICs, real estate mortgage investment conduits, a type of CMO.
CMOs and REMICs are mortgage pass-through securities issued in multiple classes.
Each class of a CMO is issued with a specified fixed or floating coupon rate and
has a stated maturity or final distribution date. Principal prepayments on the
underlying mortgage assets may cause the CMOs to be retired substantially
earlier than their stated maturities or final distribution dates, resulting in a
loss of all or part of any premium paid.
MUNICIPAL SECURITIES
Securities issued by municipalities include:
|__ General Obligation Securities, secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
|__ Revenue Securities, payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or another specific revenue source, such as the user of
the facility being financed. Industrial development and pollution control bonds
held by the Funds are revenue securities whose credit quality is usually
8
<PAGE>
directly related to the credit standing of the corporate user of the facility
involved.
|__ Moral Obligation Bonds, 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.
|__ Variable Rate Demand Obligations, tax-exempt obligations upon which
interest is payable at a floating or variable rate. The Fund 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.
|__ Municipal Lease Obligations, issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the municipality's credit, and
their interest may become taxable if the lease is assigned. If funds are not
appropriated for the following year's lease payments, the lease may terminate,
with the possibility of default on the lease obligation and significant loss to
a Fund. Certificates of participation in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest in
the lease-purchase payments made.
OTHER INVESTMENT COMPANIES
Shares of investment companies may be purchased by the Funds to the extent
consistent with applicable law.
PUT TRANSACTIONS
The option to sell a security at a fixed price before maturity. The premium paid
reduces the underlying yield.
REPURCHASE AGREEMENTS
The purchase of securities subject to the seller's agreement to repurchase them
at a mutually agreed upon date and price. The seller must be deemed creditworthy
and maintain collateral of at least 100% of the repurchase price.
REVERSE REPURCHASE AGREEMENTS
The sale of securities subject to a Fund's agreement to repurchase them at a
mutually agreed upon date and price. The Funds must maintain collateral of at
least 100% of the repurchase price.
SHORT-TERM OBLIGATIONS
Commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit, repurchase agreements, obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, and
demand and time deposits of domestic and foreign banks and savings and loan
associations.
U.S. GOVERNMENT OBLIGATIONS
Securities of the U.S. Government, including:
|__ U.S. Treasury Securities - 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.
|__ 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;
obligations supported by the discretionary authority of the U.S. Treasury to
purchase the agency's obligations; and obligations supported only by the credit
of the agency or instrumentality. 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.
|__ STRIPS - zero coupon U.S. Treasury securities, sold at a substantial
discount and redeemed at face value at maturity without interim cash payments of
interest or principal. This discount is amortized over the life of the security,
and the amortization constitutes the income earned on the security for both
accounting and tax purposes.
VARIABLE AMOUNT MASTER DEMAND NOTES
Unsecured demand notes issued by corporations, insurance companies and other
borrowers that permit the indebtedness to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Although there is no secondary market in the notes, the Funds may demand payment
of principal and accrued interest at any time.
WHEN-ISSUED SECURITIES
Securities which settle on a future date. However, the interest rate is fixed on
the purchase date and no interest accrues before settlement. The Funds must
maintain liquid assets in an amount at least equal to the value of its
commitments to purchase such securities.
TEMPORARY INVESTMENTS
The Funds are permitted to make temporary investments in Short-Term
Obligations. Such investments may be used to:
|__ invest uncommitted cash balances
|__ maintain liquidity to meet shareholder redemptions or
|__ take a temporary defensive position.
The table which follows describes which investments, including temporary
investments, each Fund may make:
9
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Treasury Reserve Cash Reserve Tax-Free Reserve
<S> <C> <C> <C>
Asset-backed securities -- o --
Bank obligations -- o 20%
Illiquid securities 10% 10% 10%
Investment companies 10% 10% 10%
Lending of securities 33 1/3% 33 1/3% 33 1/3%
Mortgage-backed securities -- o 20%
Municipal securities -- -- o
Put transactions (a) -- -- o
Repurchase agreements o o 20%
Reverse repurchase agreements 10% 10% 10%
U.S. Government obligations o o 20%
Variable amount master demand notes -- o --
When-issued securities -- -- 25%
TEMPORARY INVESTMENTS
Cash 100% 100% 100%
less than
Taxable obligations 100% 100% 20%
INVESTMENT RESTRICTIONS
Securities of any one issuer (b), (c) 5% 5% 5%
Securities of issuers in any one industry NA 25% 25%(d)
</TABLE>
o Fund may invest in security without limitation.
- - Fund may not invest.
Percentages are of total assets (except Illiquid Securities, which are shown as
a percentage of net assets).
(a) Except premiums on all puts outstanding will not exceed 2% of total assets.
(b) Except securities of the U.S. Government, its agencies or
instrumentalities.
(c) Except that up to 25% of the Fund's total assets may be invested without
regard to the 5% limitation.
(d) Limitation does not apply to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
Distributions
Shareholders of each Fund are entitled to any distributions from the
net investment income and capital gains earned on investments held by the Fund,
provided that they are shareholders of record on the date the distributions are
declared (`Record Date').
Class C Shares of the Money Market Funds begin earning income on the business
day on which the purchase order for the shares is executed. They continue to
earn income through, and including, the day before the redemption order for
these shares is executed.
Distributions are paid in the form of additional Class C Shares of a Fund. The
Transfer Agent will automatically reinvest all income and capital gains
distributions in additional shares at the net asset value in effect at the close
of business on the reinvestment date. Distributions are automatically paid by
check and mailed to the shareholder (along with any redemption proceeds) within
seven business days of a shareholder closing an account with the Fund.
Distributions from the Net Investment Income of:
|__ Money Market Funds are declared daily as a dividend and paid monthly to
shareholders.
NOTE: DISTRIBUTIONS PAID SHORTLY AFTER THE PURCHASE OF SHARES BY AN INVESTOR,
ALTHOUGH IN EFFECT A RETURN OF CAPITAL, ARE TAXABLE AS ORDINARY INCOME.
Distributions of any capital gains will be made at least annually for each Fund.
Taxes
The following is only a brief summary of some of the important federal tax
considerations generally affecting the Funds and their shareholders. We have not
attempted to present a detailed explanation of the tax treatment of the Funds or
their shareholders, and this discussion is not intended as a substitute for
careful tax planning. Potential investors and shareholders in the Funds are
urged to consult their tax advisers with specific reference to their own tax
situations.
10
<PAGE>
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 other CoreFunds portfolios. Each Fund intends to
qualify for the favorable tax treatment afforded a 'regulated investment
company' under the Code.
|__ Distributions attributable to a Fund's net investment income (including
ordinary income and net short-term capital gains) will be taxable to
shareholders as ordinary income. This includes any distributions attributable to
taxable net investment income of Tax-Free Reserve.
|__ Capital gains distributions, if any, of all Funds will be taxable as gain
from the sale or exchange of a capital asset held for more than one year,
regardless of how long a shareholder has held the shares.
|__ If a Fund declares distributions payable to shareholders of record
on a date in October, November or December of any year, the distributions 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.
|__ 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 in connection with an exchange among the CoreFunds portfolios.
|__ In the opinion of counsel, distributions made by 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.
Investments in STRIPS and Receipts 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 these obligations even
though the Fund has not received any interest payments on the 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 the
imputed income, which may occur at a time when the investment adviser would not
have chosen to sell the securities and which may result in a taxable gain or
loss.
TAX-FREE RESERVE
Tax-Free Reserve expects to qualify to pay tax-exempt interest income
distributions to its shareholders. In general, the Fund's shareholders may
exclude tax-exempt income distributions from their gross income, unless specific
circumstances disallow it. Tax-Free Reserve is permitted to purchase 'private
activity bonds' that are subject to the Federal Alternative Minimum Tax (the
'AMT') consistent with its 20% limitation on taxable obligations.
Interest on indebtedness incurred or continued by a shareholder in order to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Furthermore, the 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 or private activity bonds. 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. Corporate shareholders
should note that all tax-exempt interest income distributions are includable in
the computation of 'adjusted current earnings' for AMT purposes, regardless of
when the bonds from which they are derived were issued or whether they are
derived from 'private activity bonds.' Accordingly, corporate shareholders
should consult their tax advisers regarding the impact that holding shares of
the Fund would have on their own AMT liability.
Tax-exempt interest income distributions and other distributions paid
by the Fund may be taxable to investors as dividend income under state or local
law even though a substantial portion of such distributions may be derived from
interest on tax-exempt obligations which, if received directly, would be exempt
from such income taxes.
See the Statement of Additional Information for further information regarding
taxes.
Valuation of Shares
NET ASSET VALUE
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) of
trading in securities or instruments held by the Fund such that the Fund's net
asset value per share might be materially affected.
Money Market Funds
The net asset value per share of each of these Funds is normally determined as
of 12:00 noon (Eastern time) on each business day. These Funds are managed to
maintain a stable price per share of $1.00.
11
<PAGE>
Net asset value per share is calculated by adding the value of all of the Fund's
portfolio securities and other assets, subtracting the liabilities, and dividing
by the total number of outstanding shares of the Fund at the time of the
valuation. The result (adjusted to the nearest cent) is the net asset value per
share.
PORTFOLIO PRICING
Portfolio securities are valued according to the broadest and most
representative market. Other assets and securities for which no quotations are
readily available will be valued in a manner determined in good faith to reflect
their fair market value, pursuant to procedures adopted by the Board of
Directors.
Money Market Funds
The assets in the Money Market Funds are valued based upon the
amortized cost method in accordance with rules adopted under the Investment
Company Act of 1940 (the "Investment Company Act"). With 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).
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
Fund. CoreStates Advisers is a wholly-owned subsidiary of CoreStates Bank, N.A.,
which is itself a wholly-owned subsidiary of CoreStates Financial Corp
('CoreStates Corp'). CoreStates Corp, based in Philadelphia, Pennsylvania, is
one of the 25 largest bank holding companies in the United States.
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, as well as related
investment advisory, research, trading and fund management functions. 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,
Philadelphia, Pennsylvania 19102.
As a result of the merger of CoreStates Corp and Meridian Bancorp, Inc. in April
1996, Meridian Investment Company ('MIC') is now a wholly-owned subsidiary of
CoreStates Corp and an affiliate of CoreStates Advisers. Certain employees of
MIC perform investment management and advisory functions for the Funds under the
overall authority of CoreStates Advisers.
As investment adviser, CoreStates Advisers manages the investment portfolio of
each Fund, makes decisions about and places orders for all purchases and sales
of a Fund's portfolio securities, and maintains certain records relating to
these 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.
ADMINISTRATOR AND TRANSFER AGENT
SEI Fund Resources ('SFR' or the 'Administrator'), with principal offices at 530
East Swedesford Road, Wayne, Pennsylvania 19087, acts as the administrator for
each Fund. For its administrative services, SFR is entitled to receive a fee
from each Fund, computed daily and paid monthly, at the annual rate of .25% of
the Fund's average daily net assets. As Administrator, SFR generally assists in
the Funds' administration and operations.
Boston Financial Data Services ('BFDS'), an affiliate of State Street Bank and
Trust Company located at 225 Franklin Street, Boston, Massachusetts 02110,
serves as each Fund's transfer agent (the 'Transfer Agent') and dividend paying
agent.
DISTRIBUTOR
SEI Investments Distribution Co. (the 'Distributor'), with principal offices at
One Freedom Valley Drive, Oaks, Pennsylvania 19456, serves as each Fund's
distributor pursuant to a Distribution Agreement. Class C Shares are also
subject to a separate distribution plan (the 'Distribution Plan') approved by
the Board of Directors. The Distribution Plan for Class C Shares provides that
CoreFunds will pay the Distributor an annual fee, calculated on an average daily
net basis and paid monthly, of up to .25% of the average daily net assets of
Class C Shares of each Fund. The Distributor may use this fee as compensation
for its distribution-related services or to compensate participating
broker/dealers and shareholder servicing agents for performing distribution or
shareholder services. CoreStates Bank, N.A., has entered into a Shareholder
Servicing Agreement with the Distributor.
12
<PAGE>
The services provided by participating broker/dealers or shareholder servicing
agents may include:
|__ establishing and maintaining customer accounts and records
|__ aggregating and processing purchase and redemption requests from customers
|__ placing net purchase and redemption orders with the Distributor
|__ automatically investing customer account cash balances
|__ providing periodic statements to customers
|__ arranging for bank wires
|__ answering routine customer inquiries concerning their investments
|__ assisting customers in changing distribution options, account designations
and addresses
|__ performing sub-accounting functions
|__ processing distribution payments on behalf of customers
|__ forwarding certain shareholder communications from the Funds
to customers and
|__ providing other similar services.
With respect to the Money Market Funds, the Distributor may provide promotional
incentives, from time to time and at its own expense, in the form of cash or
other compensation, to certain financial institutions whose representatives have
sold or are expected to sell significant amounts of the shares of these Funds.
CUSTODIAN
CoreStates Bank, N.A., (the "Custodian") Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, acts as wire agent and custodian for the
assets of the Funds. The Custodian holds cash, securities and other assets of
the Funds as required by the Investment Company Act.
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.
Money Market Funds
The Money Market Funds may advertise 'yield' and 'effective yield.' Both yield
figures are based on historical earnings and are not intended to indicate future
performance.
The 'yield' of a Fund refers to the income generated by an investment in the
Fund over a 7-day period. (The period will be stated in the advertisement.) This
income is then 'annualized.' That is, the amount of income generated by the
investment during that month is assumed to be generated each month over a
12-month period and is shown as a percentage of the investment.
The 'effective yield' is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The 'effective
yield' will be slightly higher than the 'yield' because of the compounding
effect of this assumed reinvestment. (See 'Yields' in the Statement of
Additional Information.)
The Tax-Free Reserve may also advertise their 'taxable equivalent yield,' which
is calculated by taking into account the investor's current tax bracket. This is
the yield an investor would need to earn from a taxable investment in order to
realize an 'after-tax' benefit equal to the tax-free yield provided by the Fund.
IN GENERAL
The Funds will include performance data for Class C shares, as appropriate, in
any advertisement or information including performance data of the Funds.
Performance data concerning Class C Shares will reflect the distribution and
incremental transfer agent expenses borne exclusively by Class C Shares.
The performance of any investment will generally reflect market conditions,
portfolio quality and maturity, type of investment, and operating expenses. Each
Fund's performance will fluctuate and is not necessarily representative of
future results. A Fund's performance would be favorably affected by any
investment advisory fee waivers on the part of CoreStates Advisers. Shareholders
will receive unaudited semi-annual reports describing the Funds' investment
operations and annual financial statements audited by independent auditors.
Description of Shares
In addition to the portfolios described in this Prospectus, CoreFunds has set up
Class C Shares representing the Elite Treasury Reserve, Elite Cash Reserve,
Elite Government Reserve and Elite Tax-Free Reserve portfolios. In total,
CoreFunds consists of twenty-one different portfolios. CoreFunds may in the
future create additional portfolios or classes of shares within a portfolio.
Class Y Shares -- Institutional, Class A and Class B -- Individual and Shares of
the Elite Money Market Funds are offered in separate prospectuses. This
Prospectus solely relates to the Money Market Funds' Class C Shares --
Individual.
13
<PAGE>
IF YOU WISH TO OBTAIN SIMILAR INFORMATION REGARDING OTHER COREFUND PORTFOLIOS,
YOU MAY REQUEST PROSPECTUSES DESCRIBING THE PORTFOLIOS BY CONTACTING THE
DISTRIBUTOR AT 1-800-355-CORE.
Differences exist between classes of shares of some CoreFunds portfolios
pertaining to distribution costs, incremental transfer agency fees and any other
incremental expenses identified that should be properly allocated to a class.
Class A Shares are subject to a sales load, and distribution and transfer agent
expenses, for certain shareholder services they receive. Class B Shares are
subject to a contingent deferred sales load and distribution and transfer agent
expenses for certain shareholders services they receive. Class C Shares are
subject to similar expenses, but are not subject to a sales load. Class A, Class
B and Class C Shares also have voting rights, in connection with the
Distribution Plans affecting Class A, Class B and Class C Shares. The different
distribution and transfer agent expenses charged to Class A, Class B and Class C
Shares result in their having different income distributions and performance
results from Class Y Shares.
Aside from these differences, each share in each Fund represents an
equal proportionate interest in that Fund with each other share of the same
Fund. Each share in each Fund is entitled to distributions out of the income
earned on the assets belonging to the Fund, as the Board of Directors declares
at its discretion.
CoreFunds' shareholders are entitled to one vote for each full share
held, and fractional votes for fractional shares held. Shareholders 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.
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:
|__ more than 50% of the outstanding shares of a Fund or
|__ at least 67% of the shares of a Fund present at a meeting at which the
holders of more than 50% of the outstanding shares of such Fund are represented
in person or by proxy.
General Information
In accordance with the Maryland General Corporation Law, 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 that Fund.
'Assets belonging to a Fund' are defined as:
|__ the consideration received by CoreFunds upon the issuance or sale
of shares in a Fund
|__ all income, earnings, profits and proceeds derived from the
investment and
|__ any proceeds from the sale, exchange or liquidation of the
investments.
Assets belonging to a Fund are charged with the direct liabilities of that Fund
as well as a share of the general liabilities of CoreFunds. The general
liabilities of CoreFunds are allocated in proportion to the relative asset
values of each of CoreFunds portfolio at the time the expense or liability is
incurred. CoreFunds management charges the Funds for liabilities when they are
incurred and credits the Funds for assets when they are acquired. These
determinations are reviewed and approved annually by the Board of Directors and
are conclusive.
14
<PAGE>
SHAREHOLDER SERVICES GUIDE
OPENING AN ACCOUNT
AND PURCHASING SHARES
This Prospectus is provided only to CoreFunds Sweep customers of CoreStates
Bank, N.A. Please contact CoreStates Bank, N.A. at 1-800-222-0246, or consult
your CoreFunds Sweep Agreement, for information regarding CoreFund purchases and
redemptions through the CoreFunds sweep feature. If you need assistance with an
Account Opening Form for other Funds in the CoreFund Family of Mutual Funds, or
if you have any questions about the CoreFunds, please call 1-800-355-CORE
(2673).
Execution of Orders
We will execute an order on any business day at the net asset value
per share determined on that day if we receive it before 12:00 noon for a money
market fund.
We will determine the net asset value as of 12:00 noon on that date.
If we receive an order after 12:00 noon on any business day, we will execute it
on the next business day of the Fund.
We recognize receipt of an order when the Transfer Agent or its authorized agent
receives it. A Fund may establish special procedures to expedite receipt of
orders from institutional investors. For non-CoreFunds Sweep customers, an
order is deemed to be received when received by the Transfer Agent. Depending on
the terms of the CoreFunds Sweep Agreement, cash sweeps will occur on either a
daily or weekly basis. CoreFunds Sweep customers should consult their CoreFunds
Sweep Agreement for more information on purchases. The Distributor reserves the
right to reject any purchase order when it determines that it is not in the best
interests of the Fund and its shareholders to accept it.
SELLING (REDEEMING) YOUR SHARES
Important Redemption Information
We execute redemption orders for the Money Market Funds at the net asset value
per share at 12:00 noon that day if we receive the order by 12:00 noon that day.
We recognize receipt of an order when the Transfer Agent or its authorized agent
receives it, and the execution of redemption orders by the Transfer Agent will
be delayed for the period of time that the redemption order is in transit from
CoreStates Bank, N.A., to the Transfer Agent.
The Transfer Agent will pay for redeemed shares within seven business days after
receiving the request for redemption, except under extraordinary circumstances.
CoreFunds Sweep customers do not have access to telephone or other special
redemption procedures. Please contact CoreStates Bank, N.A. at 1-800-222-0246,
or consult your CoreFunds Sweep Agreement, for details regarding redemptions.
For non-CoreFunds Sweep customers, payment for redeemed shares will be made not
later than seven business days after receipt by the Transfer
Agent of the request for redemption, absent extraordinary circumstances.
For more information on CoreFunds, please call:
1-800-355-CORE (2673)
MONDAY THROUGH FRIDAY
BETWEEN 8:30 A.M. AND 8:00 P.M.
Or write to us at:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
EQUITY FUNDS
Equity Index (659)
Core Equity (742)
Growth Equity (747)
Special Equity (665)
International Growth (744)
BALANCED FUND
Balanced (751)
FIXED INCOME FUNDS
Short Term Income (663)
Short-Intermediate Bond (740)
Government Income (749)
Bond (661)
Global Bond (755)
TAX-EXEMPT INCOME FUNDS
Intermediate Municipal Bond (753)
Pennsylvania Municipal Bond (757)
New Jersey Municipal Bond (759)
MONEY MARKET FUNDS
Treasury Reserve (733)
Cash Reserve (731)
Tax-Free Reserve (737)
15
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16
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The CoreFund Family of Mutual Funds
COREFUNDS, INC.
DIRECTORS
Emil J. Mikity, Chairman
George H. Strong
Erin Anderson
Thomas J. Taylor
Cheryl H. Wade
OFFICERS
David G. Lee, President
James W. Jennings, Secretary
INVESTMENT ADVISER
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
ADMINISTRATOR
SEI Fund Resources
Wayne, PA 19087
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
INVESTMENT ADVISER
[LOGO]
For current performance, purchase, redemption, and other information, call
1-800-355-CORE (2673).
The CoreFund Family of Mutual Funds
MONEY MARKET
Treasury Reserve
Cash Reserve
Tax-Free Reserve
SEI Investments Distribution Co., Distributor
Oaks, PA 19456
1-800-355-CORE
COR-F-062-02
11/97
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CoreFund(R)
Prospectus
CoreFunds, Inc.
November 1, 1997
Elite Money Market Funds
Class Y and Class C Shares
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CoreFunds, Inc. ("CoreFunds") is an open-end management investment company
consisting of 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").
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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 November 1, 1997, 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.
530 East Swedesford Road
Wayne, PA 19087
1-800-355-CORE
Keep this Prospectus for future reference.
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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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS / / COREFUND
<TABLE>
<S> <C> <C> <C>
Transaction and Operating Expense Tables............... 3 Financial Highlights.................................... 5
</TABLE>
INFORMATION ON THE FUNDS
<TABLE>
<S> <C> <C> <C>
Investment Objectives of the Funds..................... 6 Net Asset Value......................................15
Investment Policies.................................... 6 Portfolio Pricing....................................15
Other Investment Practices of the Management..............................................16
Funds............................................... 7 Investment Adviser...................................16
Types of Securities in Which the Funds Fund Managers........................................16
Invest.............................................. 8 Administrator........................................17
Investment Restrictions................................11 Distributor..........................................17
Investor Considerations................................12 Custodian............................................18
Investment Risks....................................12 Performance Information.................................18
Distributions..........................................13 Total Return and Yield...............................18
Taxes..................................................13 Description of Shares...................................18
Valuation of Shares....................................15 General Information.....................................20
</TABLE>
SHAREHOLDER SERVICES GUIDE
<TABLE>
<S> <C>
Opening an Account and Selling Your Shares.....................................23
Purchasing Shares...................................21 Exchanging Shares.......................................26
</TABLE>
No person is authorized by CoreFunds, Inc. to give any information or make
any representation other than those contained in this Prospectus or in other
printed or written material issued by CoreFunds, Inc. and you should not
rely on any other information or representation.
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2 Table of Contents
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TRANSACTION AND OPERATING EXPENSE TABLES / / COREFUND
The purpose of the following tables is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class Y or Class C shares of the Elite Funds.
Elite Government Reserve Class Y and Elite Funds Class C Shares had not yet
commenced operations as of June 30, 1997.
<TABLE>
<CAPTION>
------- --------- -------- ---------
ELITE ELITE ELITE ELITE
CASH GOVERNMENT TREASURY TAX-FREE
RESERVE RESERVE RESERVE RESERVE
------- --------- -------- ---------
<S> <C> <C> <C> <C>
Class Y Shares
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
Other Expenses(2).............................................. .12% .12% .12% .12%
Net Annual Fund Operating Expenses(3).......................... .20% .20% .20% .20%
</TABLE>
(1) Absent voluntary waivers, the Adviser's investment advisory fees would be
.20% of average net assets. Advisory Fees and Total Operating Expenses have
been restated to reflect current expenses.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .50%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of service provider that is waiving its fee. Total
operating expenses have been restated to reflect anticipated expenses.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.
<TABLE>
<S> <C> <C> <C> <C> <C>
Example
You would pay the following 1 year $2 $2 $2 $2
expenses on a $1,000 investment, 3 year 6 6 6 6
assuming (1) a 5% annual return 5 year 11 11 11 11
and (2) redemption at the end 10 year 26 26 26 26
of each time period.
</TABLE>
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Transaction and Operating Expense Tables 3
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TRANSACTION AND OPERATING EXPENSE TABLES (continued)
<TABLE>
<CAPTION>
--------- -------------- ---------- ----------
ELITE ELITE ELITE ELITE
CASH GOVERNMENT TREASURY TAX-FREE
Class C Shares RESERVE RESERVE RESERVE RESERVE
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<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%
Other Expenses(2).............................................. .12% .12% .12% .12%
Net Annual Fund Operating Expenses(3).......................... .45% .45% .45% .45%
</TABLE>
(1) Absent voluntary waivers, the Adviser's investment advisory fees would be
.20% of the average net assets of each Fund. Advisory Fees and Total
Operating Expenses have been restated to reflect current expenses.
(2) Absent voluntary waivers by the Administrator, Other Expenses would be .30%
of average net assets.
(3) Absent the fee waivers described above, Total Operating Expenses would have
been .75%. These fee waivers are voluntary and may be discontinued at any
time at the discretion of service provider that is waiving its fee.
THE INFORMATION CONTAINED IN THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.
<TABLE>
<S> <C> <C> <C> <C> <C>
EXAMPLE
You would pay the following 1 year $5 $5 $5 $5
expenses on a $1,000 investment, 3 year 14 14 14 14
assuming (1) a 5% annual return 5 year 25 25 25 25
and (2) redemption at the end 10 year 57 57 57 57
of each time period.
</TABLE>
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4 Transaction and Operating Expense Tables
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FINANCIAL HIGHLIGHTS / / 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. The Elite Government Reserve has not yet commenced
operations. In addition, the Class C shares for each of the Elite 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 auditors, whose report thereon appears in
CoreFunds' annual report which accompanies the Statement of Additional
Information. The annual report for the Funds is available to shareholders at no
charge by calling CoreFunds at 1-800-355-CORE.
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
of Period Income Income of Period Return omitted) Assets
----------- ----------- ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
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ELITE CASH RESERVE
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CLASS Y
1997....................................... $1.00 0.05 (0.05) $1.00 5.43% $206,987 0.17%
1996....................................... $1.00 0.05 (0.05) $1.00 5.62% $384,446 0.15%
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%
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ELITE TREASURY RESERVE
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CLASS Y
1997....................................... $1.00 0.05 (0.05) $1.00 5.33% $ 21,667 0.17%
1996....................................... $1.00 0.05 (0.05) $1.00 5.54% $ 24,498 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%
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ELITE TAX-FREE RESERVE
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CLASS Y
1997....................................... $1.00 0.03 (0.03) $1.00 3.42% $147,311 0.17%
1996....................................... $1.00 0.03 (0.03) $1.00 3.51% $ 86,477 0.16%
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%
<CAPTION>
Ratio of Ratio of
Expenses Net Income
Ratio of Average Net to Average
Net Income Assets Net Assets
to Average (Excluding (Excluding
Net Assets Waivers) Waivers)
----------- ----------- -----------
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ELITE CASH RESERVE
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CLASS Y
1997....................................... 5.28% 0.50% 4.94%
1996....................................... 5.46% 0.76% 4.85%
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%
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ELITE TREASURY RESERVE
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CLASS Y
1997....................................... 5.20% 0.50% 4.87%
1996....................................... 5.39% 0.80% 4.78%
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%
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ELITE TAX-FREE RESERVE
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CLASS Y
1997....................................... 3.39% 0.50% 3.06%
1996....................................... 3.44% 0.76% 2.84%
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>
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+ Returns shown are for the period indicated and have not been annualized.
(1) The Elite Cash Reserve commenced operations on August 7, 1989. Ratios for
this period have been annualized.
(2) The Elite Treasury Reserve commenced operations on December 10, 1991. Ratios
for this period have been annualized.
(3) The Elite Tax-Free Reserve commenced operations on November 19, 1991. Ratios
for this period have been annualized.
Financial Highlights 5
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INFORMATION ON THE FUNDS
/ /
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 objective of each Elite Fund is
fundamental and may only be changed by a shareholder vote.
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
("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.
/ /
INVESTMENT
POLICIES
The Funds' investment policies are described below. 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) a non-first tier security rated according to the foregoing criteria in the
second highest short-term rating category, or, if unrated, determined to be of
comparable quality (a "second tier security"). A security is not considered to
be unrated if its issuer has outstanding obligations of comparable priority and
security that have a short-term rating.
6 Investment Policies
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/ / COREFUND
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. 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 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 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'
Investment Policies 7
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INFORMATION ON THE FUNDS (CONTINUED)
custodian in the Federal Reserve book-entry system.
OTHER INVESTMENT COMPANIES--All Funds
The Funds may invest in the securities of other investment companies within the
limits prescribed by the Investment Company Act of 1940 (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 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.
LENDING OF SECURITIES--All Funds
The lending of portfolio securities to qualified banks and securities brokers
and dealers for purposes of realizing additional income. The Fund receives
collateral consisting of cash, letters of credit issued by certain banks, or
securities issued or guaranteed by the U.S. Government or its agencies and equal
to at least 100% of the current market value of the loaned securities. Such
loans would involve risk of delay in receiving collateral, risk of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially.
Before implementing such a lending program, the Fund must first receive an
exemptive order from the SEC permitting it to use its Custodian, CoreStates
Bank, N.A., as its lending agent.
/ /
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--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.
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;
obligations supported by the discretionary authority of the U.S. Treasury to
purchase the agency's obligations and obligations supported only by the credit
of the agency or instrumentality. 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.
3. STRIPS--zero coupon U.S. Treasury securities, which means that they are
sold at a substantial discount and redeemed at face
8 Types of Securities
<PAGE>
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/ / COREFUND
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.
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. 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--
Variable amount master demand notes in which Cash Reserve may invest are
unsecured demand notes issued by corporations, insurance companies and other
borrowers that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate according to the terms of the
instrument. Although there is no secondary market in the notes, the Fund may
demand payment of principal and accrued interest at any time. 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 interest and principal
component parts of such obligations, such as STRIPS. Treasury Reserve
Types of Securities 9
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INFORMATION ON THE FUNDS (CONTINUED)
may also invest in repurchase agreements fully collateralized by U.S. Treasury
obligations.
TAX-FREE RESERVE Tax-Free Reserve will invest in municipal securities including:
1. General Obligation Securities - secured by the issuer's pledge of its
full faith, credit, and taxing power for the payment of principal and interest.
2. Revenue Securities - payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or another specific revenue source, such as the user of
the facility being financed. Industrial development and pollution control bonds
held by the Fund are revenue securities whose credit quality is usually directly
related to the credit standing of the corporate user of the facility involved.
3. Moral Obligation Bonds - 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 - tax-exempt obligations upon which
interest is payable at a floating or variable rate. The Fund 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.
5. Municipal Lease Obligations - issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the municipality's credit, and
their interest may become taxable if the lease is assigned. If funds are not
appropriated for the following year's lease payments, the lease may terminate,
with the possibility of default on the lease obligation and significant loss to
a Fund. Certificates of participation in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest in
the lease-purchase payments made.
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
10 Types of Securities
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/ / COREFUND
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.
PENNSYLVANIA MUNICIPAL SECURITIES
In managing the Tax-Free Reserve's portfolio, CoreStates Advisers intends to
invest, when possible, the Fund's assets in tax-exempt obligations issued by the
Commonwealth of Pennsylvania and its political subdivisions ("Pennsylvania
Municipal Securities"), provided the investment is consistent with the Fund's
investment objective and policies and its status as a diversified investment
company. Because of the relatively limited number of Pennsylvania municipal
issuers and restricted supply of outstanding Municipal Securities issued by them
that meet the Fund's investment criteria, CoreStates Advisers cannot predict
precisely what percentage of the Fund's portfolio will be invested in such
issuers.
Except as stated above with respect to Pennsylvania Municipal Securities,
CoreStates Advisers does not intend on a regular basis to invest more than 25%
of the Fund's total assets in (i) Municipal Securities whose issuers are in the
same state, (ii) Municipal Securities, the interest on which is paid solely from
revenues of similar projects, and (iii) industrial development bonds, although
it may do so from time to time. To the extent the Fund's assets are so
concentrated, the Fund would be subject to the peculiar risks presented by the
laws and economic conditions relating to such states, projects, and bonds to a
greater extent than it would be if its assets were not so concentrated.
TEMPORARY INVESTMENTS
Certain of the Funds are permitted to make temporary investments in
short-term obligations which are commercial paper (including variable amount
master demand notes), bankers' acceptances, certificates of deposit, repurchase
agreements, obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations. Such investments may be used to
invest uncommitted cash balances, maintain liquidity to meet shareholder
redemptions or take a temporary defensive position against potential or serious
stock market declines.
/ /
INVESTMENT
RESTRICTIONS
Investment policies of the Funds that are not fundamental may be changed by the
Board of Directors without shareholder approval, provided such changes are
deemed to be consistent with a Fund's objective and in the best interests of its
shareholders. However, the investment objectives of each Fund, along with the
restrictions and limitations described herein and in the Statement of Additional
Information, are fundamental and may be changed only by the affirmative vote of
a majority of the outstanding shares of such Fund. See "Description of Shares."
A FUND MAY NOT:
1. Make loans, except that each Fund may purchase or hold certain debt
instruments, 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
Investment Restrictions 11
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INFORMATION ON THE FUNDS (CONTINUED)
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.
/ /
INVESTOR
CONSIDERATIONS
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 the issuer prior to
12 Investor Considerations
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/ / COREFUND
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. In addition, the Fund often purchases securities supported by
credit enhancements from financial institutions. Changes in the credit quality
of these institutions could adversely affect the share price of such securities.
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.
/ /
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 Opening 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. If
neither option is selected on the Account Opening Form, the Transfer Agent will
automatically reinvest all dividends and distributions 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.
/ /
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.
The following summary is based on current tax laws and regulations which
may be changed by legislative, judicial or administrative action.
Taxes 13
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INFORMATION ON THE FUNDS (CONTINUED)
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 consequences.
Except as noted below, tax-exempt interest dividends and other
distributions 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
14 Taxes
<PAGE>
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/ / COREFUND
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.
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.
/ /
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) (12:00 p.m. for Tax-Free Reserve) 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
of $1.00 per share.
PORTFOLIO PRICING ______________________________________________________________
Portfolio securities are valued according to the broadest and most
representative market. 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 Investment Company Act rules. 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
Valuation of Shares 15
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INFORMATION ON THE FUNDS (CONTINUED)
can be no assurance that the net asset value will not vary.
/ /
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, N.A., itself a wholly-owned subsidiary of CoreStates Financial Corp
("CoreStates Corp"). CoreStates Corp, based in Philadelphia, Pennsylvania, is
one of the 25 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 $30 billion in customer
accounts through a variety of banking activities at over 600 domestic and
foreign locations.
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,
Pennsylvania 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.
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
Joyce Ann Lotkowski, Investment Officer, is portfolio manager of the Elite Cash
Reserve. She is a fixed income portfolio manager responsible for individually
managed corporate trust accounts. Ms. Lotkowski joined CoreStates Advisers in
1982 as a portfolio manager. She joined the Philadelphia National Bank in 1978
in the CPA and Government Request Department and in 1980 transferred to the
Corporate Trust Department.
16 Management
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/ / COREFUND
ELITE GOVERNMENT RESERVE
ELITE TREASURY RESERVE
Ronald R. Brasten, Vice President, 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 Ife, Nigeria.
ADMINISTRATOR __________________________________________________________________
SEI Fund Resources ("SFR" or the "Administrator"), with principal offices at 530
East Swedesford Road, Wayne, Pennsylvania 19087, acts as each Fund's
administrator. For its administrative services, SFR 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, SFR generally assists in
each Fund's administration and operations. Boston Financial Data Services, an
affiliate of State Street Bank and Trust Company located at 225 Franklin Street,
Boston, Massachusetts 02110, serves as each Fund's transfer agent (the "Transfer
Agent") and dividend paying agent.
DISTRIBUTOR ____________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), with principal offices at
One Freedom Valley Road, Oaks, Pennsylvania, 19456, serves as each Fund's
distributor pursuant to a Distribution Agreement. Class C Shares of the Elite
Funds are also subject to a separate distribution plan (the "Distribution
Plan"), which provides that CoreFunds will pay the Distributor an annual fee,
calculated on an average daily net basis and paid monthly, of up to .25% of the
average daily net assets of Class C Shares of each Fund. The Distributor may use
this fee as compensation for its distribution-related services or to compensate
Participating Broker/Dealers and Shareholder Servicing Agents for performing
distribution-related or shareholder services. CoreStates Bank, N.A., has entered
a Shareholder Servicing Agreement with the Distributor.
The services provided by Participating Broker/Dealers or Shareholder
Servicing Agents may include establishing and maintaining customer accounts and
records; aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with the Distributor;
automatically investing customer account cash balances; providing periodic
statements to customers; arranging for bank wires; answering routine customer
inquiries concerning their investments; assisting customers in changing dividend
options, account designations and addresses; performing sub-accounting
functions; processing dividend payments on behalf of customers; forwarding
certain shareholder communications from the Funds to customers; and providing
other similar services.
With respect to the Funds, the Distributor may, from time to time and at
its own expense, provide promotional incentives,
Management 17
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INFORMATION ON THE FUNDS
in the form of cash or other compensation, to certain financial institutions
whose representatives have sold or are expected to sell significant amounts of
the shares of these Funds.
Compensation received by persons selling Class C Shares may be different
than the compensation received by those persons selling Class Y Shares.
CUSTODIAN ______________________________________________________________________
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
Pennsylvania 19101, acts as wire agent and custodian for the assets of the
Funds. CoreStates Bank, N.A. holds cash, securities and other assets of the
Funds as required by the Investment Company Act.
/ /
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 7-day period (which period
will be stated in the advertisement). This income is then annualized. That is,
the amount of income generated by the investment during that month is assumed to
be generated each month over a 12-month period and is shown as a percentage of
the investment. The effective yield is calculated similarly but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. See "Yields" in the
Statement of Additional Information.
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.
Shareholders will receive unaudited semi-annual reports describing the
Funds' investment operations and annual financial statements audited by
independent auditors.
/ /
DESCRIPTION
OF SHARES
CoreFunds has set up the following twenty-one portfolios: Growth Equity, Core
Equity, Special Equity, Equity Index, International
18 Description of Shares
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/ / COREFUND
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 up to three classes of each portfolio. Class Y Shares are
primarily offered to various types of institutional investors. Class A, Class B
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. Like Class
A and Class C Shares, Class B Shares differ from Class Y Shares in that Class B
Shares are subject to distribution and transfer agent expenses for certain
shareholder services they receive. Class B Shares are also subject to a
contingent deferred sales charge. Class A, Class B and Class C Shares also have
voting rights which Class Y Shares do not, in connection with the Distribution
Plan affecting Class A, Class B and Class C Shares. The distribution and
transfer agent expenses charged Class A, Class B and Class C Shares result in
Class A, Class B and Class C Shares having different dividends and performance
results from Class Y Shares. In addition, the minimum initial investment for
Class Y Shares is substantially higher than that required for Class A, Class B
and Class 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.
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
Description of Shares 19
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INFORMATION ON THE FUNDS (CONTINUED)
Fund present at a meeting at which the holders of more than 50% of the
outstanding shares of such Fund are represented in person or by proxy.
/ /
GENERAL
INFORMATION
In accordance with the Maryland General Corporation Law, 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.
20 General Information
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SHAREHOLDER SERVICES GUIDE / / COREFUND
<TABLE>
<S> <C>
OPENING AN ACCOUNT AND To open a new account, either by mail or by wire, simply complete and return an Account Opening
PURCHASING SHARES Form. Your purchase must be equal to or greater than the $1,000,000 minimum initial investment
requirement and the $500 minimum initial investment requirement for Class Y Shares and Class C
shares, respectively, for each Fund. There is a $50 per month minimum initial investment
requirement for Automatic Investment Plans. Shares of the Funds are only offered to residents of
states in which the shares are eligible for purchase. If you need assistance with the Account
Opening Form or have any questions about the Funds, please call 1-800-355-CORE.
All purchases made by check should be in U.S. dollars and made payable to CoreFunds, Inc. (Fund
name) or in the case of a retirement account, the custodian or trustee. Third party checks will
not be accepted under any circumstance.
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</TABLE>
<TABLE>
<S> <C> <C>
PURCHASING NEW ACCOUNT ADDITIONAL INVESTMENTS TO EXISTING
BY MAIL: Mail the Account Opening Form and a check payable ACCOUNTS
Complete and sign the to CoreFunds, Inc. (Fund name) in at least the Mail your check with the return stub from
enclosed Account Opening minimum initial purchase amount to: your confirmation or statement to:
Form.
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
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</TABLE>
PURCHASING CORESTATES PHIL, for credit to
BY WIRE: Philadelphia, PA COREFUNDS
Money should be wired ABA 031000011, A/C 0169-0541
to: ACCOUNT NUMBER
<TABLE>
<S> <C>
BEFORE WIRING: The wire instructions must include the investor's account number. An order to purchase shares by
Please contact Federal Funds wire will be deemed to have been received on the business day of the wire, provided
CoreFunds Investor that investors notify CoreFunds Investor Services at 1-800-355-CORE by 12:00 p.m. (Eastern Time)
Services of their intentions to wire money.
(1-800-355-CORE)
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PURCHASING You may open an account or purchase additional shares by making an exchange from an existing
BY CoreFunds account. Call CoreFunds Investor Services at 1-800-355-CORE. For further information
EXCHANGE: regarding exchanges, please refer to page 26.
(from a CoreFund
account)
</TABLE>
Shareholder Services 21
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SHAREHOLDER SERVICES GUIDE (CONTINUED)
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AUTOMATIC INVESTMENT A shareholder or prospective shareholder may arrange for periodic investments in a fund through
PLAN ("AIP") automatic deductions by ACH from a checking account by completing the appropriate section on the
Account Opening Form or the Account Change Form. There is no minimum initial investment amount
for AIPS; however, the minimum pre-authorized investment amount is $50 per month per account. An
Account Opening Form or Account Change Form may be obtained by calling 1-800-355-CORE.
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SYSTEMATIC WITHDRAWAL CoreFunds offers a Systematic Withdrawal Plan which may be used by shareholders who wish to
PLAN ("SWP") receive regular distributions from their account. Upon commencement of the SWP, the account must
have a current value of $5,000 or more. Shareholders may elect to receive automatic payments via
check or ACH of $50 or more on a monthly, quarterly, semi-annual, or annual basis. Automatic
withdrawals are normally processed on the 25th day of the applicable month or, if such day is not
a business day, on the previous business day, and are paid promptly thereafter.
To arrange a SWP, complete the appropriate section on the Account Opening Form or the Account
Change Form. Either of these forms may be obtained by calling 1-800-355-CORE. Shareholders should
realize that if withdrawals exceed income dividends, their invested principal in the account will
be depleted. Thus, depending upon the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, their original investment could be exhausted
entirely. To participate in the SWP, shareholders must have their dividends automatically
reinvested. Shareholders may change or cancel the SWP at any time, upon written notice to
CoreFunds Investor Services or the Transfer Agent.
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An order received prior to 4:00 p.M. For any of the Funds (12:00 p.M. For Tax-free Reserve), on
EXECUTION OF ORDERS any business day, and in accordance with the procedures described below, will be executed on the
date of receipt at the net asset value determined as of 4:00 p.M. (12:00 P.M. For Tax-free
Reserve) on such date, plus any applicable sales charge. An order received after 4:00 p.M. (12:00
P.M. For Tax-free Reserve) on any business day will be executed on the next business day of the
Fund. An order is deemed to be received when received by the Transfer Agent, and the execution of
purchase orders by the Transfer Agent will be delayed for the period of time that the order is in
transit from CoreFunds Investor Service to the Transfer Agent. Special procedures may be
established by a Fund to expedite the receipt of orders from institutional investors.
Institutional investors purchasing or holding shares on behalf of their customers are responsible
for the transmission of
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22 Shareholder Services
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/ / COREFUND
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purchase and redemption orders (and the delivery of funds) to a Fund on a timely basis. The Funds
strongly recommend that investors of substantial amounts use Federal Funds to purchase shares. Every
shareholder of record will receive a confirmation of each new share transaction with a Fund, which
will show the total number of shares being held in safekeeping by the Transfer Agent for the account
of the shareholder. Shareholders may rely on these statements in lieu of certificates. Beneficial
ownership of shares held of record by institutional investors on behalf of their customers will be
recorded by the institutions and reflected in the regular account statements provided by them to
their customers.
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SELLING YOUR You may withdraw any portion of the funds in your account by redeeming shares at any time. You may
SHARES initiate a request by writing or by telephoning. Your redemption proceeds may be sent via mail, wire
or ACH. With respect to shares held by institutional investors on behalf of their customers'
accounts, however, all or part of the shares beneficially owned by a customer must be redeemed in
accordance with instructions and limitations pertaining to their account at the institution.
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REDEMPTION A written request for redemption must be received by the Transfer Agent in order to constitute a
BY MAIL: valid tender for redemption by mail. Requests should be mailed to:
COREFUNDS, INC.
C/O SEI INVESTMENTS
P.O. BOX 470
WAYNE, PA 19087-0470
The Transfer Agent may require that the signature on the written request be guaranteed by a
commercial bank or by a member firm of a domestic stock exchange. Signature guarantees will be
required if: (a) the redemption request is an amount in excess of $25,000; (b) redemption proceeds
are to be sent to a name and/or address that differs from the registered name or address of record;
or (c) a transfer of registration is requested. Otherwise, written redemption requests by mail may
be accepted without a signature guarantee.
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Shareholder Services 23
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SHAREHOLDER SERVICES GUIDE (CONTINUED)
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REDEMPTION Shareholders wishing to make redemptions by telephone must provide the information requested in the
BY Account Opening Form. Thereafter, telephone redemption requests may be made by calling CoreFunds
TELEPHONE: Investor Services at 1-800-355-CORE. Payment for telephone redemptions will normally be transmitted
on the next business day following receipt of a valid request for redemption. You may have the
proceeds sent to you either by mail or wire.
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BY WIRE: Shareholders of record may have their telephone redemption requests paid by a direct
wire to a domestic commercial bank account previously designated by the shareholder
on the Account Opening Form. The Transfer Agent may deduct its then-current wire fee
from the proceeds for wire redemptions. As of the date of this Prospectus, such fee
was $10.00 for each wire redemption. There is no minimum for telephone redemptions
paid by wire.
BY MAIL: Redemption proceeds may be paid by a check mailed to the name and address in which
the shareholder's account is registered with a Fund. There is no minimum for
telephone redemptions paid by check.
Shareholders may not close their accounts by telephone.
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CHECKWRITING The Funds will provide Class C shareholders of record, upon request to CoreFunds Investor Services or
PRIVILEGE: the Transfer Agent and without charge, with checks drawn on these Funds that will clear through
CoreStates Bank of Delaware, N.A. a subsidiary of CoreStates Bank, N.A. (the "Clearing Bank").
Shareholders will be required to sign signature cards and will be subject to any applicable rules and
regulations of the Clearing Bank relating to such check redemption privileges. Banks, corporations,
trusts, and other organizations should contact the Funds before submitting signature cards, since
corporate resolutions or other supporting documents may be required before the checkwriting privilege
may be used.
Checks drawn on the Funds may be made payable to the order of any payee in an amount of $250 or more.
Shareholders should be aware that, as is the case with regular bank checks, certain banks may not
provide cash at the time of deposit, but will wait until they have received payment from the Clearing
Bank. When a check is presented to the Clearing Bank for payment, subject to a Fund's acceptance of
the check, the Clearing Bank, as agent, causes the Fund to redeem, at the net asset value next
determined after such presentation, a sufficient number of full and fractional shares in the
shareholder's account with the Fund to cover the amount of the check. Checks will be returned by the
Clearing Bank if there are insufficient shares to meet the withdrawal amount.
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24 Shareholder Services
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Shareholders of record wishing to use this method of redemption should check the appropriate box in
the Account Opening Form, fill out the signature card available from CoreFunds Investor Services,
and mail the complete Form and signature card to CoreFunds, Inc., c/o SEI Investments, P.O. Box 470,
Wayne, PA 19087-0470. There is no charge for the clearance of any checks, although the Clearing Bank
will impose its customary overdraft fee in connection with returning any checks as to which there
are insufficient shares to meet the withdrawal amount. As of the date of this Prospectus, the
overdraft fee is $30.00.
Cancelled checks will ordinarily not be returned to the shareholder, although a shareholder may
obtain copies of cancelled checks drawn on the Funds by requesting them in writing from CoreFunds
Investor Services.
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REDEMPTION You may sell shares of the Funds by making an exchange into another CoreFunds portfolio. For more
BY information, please see below.
EXCHANGE:
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IMPORTANT / / Shareholders should be careful that transactions in Fund shares have not caused the value of
REDEMPTION their account to fall below the amount of the intended redemption.
INFORMATION: / / Redemption orders for the Funds are executed at the net asset value per share at 4:00 p.m.
(12:00 p.m. for Tax-Free Reserve) that day if received by 4:00 p.m. (12:00 p.m. for Tax-Free
Reserve) that day. An order is deemed to be received when received by the Transfer Agent and
the execution of redemption orders by the Transfer Agent will be delayed for the period of time
that the redemption order is in transit from SEI Fund Resources to the Transfer Agent. Except
as stated in the following paragraph, payment to shareholders for redeemed shares will be made
not later than seven business days after receipt by the Transfer Agent of the request for
redemption, absent extraordinary circumstances. However, to the largest extent possible, the
Funds will try to honor requests from shareholders for next-day payment, if such payment would
be consistent with a Fund's need for liquidity and stability.
/ / Shareholders should note that payment for the redemption of shares which were purchased by
check may not be made until a Fund can verify that the payment for such purchase has been, or
will be, collected, which may take up to ten calendar days after the date of purchase. The
Funds intend to pay cash for all shares redeemed, but under abnormal conditions which make
payment in cash unwise, a Fund may make payment wholly or partly in "readily marketable"
portfolio securities at their then market value equal to the redemption price. In such cases, a
shareholder may incur brokerage costs in converting such securities to cash.
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Shareholder Services 25
<PAGE>
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SHAREHOLDER SERVICES GUIDE (CONTINUED)
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MINIMUM Because of the relatively high cost of handling small investments, the Funds reserve the right to
ACCOUNT redeem, at net asset value, the shares of any shareholder whose account decreases to a value of less
BALANCE than $500. Accordingly, a shareholder making redemptions from a Fund may be subject to such
REQUIREMENT involuntary redemption. A shareholder will not be subject to such involuntary redemption if the
value of the shareholder's account falls below $500 solely because of market action. Before a Fund
redeems such shares and sends the proceeds to the shareholder, the shareholder will be given notice
that the value of the shares in the account is less than the minimum amount and will be allowed
sixty days to make an additional investment in an amount which will increase the value of the
account to at least $500.
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EXCHANGING Shares of a Fund held by a shareholder of record may be exchanged for shares in any of CoreFunds'
SHARES other retail portfolios. Shareholders wishing to use this telephone exchange privilege must check
the appropriate box on the Account Opening Form or on the account change form. Exchange requests
EXCHANGING should be directed to CoreFunds Investor Services at 1-800-355-CORE.
BY
TELEPHONE: Redemption orders may be placed by telephone. Neither the Fund nor the Transfer Agent will be
Call CoreFunds responsible for any loss, liability, cost or expense for acting upon wire instructions or upon
Investor Services telephone instructions that it reasonably believes to be genuine. The Fund and the Transfer Agent
(1-800-355-CORE) will each employ reasonable procedures to confirm that instructions communicated by telephone are
genuine. To ensure the authenticity of redemption or exchange instructions received by telephone,
the Transfer Agent examines each shareholder request by verifying the account number and/or tax
identification number at the time such request is made.
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26 Shareholder Services
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/ / COREFUND
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EXECUTION OF Telephone exchange requests received prior to 4:00 p.m. for a Fund (12:00 p.m. for Tax-Free
EXCHANGE Reserve), on any business day will be processed on the date of receipt. "Processing" a telephone
REQUESTS exchange request means that shares in the fund from which the shareholder is making an exchange will
be redeemed at the net asset value per share determined as of 4:00 p.m. for a Fund (12:00 p.m. for
Tax-Free Reserve) on the date of receipt. Purchases of shares of the Fund into which the shareholder
is making an exchange will be effected on the same business day, at such other fund's net asset
value per share determined as of 4:00 p.m. for an Equity or Fixed Income Fund, or for another Elite
Fund (12:00 p.m. for Tax-Free Reserve or a Money Market Fund other than an Elite Money Market Fund),
on such business day. Telephone exchange requests received after 4:00 p.m. for a Fund (12:00 p.m.
for Tax-Free Reserve), will be processed on the next business day in the manner described above.
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Before you make an exchange, you should consider the following:
IMPORTANT
EXCHANGE / / Shareholders may not exchange into a series of a portfolio for which they would not have been
INFORMATION initially eligible, and investors who exchange into any portfolio which imposes a sales charge
may be subject to such sales charge, if applicable and not previously paid.
/ / Shareholders should consider the investment objective, policies, and restrictions of the Fund
into which the shareholder is making an exchange, as set forth in the applicable prospectus. A
copy of the prospectus for any of the CoreFunds portfolios may be obtained by calling
1-800-355-CORE.
/ / Any telephone exchange must satisfy the requirements relating to the minimum initial investment
amounts of the Fund involved.
/ / The Company reserves the right to reject any telephone exchange request and to modify or
terminate the exchange privilege at any time, upon sixty days' written notice to Shareholders.
/ / Telephone exchanges may be subject to limitations as to amount or frequency, and to other
restrictions that may be established from time to time to ensure that such exchanges do not
disadvantage any Fund or its shareholders. There are no such limitations or restrictions in
effect as of the date hereof. Shareholders may obtain the terms of any such limitations or
restrictions, which may be revised at any time, from SEI Fund Resources.
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TAXES For federal income tax purposes, an exchange between Funds is a taxable event and, accordingly, a
capital gain or loss may be realized. Before making a telephone exchange request, shareholders
should consult a tax or other financial adviser to determine whether the redemption of shares of one
Fund or investment in shares of another Fund would be appropriate.
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Shareholder Services 27
<PAGE>
/ /
CoreFund(R)
Class Y and Class C Shares
[CoreFund Prospectus Logo]
November 1,1997
CoreFunds, Inc.
/ /
Directors
Emil J. Mikity, Chairman
George H. Strong
Erin Anderson
Cheryl H. Wade
Thomas J. Taylor
Officers
David G. Lee, President
James W. Jennings, Secretary
Investment Advisers
CoreStates Investment Advisers, Inc.
Philadelphia, PA 19101
Administrator
SEI Fund Resources
Wayne, PA 19087
Distributor
SEI Investments Distribution Co.
Oaks, PA 19456
Legal Counsel
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
Auditors
Ernst & Young LLP
Philadelphia, PA 19103
Investment Adviser
[CoreStates Logo]
CoreStates
Investment Advisers
/ /
Elite Cash Reserve
For current performance, purchase, redemption and Elite Government Reserve
other information, call 1-800-355-CORE (2673) Elite Treasury Reserve
Elite Tax-Free Reserve
<PAGE>
COREFUNDS, INC.
Statement of Additional Information
November 1, 1997
TABLE OF CONTENTS
THE COMPANY....................................... B-2
INVESTMENT POLICIES............................... B-3
INVESTMENT RESTRICTIONS........................... B-10
TEMPORARY INVESTMENTS............................. B-15
SPECIAL CONSIDERATIONS............................ B-17
PURCHASE AND REDEMPTION INFORMATION............... B-17
NET ASSET VALUE................................... B-19
DIVIDENDS......................................... B-20
PERFORMANCE ...................................... B-21
ADDITIONAL INFORMATION CONCERNING TAXES........... B-27
DESCRIPTION OF SHARES............................. B-30
DIRECTORS AND OFFICERS............................ B-32
INVESTMENT ADVISER................................ B-33
SUB-ADVISERS...................................... B-35
PORTFOLIO TRANSACTIONS............................ B-37
ADMINISTRATOR..................................... B-39
DISTRIBUTOR....................................... B-41
EXPENSES.......................................... B-43
LEGAL COUNSEL..................................... B-44
MISCELLANEOUS..................................... B-44
PRINCIPAL HOLDERS OF SECURITIES................... B-44
FINANCIAL STATEMENTS.............................. B-53
APPENDIX.......................................... B-54
This Statement of Additional Information is meant to be read in
conjunction with the applicable Prospectuses for the portfolios offered by
CoreFunds, Inc. dated November 1, 1997, and is incorporated by reference in its
entirety into those Prospectuses. Because this Statement of Additional
Information is not itself a Prospectus, no investment in shares of any portfolio
should be made solely upon the information contained herein. Copies of the
Prospectuses for the portfolios may be obtained by writing CoreFunds, Inc., c/o
SEI Investments, P.O. Box 470, Wayne, Pennsylvania 19087-0470, or by telephoning
1-800-355-CORE.
COR-F-032-07
<PAGE>
THE COMPANY
CoreFunds, Inc. (the "Company") is an open-end management investment
company that consists of twenty-one diversified and non-diversified portfolios
(the "Fund" or "Funds"). The Company is authorized to offer separate series of
shares of beneficial interest (the "Shares") of each Fund. Shareholders may
purchase Shares through four separate classes, Class Y, Class A, Class B, and
Class C, which provide for variations in sales charges, distribution costs,
transfer agent fees, voting rights, and dividends. Except for these differences
between the Class Y, Class A, Class B and Class C Shares, each Share of each
Fund represents an equal proportionate interest in that Fund. See "Description
of Shares."
The Funds
The information disclosed herein relates to all of the Funds, and all
of the Classes of Shares of the Funds, unless otherwise noted. Sections that are
particular to a certain Fund will be so referenced, or the Funds may be grouped
according to types of investment, as illustrated below.
Equity Funds:
- - Equity Index Fund
- - Core Equity Fund
- - Growth Equity Fund
- - Special Equity Fund
- - International Growth Fund
- - Balanced Fund
Fixed Income Funds:
- - Short Term Income Fund
- - Short-Intermediate Bond Fund
- - Government Income Fund
- - Bond Fund
- - Global Bond Fund
Tax-Exempt Fixed Income Funds:
- Intermediate Municipal Bond Fund
- Pennsylvania Municipal Bond Fund
- New Jersey Municipal Bond Fund
Taxable Money Market Funds:
- - Treasury Reserve
- - Cash Reserve
- - Elite Treasury Reserve
- - Elite Cash Reserve
- - Elite Government Reserve*
Tax-Exempt Money Market Funds:
- - Tax-Free Reserve
- - Elite Tax-Free Reserve
* This Fund has not yet commenced operations
Sale of Shares
Class Y Shares in the Funds are sold primarily to various types of
institutional investors, which may include CoreStates Bank, N.A., and its
affiliates and correspondent banks, for the investment of their own funds or
funds for which they serve in a fiduciary, agency, or custodial capacity.
Class A, Class B and Class C Shares of the Funds are offered to the
general public as well as to various types of institutional investors, which may
include CoreStates Bank, N.A., and its affiliates and correspondent banks, for
the investment of their own funds or funds for which they serve in a fiduciary,
agency, or custodial capacity. Investors may also include shareholders of other
investment companies which are advised by a Fund's adviser or sub-adviser, and
whose assets a Fund acquires in a tax-free reorganization, who propose to become
shareholders of the Fund as a result of such reorganization. In addition, Class
C Shares are offered to cash sweep customers of CoreStates Bank, N.A.
B-2
<PAGE>
INVESTMENT POLICIES
In General
The following policies supplement the investment objectives and
policies described in the Prospectuses for the Funds set forth below.
- Tax-Exempt Money Market Funds -
- Tax-Exempt Fixed Income Funds -
Municipal Securities
Municipal securities include debt obligations issued by or on behalf of
governmental entities or public authorities to obtain funds for various
purposes, including the construction of a wide range of public and privately-
operated facilities; the refunding of outstanding obligations; the payment of
general operating expenses; and the extension of loans to public institutions
and facilities.
There are, of course, variations in the quality of municipal securities
both within a particular classification and between classifications, and the
yields on municipal securities depend upon a variety of factors, including
general money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation, and the rating of the issue. The ratings of Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P")
described in the Appendix to this Statement of Additional Information represent
their opinions as to the quality of municipal securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and municipal securities with the same maturity, interest rate and
rating may have different yields, while municipal securities of the same
maturity and interest rate with different ratings may have the same yield.
Subsequent to its purchase by a Fund, an issue of municipal securities may cease
to be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. As Investment Adviser, CoreStates Investment Advisers,
Inc. ("CoreStates Advisers") will consider such an event in determining whether
a Fund should continue to hold the obligation.
The payment of principal and interest on most municipal securities
purchased by a Fund will depend upon the ability of the issuers to meet their
obligations. An issuer's obligations to make payments on its municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Code, and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment of interest on, and principal of, its
municipal securities may be materially adversely affected by litigation or other
conditions. For purposes of the investment limitations described in this
Statement of Additional Information and the Prospectuses, the District of
Columbia, each state, each of their political subdivisions, agencies,
instrumentalities and authorities and each multi-state agency of which a state
is a member is considered to be an "issuer." Further, the non-governmental user
of facilities financed by industrial development bonds is considered to be an
"issuer." With respect to those municipal securities that are supported by a
bank guarantee or other credit facility, the bank or other institution (or
governmental agency) providing the guarantee or credit facility may also be
considered to be an "issuer" in connection with the guarantee or facility.
Among other types of municipal securities, the Funds may purchase
short-term general obligation notes, tax anticipation notes, bond anticipation
notes, revenue anticipation notes, tax-exempt commercial paper, construction
loan notes and other forms of short-term loans. Such instruments are issued with
a short-term maturity in anticipation of the receipt of tax funds, the proceeds
of bond placements, or other revenues. In addition, these Funds may invest in
other types of tax-exempt instruments such as municipal bonds, industrial
development bonds
B-3
<PAGE>
and pollution control bonds, provided (for the Tax-Exempt Money Market Funds)
they have remaining maturities of 397 days or less at the time of purchase.
To the extent that certain of the Funds invest in securities of issuers
located in a single state (e.g., Pennsylvania and New Jersey), the Funds are
subject to the risks associated with municipal issuers in those states. In
particular, these Funds are subject to the risk that issuers in those states may
be affected by adverse economic conditions in those states, or by legislative or
judicial actions that impair the ability of issuers in those states to make
principal or interest payments on such securities.
Information on Investment Practices
1. Variable Rate Demand Obligations. Variable rate demand obligations
held by the Intermediate Municipal Bond, Pennsylvania Municipal Bond, New Jersey
Municipal Bond and Tax-Exempt Money Market Funds may have maturities of more
than 397 days, provided (i) the Funds are entitled to the payment of principal
and accrued interest at specified intervals not exceeding 397 days and upon not
more than 30 days' notice, or (ii) the rate of interest on such obligations is
adjusted automatically at periodic intervals, which normally will not exceed 31
days but may extend up to 397 days. This 397 day limit does not apply to the
Intermediate Municipal Bond Fund. The rate of interest on such notes is
generally based upon the interest rates for commercial paper issued by the
master demand note issuer. The rate will be adjusted automatically at periodic
intervals which normally will not exceed 31 days but may extend longer. Because
master demand notes are direct lending arrangements between such Fund and the
issuer, they are not normally traded.
2. When-Issued Securities. The Tax-Exempt Fixed Income and Tax-Exempt
Money Market Funds may purchase municipal securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). When a Fund agrees to purchase when-issued securities, the Company will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. The Fund may be required subsequently to place
additional assets in the separate account in order to ensure that the value of
the account remains equal to the amount of the Fund's commitment. Therefore, it
may be expected that the Fund's net assets will fluctuate to a greater degree
when they set aside portfolio securities to cover such purchase commitments than
when they set aside cash. In addition, because a Fund will set aside cash or
liquid assets to satisfy its purchase commitments in the manner described, the
Fund's liquidity and ability to manage its investment portfolios might be
affected in the event its commitments to purchase when-issued securities ever
exceeded 25% of the value of its total assets. CoreStates Advisers intends,
however, to take reasonable precautions in connection with the Tax-Free Money
Market Funds' investment practices with respect to when-issued securities to
avoid any adverse effect on a Fund's policy of maintaining a net asset value per
Share at $1.00.
When acquiring when-issued securities for a Fund, CoreStates Advisers
will assess such factors as the stability or instability of prevailing interest
rates, the amount and period of a Fund's commitment with respect to the
when-issued securities being acquired, the interest rate to be paid on those
securities, and the length of a Fund's average weighted portfolio maturity at
the time.
When a Fund engages in when-issued transactions, it relies upon the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous.
B-4
<PAGE>
- Short Term Income Fund -
- Short-Intermediate Bond Fund -
- Government Income Fund -
- Bond Fund -
- Elite Government Reserve -
GNMAs
These Funds may invest in securities issued by the Government National
Mortgage Association ("GNMA"), a wholly-owned U.S. Government corporation which
guarantees the timely payment of principal and interest. Obligations of GNMA are
backed by the full faith and credit of the U.S. Government. The market value and
interest yield of GNMA securities can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of federally insured mortgage loans. GNMA
certificates consist of underlying mortgages with a maximum maturity of 30
years. However, due to scheduled and unscheduled principal payments, GNMA
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to accurately predict the average maturity of a particular
GNMA pool. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be passed through to investors. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. As a result, there
will be monthly scheduled payments of principal and interest. In addition, there
may be unscheduled principal payments representing prepayments on the underlying
mortgages. Although GNMA certificates may offer yields higher than those
available from other types of U.S. Government securities, GNMA certificates may
be less effective than other types of securities as a means of locking in
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a GNMA certificate likely will not rise as
much as comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a GNMA certificate originally purchased
at a premium to decline in price to its par value, which may result in a loss.
- Short Term Income Fund -
- Short-Intermediate Bond Fund -
- Global Bond Fund -
- Intermediate Municipal Bond Fund -
- Pennsylvania Municipal Bond Fund -
- New Jersey Municipal Bond Fund -
- Tax-Free Reserve -
Puts
The Short Term Income Fund, Short-Intermediate Bond Fund, Global Bond
Fund, Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund and Tax-Free Reserve reserve the right to engage in
put transactions. CoreStates Advisers may purchase securities at a price which
would result in a yield to maturity lower than that generally offered by the
seller at the time of purchase when a Fund can simultaneously acquire the right
to sell the securities back to the seller, the issuer, or a third party (the
"writer") at an agreed-upon price at any time during a stated period or on a
certain date. Such a right is generally denoted as a "standby commitment" or a
"put." The purpose of engaging in transactions involving puts is to maintain
flexibility and liquidity and to permit each Fund to meet redemptions and remain
as fully invested as possible. The right to put the securities depends on the
writer's ability to pay for the securities at the time the put is exercised.
Each Fund would limit its put transactions to institutions which its adviser
believes present minimal credit risks, and the adviser would use its best
efforts to initially determine and continue to monitor the financial strength of
the sellers of the options by evaluating their financial statements and such
other information as is available in the marketplace. It may, however, be
difficult to monitor the financial strength of the writers because adequate
current financial information may not be available. In the event that any writer
is unable to honor a put for financial reasons, each
B-5
<PAGE>
Fund would be general creditor (i.e., on par with all other unsecured creditors)
of the writer. Furthermore, particular provisions of the contract between the
Fund and the writer may excuse the writer from repurchasing the securities; for
example, a change in the published rating of the underlying securities or any
similar event that has an adverse effect on the issuer's credit or a provision
in the contract that the put will not be exercised except in certain special
cases, for example, to maintain portfolio liquidity. A Fund could, however, at
any time, sell the underlying portfolio security in the open market or wait
until the portfolio security matures, at which time it should realize the full
par value of the security.
The securities purchased subject to a put may be sold to third persons
at any time, even though the put is outstanding, but the put itself, unless it
is an integral part of the security as originally issued, may not be marketable
or otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or a lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such option. If such a renewal cannot be negotiated on terms
satisfactory to a Fund, the Fund could, of course, sell the security. The
maturity of the underlying security will generally be different from that of the
put. There will not be a limit to the percentage of portfolio securities that
the Funds may purchase subject to a put, but the amount paid directly or
indirectly for premiums on all puts outstanding will not exceed 2% of the value
of the total assets of such Fund calculated immediately after any such put is
acquired. For the purpose of determining the maturity of securities purchased
subject to an option to put, and for purposes of determining the dollar-weighted
average maturity of a Fund including such securities, the Company will consider
the maturity to be the first date on which it has the right to demand payment
from the writer of the put although the final maturity of the security is later
than such date.
- Core Equity Fund -
- Growth Equity Fund -
- Special Equity Fund -
- International Growth Fund -
Convertible Securities
Some securities purchased by these Funds (usually bonds, debentures or
preferred stock) may have a conversion or exchange feature. This allows the
holder to exchange the security for another class of security (usually common
stock) according to the specific terms and conditions of the issue. The interest
or dividend rate may be lower than the market rate on a comparable
non-convertible security, but the market value of the convertible security will
rise if the common stock price rises sufficiently. The value of a security is
also affected by prevailing interest rates, the credit quality of the issuer,
and any put or call provisions.
- Core Equity Fund -
- Special Equity Fund -
- International Growth Fund -
- Global Bond Fund -
Futures and Options
As stated in the Prospectuses, International Growth Fund and Global
Bond Fund may purchase futures contracts and purchase or sell options on
securities for, among other things, the purposes of hedging against market risks
related to the Fund's Portfolio securities, remaining fully invested, and
reducing transaction costs and currency fluctuations. In addition, Core Equity
Fund and Special Equity Fund may purchase or sell options on securities on a
hedged and unhedged basis for, among other things, hedging against market risks,
to remain fully invested, reduce transaction costs and increase income.
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Futures. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instruments are traded
on national futures exchanges. Although futures contracts by their terms call
for actual delivery or acceptance of the underlying securities, in most cases
the contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking an
opposite position (buying a contract which has previously been sold, selling a
contract previously purchased) in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract is bought
or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of an
additional variation margin will be required. Conversely, change in the contract
value may reduce the required margin, resulting in a repayment of excess margin
to the contract holder. Variation margin payments are made to and from the
futures broker for as long as the contract remains open. These Funds expect to
earn interest income on its margin deposits.
Regulations of the Commodity Futures Trading Commission ("CFTC") permit
the use of future transactions for bona fide hedging purposes without regard to
the percentage of assets committed to futures margin and options premiums. In
addition, CFTC regulations also allow funds to employ futures transactions for
other non- hedging purposes to the extent that aggregate initial futures margins
and options premiums do not exceed 5% of total assets. The International Growth
and Global Bond Funds will only sell futures contracts to protect securities
they own against price declines or purchase contracts to protect against an
increase in the price of securities intended for purchase.
The use of such futures contracts is an effective way in which the
International Growth and Global Bond Funds may control the exposure of its
income to market fluctuations. While these Funds may incur commission expenses
in both opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of U.S. Government
securities.
Options. Different uses of options have different risk and return
characteristics. Generally, purchasing put options and writing call options are
strategies designed to protect against falling securities prices. However, the
use of such options can limit potential gains if prices rise. Purchasing call
options and writing put options are strategies whose returns tend to rise and
fall together with securities prices and can cause losses if prices fall. If
securities prices remain unchanged over time option writing strategies tend to
be profitable, while option buying strategies tend to decline in value.
By writing a call option, a Fund becomes obligated during the term of
the option to deliver the securities underlying the option upon payment of the
exercise price if the option is exercised. By writing a put option, a Fund
becomes obligated during the term of the option to purchase the securities
underlying the option at the exercise price if the option is exercised. Writing
covered options means that so long as a Fund is obligated as the writer of a
call option, it will cover the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of securities
exchanges). Apart from owning the underlying security, a Fund will be considered
"covered" with respect to a put option, if it deposits and maintains liquid
assets having a value equal to or greater than the exercise price of the option.
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Through the writing of call or put options, a Fund may obtain a greater
current return than would be realized on the underlying securities alone. The
Funds receive premiums from writing call or put options, which they retain
whether or not the options are exercised. By writing a call option, a Fund might
lose the potential for gain on the underlying security while the option is open,
and by writing a put option a Fund might become obligated to purchase the
underlying security for more than its current market price upon exercise.
The Fund may purchase put options in order to protect portfolio
holdings in an underlying security against a decline in the market value of such
holdings. Such protection is provided during the life of the put because a Fund
may sell the underlying security at the put exercise price, regardless of a
decline in the underlying security's market price. Any loss to a Fund is limited
to the premium paid for, and transaction costs paid in connection with, the put
plus the initial excess, if any, of the market price of the underlying security
over the exercise price. However, if the market price of such security
increases, the profit a Fund realizes on the sale of the security will be
reduced by the premium paid for the put option less any amount for which the put
is sold.
A Fund may wish to protect certain portfolio securities against a
decline in market value at a time when no put options on those particular
securities are available for purchase. The Fund may therefore purchase a put
option on securities other than those it wishes to protect even though it does
not hold such other securities in its portfolio. While the Fund will only
purchase put option on securities where, in the opinion of the Adviser, changes
in the value of the put option should generally offset changes in the value of
the securities to be hedged, the correlation will be less than in transactions
in which the Funds purchase put options on underlying securities they own.
The Funds may also purchase call options. During the life of the call
option, the Fund may buy the underlying security at the call exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, a Fund will reduce any
profit it might have realized had it bought the underlying security at the time
it purchased the call option by the premium paid for the call option and by
transaction costs.
The securities exchanges have established limitations governing the
maximum number of options which may be written or held by an investor or group
of investors acting in concert. These position limits may restrict a Fund's
ability to purchase or sell options on a particular security. Similarly, the
securities exchanges have also established limitations governing the maximum
number of options which may be exercised by an investor or group of investors
acting as concert. It is possible that with respect to a Fund, the Fund and
other clients of the Adviser or any Sub-Adviser, may be considered to be a group
of investors acting in concert. Thus, the number of options which a Fund may
hold or write may be affected by the options transactions of other investment
advisory clients of the Adviser or of any Sub-Advisers.
Risks Associated with Futures and Options. The primary risks associated
with the use of futures and options are (i) imperfect correlation between the
changes in market value of the securities held by a Fund and the prices of
futures and options, and (ii) possible lack of a liquid secondary market for a
futures contract and the resulting inability to close a futures position prior
to its maturity date. The risk of imperfect correlation will be minimized by
investing only in those contracts whose behavior is expected to resemble that of
a Fund's underlying securities. The risk that the Funds will be unable to close
out an outstanding futures and/or options position will be minimized by entering
into such transactions on a national exchange with an active and liquid
secondary market. In addition, although these Funds will not use futures and/or
options contracts for speculative purposes, there is the risk that the advisers
of these Funds could be incorrect in their assessment of the direction of stock
prices.
B-8
<PAGE>
- International Growth Fund -
- Global Bond Fund -
Forward Currency Contracts
Forward currency contracts involve an obligation to purchase or sell a
specified currency at a future date at a price set at the time of the contract.
Forward currency contracts do not eliminate fluctuations in the values of
portfolio securities but, rather, allow the Funds to establish a rate of
exchange for a future point in time.
When entering into a forward currency contract for the purchase or sale
of a security in a foreign currency, these Funds may enter into a contract for
the amount of the purchase or sale price to protect against variations between
the date the security is purchased or sold and the date on which payment is made
or received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
Also, when the advisers anticipate that a particular foreign currency
may decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, the Funds may enter into a contract to
sell, for a fixed amount, the amount of foreign currency approximating the value
of its securities denominated in such foreign currency. With respect to any such
forward currency contract, it will not generally be possible to match precisely
the amount covered by that contract and the value of the securities involved due
to changes in the values of such securities resulting from market movements
between the date the contract is entered into and the date it matures. In
addition, while forward currency contracts may offer protection from losses
resulting from declines in value of a particular foreign currency, they also
limit potential gains which might result from increases in the value of such
currency. The Funds will also incur costs in connection with forward currency
contracts and conversions of foreign currencies into U.S. dollars.
- All Funds -
Illiquid Securities
The Funds may invest some of their assets in illiquid securities. Each
Fund's advisers, under procedures adopted by the Board of Directors, determine
the liquidity of the Fund's investments. The absence of a trading market can
make it difficult to determine a market value for illiquid investments.
Disposing these investments can involve time-consuming negotiations and legal
expenses, and it may be difficult or impossible for a Fund to sell them promptly
at an acceptable price.
- All Funds -
Lending of Securities
The Funds may lend their portfolio securities to qualified brokers,
dealers, banks, and other financial institutions in exchange for cash, letters
of credit, government or government agency securities as collateral in an amount
equal to at least 100% of the current market value of the loaned securities plus
accrued interest. Cash collateral received by the Funds will be invested in
short-term debt securities.
These Funds will retain most rights of beneficial ownership, including
the right to receive dividends, interest, or other distributions. Voting rights
pass with the lending. If a material issue affecting the investment needs to be
voted upon, then the Funds will call the loans to vote proxies.
The Funds will only loan securities to borrowers that CoreStates
Advisers deems to be of good standing. Such loans still would involve the risk
of delay in receiving additional collateral in the event the value of the
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<PAGE>
collateral decreased below the value of the securities loaned, or the risk of
delay in recovering the securities loaned, or even the loss of rights in the
collateral, should the borrower fail financially.
- Global Bond Fund -
Swaps
Swap agreements will tend to shift the Fund's investment exposure from
one type of investment to another. For example, if this Fund agrees to exchange
payments in U.S. dollars for receipts in foreign currency, the swap agreement
would tend to increase the Fund's exposure to foreign currency and interest
rates. Caps and floors have an effect similar to buying or writing options.
Depending upon how the Fund uses these agreements, swap agreements may increase
or decrease the overall volatility of the Global Bond Fund's investments as well
as its share price and yield. The Fund will only enter swaps with counterparties
that its advisers deem creditworthy.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
These agreements are subject to the risks related to the counterparty's ability
to perform, and may decline in value if the counterparty's creditworthiness
deteriorates. A Fund may also suffer losses if it is unable to terminate
outstanding swap agreements or reduce their exposure through offsetting
transactions. Any obligation a Fund may have under these types of arrangements
will be covered by setting aside liquid assets in a segregated account.
INVESTMENT RESTRICTIONS
In General
The Prospectuses relating to the Funds list certain investment
restrictions that may be changed only by a vote of a majority of the outstanding
Shares of each Fund, as defined in the Prospectuses. The additional investment
limitations and restrictions listed herein supplement those contained in the
applicable Prospectuses. Except as otherwise indicated, these limitations and
restrictions may be changed only by such a shareholder vote.
The percentage limitations noted will apply at the time of the purchase
of a security and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of a purchase of
such security.
Fundamental Investment Limitations and Restrictions
- Equity Funds -
The following policies are applicable to the Equity Funds, except International
Growth Fund, which is subject only to Restrictions #5, #7, #8, #10 and #11. In
addition, the Core Equity and Special Equity Funds are not subject to
Restrictions #2 and #4.
An Equity Fund may not:
1. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any securities
trading account.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or development
programs, or real estate (although investments in marketable
securities of companies engaged in such activities are not hereby
precluded).
B-10
<PAGE>
3. Purchase securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, reorganization,
acquisition of assets, or where otherwise permitted by the
Investment Company Act of 1940 (the "Investment Company Act").
4. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof.
5. Invest in any issuer for purposes of exercising control or
management.
6. Purchase securities with legal or contractual restrictions.
7. Purchase or retain securities of any issuer, if the Officers or
Directors of the Company or its investment adviser owning
beneficially more than one-half of 1% of the securities of such
issuer together own beneficially more than 5% of such securities.
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of less
than three years continuous operation.
9. Underwrite the securities of other issuers, except to the extent
that the purchase of debt obligations directly from an issuer
thereof, in accordance with an Equity Fund's investment objective,
policies, and restrictions, may be deemed to be an underwriting.
10. Purchase any securities which would cause 25% or more of its total
assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities
in the same industry.
11. Make loans, except that each Fund may purchase or hold certain debt
instruments, engage in lending of portfolio securities, in
accordance with its policies and limitations, and enter into
repurchase agreements, in accordance with its policies and
limitations.
- Fixed Income Funds -
The following policies are applicable to the Fixed Income Funds (including the
Tax-Exempt Fixed Income Funds).
A Fixed Income Fund may not:
1. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any securities
trading account.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or development
programs, or real estate (although investments in marketable
securities of companies engaged in such activities are not hereby
precluded), except that the Global Bond Fund may engage in future
contracts.
3. Purchase securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, reorganization,
acquisition of assets, or where otherwise permitted by the
Investment Company Act.
4. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof, except that Government Income
Fund, Intermediate Municipal Bond Fund,
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<PAGE>
Global Bond Fund, Pennsylvania Municipal Bond Fund and New Jersey
Municipal Bond Fund may engage in put transactions.
5. Buy common stocks or voting securities.
6. Invest in any issuer for purposes of exercising control or
management.
7. With respect to the Short Intermediate Bond Fund, purchase
securities with legal or contractual restrictions.
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of less
than three years continuous operation.
9. Purchase or retain securities of any issuer, if the Officers or
Directors of the Company or its investment adviser owning
beneficially more than one-half of 1% of the securities of such
issuer together own beneficially more than 5% of such securities.
10. Underwrite the securities of other issuers, except to the extent
that the purchase of debt obligations directly from an issuer
thereof, in accordance with a Fixed Income Fund's investment
objective, policies, and restrictions, may be deemed to be an
underwriting.
11. Make loans, except that each Fund may purchase or hold certain debt
instruments, engage in lending of portfolio securities, in
accordance with its policies and limitations, and enter into
repurchase agreements, in accordance with its policies and
limitations.
- Taxable Money Market Funds -
The following policies are applicable to the Taxable Money Market Funds.
A Taxable Money Market Fund may not:
1. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any securities
trading account.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or development
programs, or real estate (although investments in marketable
securities of companies engaged in such activities are not hereby
precluded).
3. Purchase securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, reorganization,
acquisition of assets, or where otherwise permitted by the
Investment Company Act.
4. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof.
5. Buy common stocks or voting securities, or state, municipal or
industrial revenue bonds.
6. Invest in any issuer for purposes of exercising control or
management.
7. Purchase securities with legal or contractual restrictions.
B-12
<PAGE>
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of less
than three years continuous operation.
9. Purchase or retain securities of any issuer, if the Officers or
Directors of the Company or its investment adviser owning
beneficially more than one-half of 1% of the securities of such
issuer together own beneficially more than 5% of such securities.
10. Underwrite the securities of other issuers, except to the extent
that the purchase of debt obligations directly from an issuer
thereof, in accordance with a taxable Money Market Fund's
investment objective, policies, and restrictions, may be deemed to
be an underwriting.
11. Make loans, except that each Fund may purchase or hold certain debt
instruments, engage in lending of portfolio securities, in
accordance with its policies and limitations, and enter into
repurchase agreements, in accordance with its policies and
limitations.
- Tax-Exempt Money Market Funds -
The following policies are applicable to the Tax-Exempt Money Market Funds.
A Tax-Exempt Money Market Fund may not:
1. Invest less than 80% of its total assets in securities, the
interest on which is exempt from federal income tax, except during
temporary defensive periods.
2. Purchase or sell commodities, commodity contracts (including
futures contracts), oil, gas or mineral exploration or development
programs, or real estate (although investments in marketable
securities of companies engaged in such activities are not hereby
precluded).
3. Purchase the securities of any one issuer if, as a result thereof,
more than 5% of the value of its total assets would be invested in
the securities of such issuer, except that this 5% limitation does
not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; provided, however,
that the Fund may invest up to 25% of its total assets without
regard to this restriction as permitted by applicable law.
For purposes of this limitation, a security is considered to be
issued by the governmental entity (or entities) whose assets and
revenues back the security, or, with respect to an industrial
development bond that is backed only by the assets and revenues of
a non-governmental user, such non-governmental user. The guarantor
of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a
security shall not be deemed to be a security issued by the
guarantor when the value of all securities issued or guaranteed by
the guarantor, and owned by a Tax- Exempt Money Market Fund, does
not exceed 10% of the value of the Fund's total assets.
4. Purchase securities on margin, sell securities short, or
participate on a joint or joint and several basis in any securities
trading account.
5. Purchase securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, reorganization,
acquisition of assets, or where otherwise permitted by the
Investment Company Act.
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<PAGE>
6. Write or purchase options, including puts, calls, straddles,
spreads, or any combination thereof.
7. Buy common stocks or voting securities.
8. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of less
than three years continuous operation.
9. Invest in any issuer for purposes of exercising control or
management.
10. Purchase securities with legal or contractual restrictions.
11. Purchase or retain securities of any issuer, if the Officers or
Directors of the Company or the Fund's investment adviser or
sub-adviser owning beneficially more than one-half of 1% of the
securities of such issuer together own beneficially more than 5% of
such securities.
12. Underwrite the securities of other issuers, except to the extent
that the purchase of debt obligations directly from an issuer
thereof, in accordance with a Tax-Exempt Money Market Fund's
investment objective, policies, and restrictions, may be deemed to
be an underwriting.
13. Make loans, except that each Fund may purchase or hold certain debt
instruments, engage in lending of portfolio securities, in
accordance with its policies and limitations, and enter into
repurchase agreements, in accordance with its policies and
limitations.
Non-Fundamental Investment Limitations
The following are non-fundamental investment restrictions that may be
changed by a majority of the Board of Directors.
- All Funds -
1. With regard to Restriction #2 for each Fund, all Funds have a
non-fundamental investment limitation which precludes investments
in oil, gas, or other mineral leases, as well as investments in
real estate limited partnerships, except for readily marketable
interests in real estate investment trusts.
2. Notwithstanding the language in Restriction #8 for each Fund, each
Fund currently has no intention of investing more than 5% of its
total assets in the securities of issuers which together with any
predecessors have a record of less than three years continuous
operation.
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<PAGE>
- Core Equity Fund -
- Special Equity Fund -
- Balanced Fund -
- Short Term Income Fund -
- Government Income Fund -
- Bond Fund -
- Global Bond Fund -
- Intermediate Municipal Bond Fund -
- Pennsylvania Municipal Bond Fund -
- New Jersey Municipal Bond Fund -
Each of the above Funds may not knowingly invest more than 15% of its
total assets in illiquid securities, including repurchase agreements providing
for settlement more than seven days after notice.
TEMPORARY INVESTMENTS
In General
As stated in the Prospectuses, the Funds may invest a portion of their
assets in certain "Temporary Investments." Short-term taxable investments which
these Funds may utilize include fixed income securities (such as bonds) and/or
money market instruments (such as Treasury bills, certificates of deposit,
commercial paper, and repurchase agreements).
Generally, the Equity and Tax-Exempt Money Market Funds' use of such
Temporary Investments is subject to certain minimum ratings by Moody's and/or
S&P. These Funds may utilize Temporary Investments that are not rated by either
agency if, in the opinion of their investment adviser, they are determined to be
of comparable investment quality. See the Appendix to this Statement of
Additional Information for a description of applicable ratings.
-Equity Funds -
- Tax-Exempt Money Market Funds -
1. Money Market Instruments. Short-term money market instruments issued
in the U.S. (or abroad with respect to International Growth Fund) in which the
Equity and Tax-Exempt Money Market Funds may invest temporary cash balances
include bankers' acceptances, certificates of deposit, and commercial paper.
Bankers' acceptances are negotiable drafts or bills of exchange normally drawn
by an importer or exporter to pay for specific merchandise which are "accepted"
by a bank; meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument upon maturity. A certificate of deposit is a
negotiable certificate issued against funds deposited in a commercial bank for a
definite period of time and earning a specified return. Commercial paper
consists of unsecured short-term promissory notes issued by corporations and
must be rated at least A-1 by S&P or Prime-1 by Moody's.
Except for International Growth Fund, the Funds will limit their
purchases of bank obligations to those of domestic branches of U.S. banks having
total assets at the time of purchase of $1 billion or more.
2. Government Obligations. The Equity and Tax-Exempt Money Market Funds
may invest in obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities. U.S. Treasury bills and notes and obligations of
certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association, are supported by the full faith and
credit of the United States; others, such as those of the Export-Import Bank of
the United States, are supported by the right of the issuer to borrow from the
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<PAGE>
Treasury; others, such as those of the Fannie Mae, are supported by the
discretionary authority of the U.S. Treasury to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated to
do so by law.
In addition, International Growth Fund may invest in the obligations of
foreign governments or foreign governmental agencies deemed to be creditworthy
under guidelines approved by the Company's management. Such investments may
include securities issued by supranational organizations, such as the European
Economic Community and the World Bank, which are chartered to promote economic
development and are supported by various governments and governmental entities.
3. Repurchase Agreements. The Equity and Tax-Exempt Money Market Funds
may enter into repurchase agreements with respect to portfolio securities. Under
the terms of a repurchase agreement, a Fund purchases securities ("collateral")
from financial institutions such as banks and broker-dealers ("seller") which
are deemed to be creditworthy under guidelines approved by the Funds'
management, subject to the seller's agreement to repurchase them at a mutually
agreed-upon date and price. The repurchase price generally equals the price paid
by a Fund (plus interest) negotiated on the basis of current short-term rates
(which may be more or less than the rate on the underlying portfolio
securities). The seller under a repurchase agreement is required to maintain the
value of the collateral held pursuant to the agreement at not less than 100% of
the repurchase price, and securities subject to repurchase agreements are held
by the Custodian in the Federal Reserve's book-entry system. Default by the
seller would, however, expose a Fund to possible loss because of adverse market
action or delay in connection with the disposition of the underlying securities.
Repurchase agreements are considered to be loans by the Funds under the
Investment Company Act.
4. Reverse Repurchase Agreements. The Equity and Tax-Exempt Money
Market Funds may borrow money for temporary purposes by entering into reverse
repurchase agreements. Pursuant to such agreements, a Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them at a mutually agreed-upon date and price. A Fund enters into
reverse repurchase agreements only to avoid otherwise selling securities during
unfavorable market conditions to meet redemptions. At the time a Fund enters
into a reverse repurchase agreement, it places in a segregated custodial account
liquid assets having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which it is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by the Funds under the Investment
Company Act.
5. Fixed Income Securities. The Equity Funds may make short-term
investments in investment-grade fixed income debt securities (such as bonds and
notes) issued by banks, corporations, and the U.S. Government or governmental
entities. The Equity Funds anticipate that their investments in investment-grade
debt securities will be generally in those with the most active trading markets.
See the attached Appendix for a description of investment-grade securities
ratings.
In addition, International Growth Fund may invest in fixed income
investment-grade debt securities of foreign governments or foreign governmental
entities. See the attached Appendix for a description of investment-grade
securities ratings.
B-16
<PAGE>
SPECIAL CONSIDERATIONS
- Equity Funds -
Common Stocks
An investment in Shares of the Equity Funds should be made with an
understanding of the risks which an investment in common stocks entails,
including the risk that the financial condition of the issuers of securities
held by an Equity Fund or the general condition of the stock markets may worsen,
and the value of the securities held by the Fund and, therefore, the value of
the Fund's Shares may decline.
The rights of holders of common stocks to receive payments from the
issuers of such common stocks are generally inferior to those of creditors, or
holders of preferred stocks of such issuers. Holders of common stocks of the
type held by the Equity Funds have a right to receive dividends only when and
if, and in the amounts, declared by the issuer's board of directors, and have a
right to participate in amounts available for distribution by the issuer upon
liquidation only after all other claims on the issuer have been paid or provided
for. By contrast, holders of preferred stocks generally have the right to
receive dividends at a fixed rate when and as declared by the issuer's board of
directors, frequently on a cumulative basis, but do not participate in other
amounts available for distribution by the issuing corporation. Common stocks do
not represent a secured obligation of the issuer and therefore do not offer an
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest, and dividends,
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock, or the rights of holders of common
stock with respect to assets of the issuer upon liquidation or bankruptcy. The
value of common stocks is subject to market fluctuations for as long as the
common stocks remain outstanding. Thus, the value of such securities held by the
Equity Funds may be expected to fluctuate.
- Tax-Exempt Money Market Funds -
- Tax-Exempt Fixed Income Funds -
Municipal Securities
From time to time, proposals have been introduced in Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities, and the Funds cannot predict what legislation
relating to municipal securities, if any, may be introduced in Congress in the
future. It may be noted, however, that the Treasury Department has in the past
proposed, as a part of general tax reform, to limit the exemption for state and
local bonds to those issued for governmental purposes. Such proposals, if
enacted, might materially adversely affect the availability of municipal
securities for investment by the Funds and hence the value of their portfolios.
In such an event, the Funds would re-evaluate their investment objectives and
policies and consider changes in their structure or possible dissolution.
PURCHASE AND REDEMPTION INFORMATION
- All Funds -
The various types of customer accounts maintained by institutional
investors which may be used to purchase Shares of the Funds include: Qualified
Individual Retirement and Keogh Plan Accounts (for non-tax-exempt Funds); trust
accounts; managed agency accounts; custodial accounts; and various other
depository accounts. Investors purchasing Fund Shares may include officers,
directors, or employees of CoreStates Financial Corp or its affiliated and
subsidiary banks.
B-17
<PAGE>
A Fund may suspend the right of redemption or postpone the date of
payment for Shares during any period when: (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission; (b) the Exchange is closed for other
than customary weekend and holiday closings; (c) the Securities and Exchange
Commission has by order permitted such suspension; or (d) an emergency exists as
determined by the Securities and Exchange Commission. Upon the occurrence of any
of the foregoing conditions, a Fund may also suspend or postpone the recordation
of the transfer of its Shares.
The Company also reserves the right to suspend sales of Shares of the
Company for any period during which the New York Stock Exchange, the Adviser,
the Administrator and/or the Custodian are not open for business. The New York
Stock Exchange will not open in observance of the following holidays: New Year's
Day; Martin Luther King, Jr.'s Birthday; Presidents' Day; Good Friday; Memorial
Day; Independence Day; Labor Day; Columbus Day; Veterans' Day; Thanksgiving;
and Christmas.
In addition, a Fund may compel the redemption of, reject any order for,
or refuse to give effect on the Fund's books to the transfer of, its Shares in
an effort to prevent personal holding company status within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code"). A Fund may also make
payment for redemption in portfolio securities if it appears appropriate to do
so in light of the Fund's responsibilities under the Investment Company Act. See
"Net Asset Value."
Sales Charge Waivers
From time to time, the Company may enter into arrangements with certain
classes of purchasers who are eligible to purchase Class A Shares of the Funds
without a sales charge (see "Sales Charge" in the Individual Shares prospectus).
Rights of Accumulation
In calculating the sales charge rates applicable to current purchases
of Class A Shares of the Fixed Income and Equity Funds by a "single purchaser,"
the Company will cumulate current purchases at the offering price with total
market value or net investment, whichever is higher, of Class A Shares which are
sold subject to a sales charge ("Eligible Funds").
The term "single purchaser" refers to (i) an individual; (ii) an
individual and spouse purchasing Shares of an Eligible Fund for their own
account or for trust or custodial accounts for their minor children; or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account, including
employee benefit plans created under Sections 401 or 457 of the Code, including
related plans of the same employer. To be entitled to a reduced sales charge
based upon Shares already owned, the investor must ask the Distributor for such
reduction at the time of purchase and provide the account number(s) of the
investor, the investor and spouse, and their children (under age 21), and give
the ages of such children. The Funds may amend or terminate this Right of
Accumulation at any time as to subsequent purchases.
Letter of Intent
The reduced sales charges described in the Prospectus for Class A
Shares are also applicable to the aggregate amount of purchases made by any such
purchaser previously enumerated within a 13-month period pursuant to a written
Letter of Intent provided by the Distributor, and not legally binding on the
signer or a Fund which provides for the holding in escrow by the Administrator
of 5% of the total amount intended to be purchased until such purchase is
completed within the 13-month period. A Letter of Intent may be dated to include
Shares purchased up to 90 days prior to the date the Letter is signed. The
13-month period begins on the date of the earliest purchase. If the intended
investment is not completed, the purchaser will be asked to pay an amount equal
to the
B-18
<PAGE>
difference between the sales charge on the Shares purchased at the reduced rate
and the sales charge otherwise applicable to the total Shares purchased. If such
payment is not made within 20 days following the expiration of the 13-month
period, the Administrator will surrender an appropriate number of the escrowed
Shares for redemption in order to realize the difference. Such purchasers may
include the market value of all their Shares of the Fund, and of any of the
other Funds, previously purchased and still held as of the date of their Letter
of Intent toward the completion of such Letter.
Conversion Feature (Class B Shares)
As described in the Prospectus, Class B Shares of the Funds will
automatically convert to Class A Shares and will no longer be subject to the
higher distribution and service fees or the contingent deferred sales charge
applicable to Class B Shares after six years after the beginning of the month in
which the Shares were issued. Such conversion will be on the basis of the
relative net asset values of the two Classes, without the imposition of a sales
charge, fee or other charge. Because the per share net asset value of the Class
A Shares may be higher than that of the Class B Shares at the time of
conversion, a shareholder may receive fewer Class A Shares than the number of
Class B Shares converted, although the dollar value will be the same.
NET ASSET VALUE
- Taxable Money Market Funds -
- Tax-Exempt Money Market Funds -
Rule 2a-7
Each Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the Investment Company Act. This involves
valuing an instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. This method
may result in periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price a Money Market Fund would
receive if it sold the instrument. The value of securities held by the Money
Market Funds can be expected to vary inversely with changes in prevailing
interest rates.
Pursuant to Rule 2a-7, as amended, each Money Market Fund will maintain
a dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per share, provided that a Money Market
Fund will neither purchase any security with a remaining maturity of more than
397 days (securities subject to repurchase agreements and certain other
securities may bear longer maturities) nor maintain a dollar-weighted average
portfolio maturity which exceeds 90 days.
In addition, each Money Market Fund may acquire only U.S.
dollar-denominated obligations that present minimal credit risks and that are
"First Tier Securities" at the time of investment. First Tier Securities are
those that are rated in the highest rating category by at least two nationally
recognized security rating organizations ("NRSROs") or by one if it is the only
NRSRO rating such obligation or, if unrated, determined to be of comparable
quality. A security is deemed to be rated if the issuer has any security
outstanding of comparable priority and security which has received a short-term
rating by an NRSRO. CoreStates Advisers will determine that an obligation
presents minimal credit risks or that unrated investments are of comparable
quality, in accordance with guidelines established by CoreFunds' Board of
Directors.
CoreFunds' Board of Directors has also established procedures
reasonably designed, taking into account current market conditions and a Money
Market Fund's investment objective, to stabilize such Fund's net asset value per
Share for purposes of sales and redemptions at $1.00. These procedures include
review by the Board of
B-19
<PAGE>
Directors, at such intervals as it deems appropriate, to determine the extent,
if any, to which a Money Market Fund's net asset value per Share calculated by
using available market quotations deviates from $1.00 per Share. In the event
such deviation exceeds one-half of one percent, the Rule requires that the Board
of Directors promptly consider what action, if any, should be initiated. If the
Board of Directors believes that the extent of any deviation from a Money Market
Fund's $1.00 amortized cost price per Share may result in material dilution or
other unfair results to new or existing investors, it will take such steps as it
considers appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may include:
selling portfolio instruments prior to maturity; shortening the average
portfolio maturity; withholding or reducing dividends; or redeeming Shares in
kind.
- Fixed Income Funds -
Portfolio securities which are traded both over-the-counter and on a
national securities exchange are valued according to the broadest and most
representative market, and it is expected that for bonds, and other fixed income
securities, this would ordinarily be the over-the-counter market. Valuation of
such securities is the currently quoted bid price on each business day. When
securities exchange valuations are used, the valuation will be the latest sale
price on such exchange on such business day or, if there is no such reported
sale, the current bid price. Short-term investments (if any) are stated at cost,
which approximates market value. Other assets and securities for which no
quotations are readily available will be valued in a manner determined in good
faith by the Board of Directors to reflect their fair market value.
Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. The prices provided by a pricing
service take into account a variety of factors in determining fair market value.
Even though the market prices of intermediate term, fixed income
securities tend to be relatively stable, the prices of such securities vary
inversely with changes in interest rates and are therefore subject to market
price fluctuations. The longer maturity a bond has, the greater the potential
for fluctuations in prices.
DIVIDENDS
- Equity Funds -
The policy of the Equity Index, Core Equity, Growth Equity, Special
Equity and Balanced Funds is to generally declare and distribute dividends from
their net investment income on a quarterly basis. Distributions of any net
realized long-term capital gains will be made at least annually.
The policy of the International Growth Fund is to generally declare and
distribute dividends from its net investment income periodically. Distributions
of any net realized capital gains will be made at least annually.
The shareholders of the Equity Funds have the privilege of reinvesting
both income dividends and capital gains distributions, if any, in additional
full or fractional Shares of the respective Funds at the net asset value in
effect on the reinvestment date. The Company's management believes that most
investors will wish to take advantage of this privilege. The Equity Funds have,
therefore, made arrangements with the Transfer Agent to have all income
dividends and capital gains distributions declared by each Fund automatically
reinvested in the account of each shareholder. At any time, a shareholder may
request in writing to the Company or with the Transfer Agent to have subsequent
dividends and/or distributions paid in cash. In the absence of such a written
request, each purchase of Shares of an Equity Fund is made upon the condition
and understanding that the Transfer Agent is automatically appointed to receive
the dividends and distributions upon all Shares in the shareholder's account and
B-20
<PAGE>
to reinvest them in full and fractional Shares of the Fund at the net asset
value in effect at the close of business on the reinvestment date.
Any dividend or capital gains distribution received by a shareholder
shortly after the purchase of Shares of an Equity Fund may have the effect of
reducing the per share net asset value of such Shares by the amount of the
dividend or distribution. Furthermore, such a dividend or distribution, although
in effect a return of capital, may be subject to income taxes.
- Fixed Income Funds -
- Taxable Money Market Funds -
- Tax-Exempt Money Market Funds -
The policy of the Short Intermediate Bond, Bond, Short-Term Income,
Government Income, Intermediate Municipal Bond, Pennsylvania Municipal Bond and
New Jersey Municipal Bond Funds is to generally declare their net investment
income on a daily basis and to make distributions to shareholders in the form of
monthly dividends. The policy of Global Bond Fund is to distribute its net
investment income in the form of quarterly dividends.
Net income for dividend purposes includes (i) interest and dividends
accrued and discount earned on the Funds' assets (including both original issue
and market discount), less (ii) amortization of any premium on such assets and
accrued expenses directly attributable to the Funds, and the general expenses
(e.g., legal, auditing, and Board of Directors' fees) of the Company prorated to
each portfolio on the basis of its relative net assets. For the Fixed Income
Funds, realized and unrealized gains and losses on portfolio securities are
reflected in fluctuations in net asset value. Net realized long-term capital
gains (if any) are distributed at least annually.
PERFORMANCE
- Equity Funds -
- Fixed Income Funds -
Total Return
From time to time, the Funds may advertise total return on an average
annual total return basis and on an aggregate total return basis for various
periods. Average annual total return reflects the average annual percentage
change in the value of an investment in a Fund over the particular measuring
period. Aggregate total return reflects the cumulative percentage change in
value over the measuring period. Aggregate total return is computed according to
a formula prescribed by the SEC. The formula can be expressed as follows: P (1 +
T)n = ERV, where P = a hypothetical initial payment of $1,000; T = average
annual total return; n = number of years; and ERV = ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the designated time period
as of the end of such period or the life of the fund. The formula for
calculating aggregate total return can be expressed as (ERV/P)-1.
The calculation of total return assumes reinvestment of all dividends
and capital gain distribution on the reinvestment dates during the period and
that the entire investment is redeemed at the end of the period. In addition the
maximum sales charge for each Fund is deducted from the initial $1,000 payment.
Total return may also be shown without giving effect to any sales charges.
The Funds' performance may from time to time be compared to other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical
Services) or financial and business publications and periodicals, broad groups
of comparable mutual funds, unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs or to other investment alternatives. The Funds
B-21
<PAGE>
may quote Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance, and Ibbotson Associates of Chicago, Illinois, which
provides historical returns of the capitals markets in the U.S. The Funds may
use long term performance of these capital markets to demonstrate general
long-term risk versus reward scenarios and could include the value of a
hypothetical investment in any of the capital markets. The Funds may also quote
financial and business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
The Funds may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.
The performance results listed below refer to results on Class Y Shares
and Class A Shares (where applicable) of the Funds for the fiscal year ended
June 30, 1997. Class B Shares were not offered as of June 30, 1997.
<TABLE>
<CAPTION>
Average Annual Total Return
--------------------------------------------------------------------
Since
Fund Class One Year Five Year Ten Year Inception
---- ----- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Equity Index Fund Y 34.44% 18.90% 13.43% 16.09%
A without Load ** ** ** 41.56%
A with Load ** ** ** 30.93%
Core Equity Fund Y 33.10% 18.74% ** 18.03%
A without Load 32.74% 18.64% ** 17.96%
A with Load 25.41% 17.31% ** 17.06%
Special Equity Fund Y 17.94% ** ** 17.31%
A without Load 17.73% ** ** 17.20%
A with Load 11.25% ** ** 15.22%
Growth Equity Fund Y 21.67% 15.86% ** 11.90%
A without Load 21.29% 15.62% ** 11.69%
A with Load 14.65% 14.32% ** 10.53%
International Growth Y 15.43% 11.87% ** 9.57%
Fund A without Load 15.09% 11.67% ** 9.44%
A with Load 8.78% 10.42% ** 8.60%
Y 16.44% ** ** 12.01%
Balanced Fund A without Load 16.15% ** ** 11.56%
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
--------------------------------------------------------------------
Since
Fund Class One Year Five Year Ten Year Inception
---- ----- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
A with Load 9.79% ** ** 10.10%
Short-Intermediate Y 6.90% 5.51% ** 5.56%
Bond Fund A without Load 6.64% 5.26% ** 5.34%
A with Load 3.15% 4.56% ** 4.69%
Bond Fund Y 7.43% 6.03% ** 7.73%
A without Load 7.15% 5.91% ** 7.65%
A with Load 2.03% 4.88% ** 6.94%
Short Term Income Y 5.82% ** ** 5.42%
Fund A without Load 5.59% ** ** 5.07%
A with Load 2.19% ** ** 3.43%
Government Income Y 8.15% ** ** 5.66%
Fund A without Load 7.88% ** ** 5.21%
A with Load 4.41% ** ** 4.37%
Intermediate Y 5.62% ** ** 4.07%
Municipal Bond Fund A without Load 5.36% ** ** 3.81%
A with Load 1.97% ** ** 2.98%
Pennsylvania Y 7.92% ** ** 6.90%
Municipal Bond Fund A without Load 7.65% ** ** 6.64%
A with Load 2.54% ** ** 4.98%
New Jersey Y 6.70% ** ** 6.15%
Municipal Bond Fund A without Load 6.44% ** ** 5.85%
A with Load 1.40% ** ** 4.21%
Global Bond Fund Y 6.18% ** ** 3.92%
A without Load 5.92% ** ** 3.65%
A with Load 0.92% ** ** 2.23%
</TABLE>
- ----------------
** Not in operation during that period
B-23
<PAGE>
Yield
- Taxable Money Market Funds -
- Tax-Exempt Money Market Funds -
From time to time, the Funds may advertise their current yield and
effective compound yield. Both yield figures are based on historical earnings
and are not intended to indicate future performance. The yield of the Funds
refers to the income generated by an investment in a Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
annualized. That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
Current or Seven-Day Yield
The current yield of the Funds will be calculated daily based upon the
seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The effective
compound yield of the Funds is determined by computing the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula: Effective Yield =[(Base
Period Return + 1)365/7] - 1. The current and the effective yields reflect the
reinvestment of net income earned daily on portfolio assets.
Taxable Equivalent Yield
For a Tax-Exempt Money Market Fund, the taxable equivalent yield is
determined by dividing that portion of the Fund's yield which is tax-exempt by
one minus a stated federal income tax rate and adding the product to that
portion, if any, of the Fund's yield that is not tax-exempt (tax equivalent
yields assume the payment of federal income taxes at a rate of 39.6%).
The resulting yield is what an investor generally would need to earn
from a taxable investment in order to realize an after-tax benefit equal to the
tax-free yield provided by a Tax-Exempt Money Market Fund.
Below are the Taxable & Tax-Exempt Money Market Funds' current,
effective and tax-equivalent yields for the 7-day period ended June 30, 1997. As
of June 30, 1997, Class B Shares of the Cash Reserve, Class C Shares of the
Elite Cash Reserve, Elite Treasury Reserve, and Elite Tax-Free Reserve, and
Shares of the Elite Government Reserve were not offered.
B-24
<PAGE>
<TABLE>
<CAPTION>
Fund Class Current Yield Effective Yield Tax-Equivalent Yield
---- ----- ------------- --------------- --------------------
<S> <C> <C> <C> <C>
Treasury Reserve Y 5.01% 5.13% N/A
C 4.76% 4.87% N/A
Cash Reserve Y 5.20% 5.34% N/A
C 4.96% 5.08% N/A
Tax-Free Reserve Y 3.61% 3.67% 5.98%
C 3.36% 3.41% 5.56%
Elite Cash Reserve Y 5.51% 5.67% N/A
Elite Treasury Reserve Y 5.36% 5.51% N/A
Elite Tax-Free Reserve Y 3.99% 4.07% 6.61%
</TABLE>
- Equity Funds -
- Fixed Income Funds -
Thirty-Day Yield
The Equity and Fixed Income Funds may advertise a 30-day yield. These
figures will be based on historical earnings and are not intended to indicate
future performance. The yield of these Funds refers to the annualized income
generated by an investment in the Funds over a specified 30-day period. The
yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = 2[(A-B + 1)6 - 1]
------------
CD
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursements)
C = the average daily number of Shares outstanding during
the period that were entitled to receive dividends
D = net asset value per share on the last day of the period
Yields are one basis upon which investors may compare the Funds with
other funds; however, yields of other funds and other investment vehicles may
not be comparable because of the factors set forth above and differences in the
methods used in valuing portfolio instruments.
The yield of these Funds fluctuates, and the annualization of a week's
dividend is not a representation by the Company as to what an investment in the
Fund will actually yield in the future. Actual yields will depend on such
variables as asset quality, average asset maturity, the type of instruments the
Fund invests in, changes in interest rates on money market instruments, changes
in the expenses of the Fund and other factors.
Taxable Equivalent Yield
The tax equivalent yield for the Intermediate Municipal Bond,
Pennsylvania Municipal Bond and New Jersey Municipal Bond Funds is computed by
dividing that portion of the Fund's yield which is tax-exempt by one minus a
stated federal and/or state income tax rate and adding the product to that
portion, if any, of the Fund's yield that is not tax-exempt. (Tax equivalent
yields assume the payment of federal income taxes at a rate of
B-25
<PAGE>
39.6% and, if applicable, New Jersey income taxes at a rate of 6.5% and
Pennsylvania income taxes at a rate of 2.8%).
The resulting yield is what an investor generally would need to earn
from a taxable investment in order to realize an after-tax benefit equal to the
tax-free yield provided by the Fund.
For the 30-day period ended June 30, 1997, the yields on the Funds,
other than the Money Market Funds and Class B Shares of the Funds which were not
in operation, were as follows:
<TABLE>
<CAPTION>
Fund Class SEC 30-Day Yield Tax Equivalent Yield
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Equity Y 0.05% N/A
-----------------------------------------------------------------------------------------
A 0.00% N/A
- -----------------------------------------------------------------------------------------------------------------------
Core Equity Y 0.44% N/A
-----------------------------------------------------------------------------------------
A 0.19% N/A
- -----------------------------------------------------------------------------------------------------------------------
Special Equity Y 0.00% N/A
-----------------------------------------------------------------------------------------
A 0.00% N/A
- -----------------------------------------------------------------------------------------------------------------------
Equity Index Y 1.38% N/A
-----------------------------------------------------------------------------------------
A 1.30% N/A
- -----------------------------------------------------------------------------------------------------------------------
International Growth Y 0.00% N/A
-----------------------------------------------------------------------------------------
A 0.00% N/A
- -----------------------------------------------------------------------------------------------------------------------
Balanced Y 2.57% N/A
-----------------------------------------------------------------------------------------
A 2.20% N/A
- -----------------------------------------------------------------------------------------------------------------------
Short-Intermediate Bond Y 5.96% N/A
-----------------------------------------------------------------------------------------
A 5.52% N/A
- -----------------------------------------------------------------------------------------------------------------------
Bond Y 6.37% N/A
-----------------------------------------------------------------------------------------
A 5.88% N/A
- -----------------------------------------------------------------------------------------------------------------------
Short-Term Income Y 5.43% N/A
-----------------------------------------------------------------------------------------
A 5.01% N/A
- -----------------------------------------------------------------------------------------------------------------------
Government Income Y 6.40% N/A
-----------------------------------------------------------------------------------------
A 5.95% N/A
- -----------------------------------------------------------------------------------------------------------------------
Intermediate Municipal
Bond Y 4.04% 6.69%
-----------------------------------------------------------------------------------------
A 3.70% 6.13%
- -----------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal
Bond Y 4.97% 6.36%
-----------------------------------------------------------------------------------------
A 4.53% 5.80%
- -----------------------------------------------------------------------------------------------------------------------
New Jersey Municipal
Bond Y 4.97% 8.23%
-----------------------------------------------------------------------------------------
A 4.50% 7.45%
- -----------------------------------------------------------------------------------------------------------------------
Global Bond Y 4.29% N/A
-----------------------------------------------------------------------------------------
A 3.85% N/A
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-26
<PAGE>
ADDITIONAL INFORMATION CONCERNING TAXES
- All Funds -
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Funds' prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders and the
discussion here and in the Funds' prospectuses is not intended as a substitute
for careful tax planning.
The following discussion of federal income tax consequences is based on
the Code and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. New legislation, as well as administrative
changes or court decisions, may significantly change the conclusions expressed
herein, and may have a retroactive effect with respect to the transactions
contemplated herein.
In General
The Company's policy is to distribute as dividends substantially all of
its net investment company income (whether taxable or tax-exempt) and any net
realized long-term capital gains to shareholders each year.
Information as to the tax status of distributions to shareholders will
be furnished at least annually by each Fund. Investors considering purchasing
Shares of any Fund should consult competent tax counsel regarding the state and
local, as well as federal, tax consequences before investing.
Tax Status of the Funds
Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with the Company's other Funds. Each Fund intends
to qualify as a "regulated investment company" ("RIC") under Subchapter M of the
Code so that it will be relieved of federal income tax on that part of its
income that is distributed to shareholders. In order to qualify as a RIC, each
Fund must distribute dividends each year equal to at least the aggregate of (i)
90% of its tax-exempt interest income, net of certain deductions, and (ii) 90%
of its investment company taxable income, if any. In addition, each Fund must
meet numerous tests regarding derivation of gross income and diversification of
assets.
Specifically, a Fund must derive at least 90% of its gross income each
taxable year from certain specified investment sources, such as dividends,
interest, and gains from the sale of stock or securities. In addition, each Fund
must diversify its assets such that at the close of each fiscal quarter of the
Fund's taxable year, at least 50% of the value of its assets is made up of cash
and cash items, U.S. government securities, securities of other RICs, and
certain other securities, such "other" securities being limited with respect to
each issuer to an amount not greater than 10% of the outstanding voting
securities of such issuer and not more than 5% of the value of the Fund's
assets. Furthermore, at the close of each fiscal quarter of the Fund's taxable
year, no more than 25% of the value of its assets may be invested in the
securities (other than U.S. government securities and securities of other RICs)
of any one issuer or of two or more issuers which the Fund controls and which
are engaged in the same, similar, or related trades or businesses.
While none of the Money Market or Fixed Income Funds expect to realize
any net capital gains (the excess of net long-term capital gains over net
short-term capital losses), any Fund that does realize such gains will
distribute them at least annually. A Fund will have no tax liability with
respect to distributed gains and the distributions will be taxable to Fund
shareholders as gain from the sale or exchange of a capital asset held for more
than one year, regardless of how long a shareholder has held Fund Shares. Such
distributions will be designated as capital gains dividends in a written notice
mailed by each Fund to shareholders not later than sixty days after the close of
the Fund's taxable year.
B-27
<PAGE>
Any gain or loss recognized on a sale, exchange or redemption of Shares
of a Fund by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital gain or loss if the
Shares have been held for more than eighteen months, mid-term capital gain if
the share have been held for more than twelve months but not more than eighteen
months, and otherwise will be treated as short-term capital gain or loss.
However, if Shares on which a shareholder has received a net capital gain
distribution are subsequently sold, exchanged or redeemed and such Shares have
been held for six months or less, any loss recognized will be treated as a
long-term capital loss to the extent of the net capital gain distribution.
Long-term capital gains are currently taxed at a maximum rate of 20%, mid-term
capital gains are currently taxed at a maximum rate of 28%, and short-term
capital gains are currently taxed at ordinary income tax rates.
A non-deductible, 4% federal excise tax will be imposed on any
regulated investment company that does not distribute to investors in each
calendar year an amount equal to (i) 98% of its calendar year ordinary income,
(ii) 98% of its capital gain net income (the excess of short- and long-term
capital gain over short- and long-term capital loss) for the one-year period
ending October 31, and (iii) ordinary income and capital gain net income from
the prior years, to the extent that such amounts were not distributed or taxed
at the RIC level in previous years. Each Fund intends to declare and pay
dividends and any capital gains distributions so as to avoid imposition of the
federal excise tax.
If for any taxable year a Fund does not qualify for the special tax
treatment afforded to RICs, all of the taxable income of that Fund will be
subject to federal income tax at regular corporate rates (without any deduction
for distributions to Fund shareholders). In such event, all dividend
distributions made by the Fund (whether or not derived from tax-exempt interest)
would be taxable to shareholders to the extent of the Fund's earnings and
profits, and such dividend distributions may be eligible for the
dividends-received deduction for corporate shareholders.
Generally, the Funds are required to withhold 31% of ordinary income
dividends, capital gains distributions, and redemptions paid to shareholders who
have not complied with IRS taxpayer identification regulations and in certain
other circumstances. Shareholders who are not otherwise subject to back-up
withholding may avoid this withholding requirement by certifying on the Account
Application Form their proper Social Security or Taxpayer Identification Number
and certifying that they are not subject to back-up withholding.
- Tax-Exempt Money Market Funds -
- Tax-Exempt Fixed Income Funds -
As described herein and in the Prospectuses relating to the Tax-Exempt
Money Market Funds and Tax- Exempt Fixed Income Funds, each of these Funds is
designed to provide investors with current tax-exempt interest income and is not
intended to constitute a balanced investment program. Shares of the Tax-Exempt
Funds would not be suitable for tax-exempt shareholders and plans, since such
shareholders and plans would not gain any additional benefit from the Funds'
dividends being tax-exempt.
In addition, the Funds may not be appropriate investments for entities
which are "substantial users" (or related to substantial users) of facilities
financed by "private activity bonds" or industrial development bonds. For these
purposes, the term "substantial user" is defined under U.S. Treasury Regulations
to include a non-exempt person who regularly uses a part of such facilities in a
trade or business.
Each Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by satisfying the Code's requirement that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
consists of securities the interest on which is exempt from federal income tax.
Current federal tax law limits the types and volume of bonds qualifying for
federal income tax exemption of interest, which may have an effect on the
ability of the funds to purchase sufficient amounts of tax-exempt securities to
satisfy this requirement. Exempt interest dividends are excludable from
shareholders' gross income for regular federal income tax purposes but may have
collateral federal income tax consequences. Exempt-interest dividends may be
subject to the alternative minimum
B-28
<PAGE>
tax (the "AMT") imposed by Section 55 of the Code or the environmental tax (the
"Environmental Tax") imposed by Section 59A of the Code. The AMT is imposed at a
rate of up to 28% in the case of non-corporate taxpayers and at the rate of 20%
in the case of corporate taxpayers, to the extent it exceeds the taxpayer's
regular tax liability. The Environmental Tax is imposed at the rate of 0.12% and
applies only to corporate taxpayers. The AMT and the Environmental Tax may be
affected by the receipt of exempt-interest dividends in two circumstances.
First, exempt-interest dividends derived from certain "private activity bonds"
issued after August 7, 1986 will generally be an item of tax preference for both
corporate and non-corporate taxpayers. Second, exempt-interest dividends,
regardless of when the bonds from which they are derived were issued or whether
they are derived from private activity bonds, will be included in a corporate
shareholder's "adjusted current earnings," as defined in Section 56(g) of the
Code, in calculating the corporation's alternative minimum taxable income for
purposes of determining the AMT and the Environmental Tax.
The deduction otherwise allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Foreign corporations engaged in a trade or business in the United States will be
subject to a "branch profits tax" on their "dividend equivalent amount" for the
taxable year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85 percent of the Social
Security benefits or railroad retirement benefits received by an individual
during any taxable year will be included in the gross income of such individual
if the individual's modified adjusted gross income (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.
Issuers of bonds purchased by a Fund (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Shareholders should be aware
that exempt- interest dividends may become subject to federal income taxation
retroactively to the date of issuance of the bonds to which such dividends are
attributable if such representations are determined to have been inaccurate or
if the issuers (or the beneficiary) of the bonds fail to comply with certain
covenants made at that time.
The percentage of total dividends paid by each Fund with respect to
any taxable year which qualifies as federal exempt-interest dividends will be
the same for all shareholders receiving dividends during such year. Interest on
indebtedness incurred by a shareholder to purchase or carry Fund Shares will
generally not be deductible for federal income tax purposes. Any loss on the
sale or exchange of Shares held for six months or less will be disallowed to the
extent of any exempt-interest dividends received by the selling shareholder with
respect to such Shares.
In addition, while each of these Funds will seek to invest
substantially all of its assets in tax-exempt obligations (except on a temporary
basis or for temporary defensive periods), any investment company taxable income
earned by a Fund will be distributed. In general, a Fund's investment company
taxable income would include interest income received from Temporary Investments
(as defined herein), plus any net short-term capital gains realized by the Fund,
subject to certain adjustments and excluding net long-term capital gains for the
taxable year over the net short-term capital losses, if any, for such year ("net
capital gains"). To the extent such income is distributed by a Fund (whether in
cash or additional Shares), it will generally be taxable to shareholders as
ordinary income. Additionally, any net capital gains distributed to shareholders
will be taxable to shareholders as gain from the sale or exchange of a capital
asset held for more than one year, regardless of how long a shareholder has held
Fund Shares.
B-29
<PAGE>
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to 30 billion full and fractional Shares of Common Stock.
The Company presently consists of twenty-one portfolios, each having an
institutional class of Shares (Class Y) and individual classes of Shares (Class
A, Class B and/or Class C), as listed below:
Class of Shares # of Shares Fund
- --------------- ----------- ----
Class Y 1 billion Cash Reserve
Class B 1 billion Cash Reserve
Class C 1 billion Cash Reserve
Class Y 1.25 billion Treasury Reserve
Class C 1.25 billion Treasury Reserve
Class Y 50 million Core Equity Fund
Class A 50 million Core Equity Fund
Class B 50 million Core Equity Fund
Class Y 25 million International Growth Fund
Class A 25 million International Growth Fund
Class B 25 million International Growth Fund
Class Y 500 million Equity Index Fund
Class A 500 million Equity Index Fund
Class B 500 million Equity Index Fund
Class Y 100 million Growth Equity Fund
Class A 100 million Growth Equity Fund
Class B 100 million Growth Equity Fund
Class Y 100 million Short-Intermediate Bond Fund
Class A 100 million Short-Intermediate Bond Fund
Class Y 250 million Tax-Free Reserve
Class C 250 million Tax-Free Reserve
Class Y 100 million Balanced Fund
Class A 100 million Balanced Fund
Class B 100 million Balanced Fund
Class Y 100 million Government Income Fund
Class A 100 million Government Income Fund
Class Y 100 million Intermediate Municipal Bond Fund
B-30
<PAGE>
Class of Shares # of Shares Fund
- --------------- ----------- ----
Class A 100 million Intermediate Municipal Bond Fund
Class Y 25 million Global Bond Fund
Class A 25 million Global Bond Fund
Class Y 100 million Pennsylvania Municipal Bond Fund
Class A 100 million Pennsylvania Municipal Bond Fund
Class Y 100 million New Jersey Municipal Bond Fund
Class A 100 million New Jersey Municipal Bond Fund
Class Y 750 million Elite Cash Reserve
Class C 750 million Elite Cash Reserve
Class Y 250 million Elite Treasury Reserve
Class C 250 million Elite Treasury Reserve
Class Y 1 billion Elite Government Reserve
Class C 1 billion Elite Government Reserve
Class Y 250 million Elite Tax-Free Reserve
Class C 250 million Elite Tax-Free Reserve
Class Y 1 billion Special Equity Fund
Class A 1 billion Special Equity Fund
Class B 100 million Special Equity Fund
Class Y 1 billion Bond Fund
Class A 1 billion Bond Fund
Class Y 1 billion Short Term Income Fund
Class A 1 billion Short Term Income Fund
Previously, Class A Shares and Class C Shares were known as Series B
Shares, while Class Y Shares were known as Series A Shares. CoreFunds has
changed their designation to conform to the standard designations suggested by
the Investment Company Institute.
The Board of Directors may classify or reclassify any authorized but
unissued Shares of the Company into one or more additional portfolios or series
of Shares within a portfolio.
Shares have no subscription or pre-emptive rights and only such
conversion or exchange rights as the Board may grant in its discretion. When
issued for payment as described in the Prospectuses relating to the Funds and in
this Statement of Additional Information, a Fund's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Company,
Shares of each Fund are entitled to receive the assets available for
distribution belonging to the Fund, and a proportionate distribution, based upon
the relative asset values of the Fund and the Company's other portfolios, of any
general assets not belonging to any particular Fund which are available for
distribution.
B-31
<PAGE>
DIRECTORS AND OFFICERS
The names and general background information of the Company's Directors
and Executive Officers are set forth below:
ERIN ANDERSON (6/10/55) - Director - Professor of Marketing, INSEAD,
Fountainebleu, France since 1994; Associate Professor of Marketing, The
Wharton School of the University of Pennsylvania, 1981- 1994.
EMIL J. MIKITY (8/31/28) - Director - Retired; Senior Vice President
Investments, Atochem North America, 1979-1989.
GEORGE H. STRONG (7/15/26) - Director - Financial Consultant since
1985; Director and Senior Vice President, Universal Health Services,
Inc., 1979-1984.
THOMAS J. TAYLOR (1/26/39) - Director - Consultant; Chairman, Conestoga
Funds since 1995 and a Trustee 1990-1995; Trustee of Community Heritage
Fund since 1993.
CHERYL H. WADE (11/7/47) - Director - Associate General Secretary and
Treasurer, American Baptist Churches since 1993; Treasurer, the
Ministers and Missionaries Benefit Board, American Baptist Churches,
1990-1993.
DAVID LEE (4/16/52) - President, Chief Executive Officer - Senior Vice
President of the Administrator and Distributor since 1993; Vice
President of the Administrator and Distributor since 1991; President,
GW Sierra Trust Funds prior to 1991.
JAMES W. JENNINGS (1/15/37) - Secretary - Partner of the law firm of
Morgan, Lewis & Bockius LLP since 1970.
KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary -
Senior Vice President and General Counsel of SEI Investments and the
Distributor since 1994; Vice President and Assistant Secretary of the
Administrator and the Distributor, 1992-1994; Associate, Morgan, Lewis
& Bockius LLP (law firm) prior to 1992.
SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor
since 1983.
KATE STANTON (11/18/58) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor
since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm) before
1994.
TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Mr.
Cipperman has been Vice President and Assistant Secretary of SEI
Investments since November 1995. From 1994 to May 1995, Mr. Cipperman
was an Associate with Dewey Ballentine. Prior to 1994, Mr. Cipperman
was an Associate with Winston & Strawn.
MARC H. CAHN (6/19/57) - Vice President, Assistant Secretary - Mr. Cahn
has been Vice President and Assistant Secretary of SEI Investments
since July 1996. From 1995 to 1996, Mr. Cahn served as Special Counsel
to Barclays Bank. Prior to 1995, he was counsel for First Fidelity
Bancorporation; Associate, Morgan, Lewis & Bockius LLP (law firm) prior
thereto.
B-32
<PAGE>
CAROL ROONEY (5/8/64) - Controller, Treasurer, and Assistant Secretary
- A Director of SEI Fund Resources since 1992.
JOHN H. GRADY, JR. (6/01/61) - Assistant Secretary - Partner, Morgan,
Lewis & Bockius LLP, Counsel to the Company, Administrator and
Distributor.
EDWARD B. BAER (9/27/68) - Assistant Secretary - Associate, Morgan,
Lewis & Bockius LLP, Counsel to the Company, Administrator and
Distributor, since 1995. Attorney, Aquila Management Corporation, 1994.
Rutgers University School of Law - Newark, 1991-1994.
The Directors of the Company receive fees and expenses for each meeting
of the Board of Directors attended, and an annual retainer. During the fiscal
year ended June 30, 1997, the Company paid a total of $174,350 on behalf of the
Funds to its Directors. No officer or employee of the Administrator or
Distributor receives any compensation from the Company for acting as a director
of the Company, and the officers of the Company receive no compensation from the
Company for performing the duties of their offices. Morgan, Lewis & Bockius LLP,
of which Mr. Jennings is a partner, receives legal fees as counsel to the
Company. The Directors and Officers of the Company as a group own less than 1%
of the outstanding Shares of each Fund.
The following table shows aggregate compensation paid to each of the
Fund's Directors by the Fund and the Fund Complex respectively, for the year
ended June 30, 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Total Compensation
Person, Compensation Retirement Annual From Registrant
Position From Registrant Benefits Accrued Benefits and Fund Complex
for the fiscal as Part of Fund Upon Paid to Directors
year ended Expenses Retirement for the fiscal year
June 30, 1997 ended June 30, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Erin Anderson, $29,900 N/A N/A $29,900
Director
Emil J. Mikity, 54,750 N/A N/A 54,750
Director
George H. Strong, 29,900 N/A N/A 29,900
Director
Thomas J. Taylor, 29,900 N/A N/A 29,900
Director
Cheryl H. Wade, 29,900 N/A N/A 29,900
Director
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISER
- All Funds -
CoreStates Investment Advisers, Inc. ("CoreStates Advisers"), a
wholly-owned subsidiary of CoreStates Bank, N.A. ("CoreStates Bank"), itself a
wholly-owned subsidiary of CoreStates Financial Corp ("CoreStates Corp"), is the
Company's investment adviser.
B-33
<PAGE>
The services provided and the expenses assumed by CoreStates Advisers
as investment adviser, as well as the fees payable to it, are described in the
Funds' Prospectuses.
CoreStates Corp is a bank holding company registered under the Bank
Holding Company Act. CoreStates Corp is engaged through its principal
subsidiary, CoreStates Bank, N.A. (a national banking association), in
commercial, international and consumer banking, and in providing trust services.
CoreStates Corp, through other direct and indirect subsidiaries also provides
consumer financing, factoring, commercial financing, and financial advisory
services. The principal executive offices of CoreStates Corp are located at 1500
Market Street, Philadelphia, Pennsylvania 19102.
Glass-Steagall Act
CoreStates Corp and its banking subsidiaries are permitted to perform
the services contemplated by the investment advisory agreements with the Funds
and to engage in certain activities in connection with the investment of their
customer accounts in Class A, Class B or Class C Shares of the Funds without
violating the federal banking law commonly referred to as the Glass-Steagall
Act, or other applicable banking laws or regulations. Future changes to any of
these laws or regulations or administrative or judicial interpretations of such
laws or regulations, however, could prevent or restrict CoreStates Corp (and its
banking subsidiaries) from performing such services. If CoreStates Advisers were
thereby prohibited from serving as investment adviser to the Funds, the Board of
Directors would promptly seek to retain another qualified investment adviser for
the Funds.
The Investment Advisory Agreements
The Investment Advisory Agreements between each Fund and CoreStates
Advisers provide that CoreStates Advisers shall not be liable for any error of
judgment or mistake of law or for any loss suffered by a Fund in connection with
its performance under the respective Investment Advisory Agreements, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of CoreStates Advisers in the performance
of its duties, or from reckless disregard by it of its duties and obligations
thereunder.
Unless sooner terminated, the Investment Advisory Agreements will
remain in effect from year to year if such continuance is approved at least
annually by CoreFunds' Board of Directors, or by vote of a majority of the
outstanding Shares of each Fund (as defined in the Prospectuses), and by a
majority of the Directors who are not parties to the Investment Advisory
Agreements or interested persons (as defined in the Investment Company Act) of
any party to the Investment Advisory Agreements, by vote cast in person at a
meeting called for such purpose. The Investment Advisory Agreements are
terminable at any time on sixty days' written notice without penalty by the
Directors, by vote of a majority of the outstanding Shares of the respective
Funds, or by CoreStates Advisers. The Investment Advisory Agreements also
terminate automatically in the event of their assignment, as defined in the
Investment Company Act.
Investment Advisory Fees
For the fiscal years ended June 30, 1995, 1996 and 1997, the Funds paid
the following investment advisory fees to CoreStates Advisers:
B-34
<PAGE>
<TABLE>
<CAPTION>
Fund Advisory Fees Paid Advisory Fees Waived
---- ---------------------------------- ----------------------------------
1995 1996 1997 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund $386,678 $728,921 $1,003,799 $193,333 $84,312 $19,771
Core Equity Fund 199,645 1,973,776 3,459,108 51,162 0 0
Special Equity Fund * 25,955 396,971 * 573,349 609,289
Equity Index Fund 85,692 182,967 283,548 259,535 365,435 516,386
International Growth 861,592 964,647 1,131,220 57,439 20,021 0
Balanced Fund 240,853 441,222 642,244 133,801 106,546 146,497
Short-Intermediate
Bond Fund 203,083 267,327 463,789 87,019 137,169 378,953
Bond Fund * 457,043 681,517 * 509,285 759,385
Short Term Income
Fund * 55,281 81,604 * 108,344 160,231
Intermediate Municipal
Bond Fund 2,752 871 2,779 6,425 5,571 6,279
Government Income
Fund 22,528 49,103 87,561 33,796 23,318 13,544
Pennsylvania
Municipal Bond Fund 0 0 0 10,956 22,299 55,962
New Jersey Municipal
Bond Fund 0 0 0 8,045 7,888 8,073
Global Bond Fund 77,740 145,856 174,911 77,729 45,157 32,160
Cash Reserve 1,196,254 1,825,668 2,569,922 1,522,489 1,236,846 971,784
Treasury Reserve 1,039,138 1,694,725 2,613,273 1,322,599 1,101,807 993,819
Tax-Free Reserve 172,635 208,997 358,201 219,739 134,575 135,897
Elite Treasury Reserve 0 0 5,202 109,215 96,785 46,509
Elite Cash Reserve 0 0 51,000 2,011,375 1,892,127 659,442
Elite Tax-Free Reserve 0 0 26,012 424,166 405,929 196,322
</TABLE>
- ---------------
* Not in operation during such period.
** The Elite Government Reserve was not in operation during this period.
SUB-ADVISERS
- International Growth Fund -
Martin Currie, Inc. ("Martin Currie"), a subsidiary of Martin Currie,
Ltd., and Aberdeen Fund Managers, Inc. ("Aberdeen"), a subsidiary of Aberdeen
Asset Management PLC, are the International Growth Fund's sub- advisers.
Martin Currie, Ltd., through its various subsidiaries, performs various
investment advisory services for a number of open- and closed-end mutual funds,
investment trusts, unit trusts, offshore funds, pension funds, foundations,
charities and individual accounts. Martin Currie's current assets under
management total over $3.2 billion. Martin Currie's offices are located at
Saltire Court, 20 Castle Terrace, Edinburgh, Scotland.
Aberdeen Asset Management PLC performs various investment advisory
services for a number of investment trusts, unit trusts, institutional funds and
individual clients. Current assets under management total over $18.1 billion.
Aberdeen Asset Management PLC's offices are located at 10 Queens Terrace,
Aberdeen AB9 1QJ Scotland and Aberdeen officers are located at Nations Bank
Tower, 22nd Floor, Ft. Lauderdale, Florida 33396.
B-35
<PAGE>
The services provided and the expenses assumed by Martin Currie and
Aberdeen as sub-advisers, as well as the fees payable to them, are described in
the Prospectuses relating to International Growth Fund.
- Global Bond Fund -
Analytico TSA International, Inc. ("Analytic") is the sub-adviser to
the Global Bond Fund.
Analytic is a specialist manager of fixed income securities and cash
for institutional investors. Based in London, England, it is a wholly-owned
subsidiary of United Asset Management Corporation of Boston, Massachusetts,
whose assets under management currently exceed $190 billion. Analytic is a
member of the Investment Management Regulatory Organization, one of the
regulatory bodies approved by the UK Government, and its activities are
regulated accordingly.
Sub-Advisory Agreements
The Sub-Advisory Agreements between CoreStates Advisers and Martin
Currie, Aberdeen, and Analytic provide that Martin Currie, Aberdeen, and
Analytic shall not be liable for any error of judgment or mistake of law or for
any loss suffered by a Fund in connection with its performance under its
Sub-Advisory Agreement, except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services or loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Martin Currie,
Aberdeen, and Analytic in the performance of its duties, or from reckless
disregard by it of its duties and obligations thereunder.
Unless sooner terminated, each Sub-Advisory Agreement will remain in
effect from year to year if such continuance is approved at least annually by
CoreFunds' Board of Directors, or by vote of a majority of the outstanding
Shares of the relevant Fund (as defined in the Prospectuses), and by a majority
of the Directors who are not parties to this Sub-Advisory Agreement or
interested persons (as defined in the Investment Company Act) of any party to
this Sub-Advisory Agreement, by vote cast in person at a meeting called for such
purpose. Each Sub- Advisory Agreement is terminable at any time on sixty days'
written notice without penalty by the Directors, by vote of a majority of the
outstanding Shares of the Fund, by CoreStates Advisers, or by Martin Currie,
Aberdeen, or Analytic. Each Sub-Advisory Agreement also terminates automatically
in the event of its assignment, as defined in the Investment Company Act.
Investment Sub-Advisory Fees
For the fiscal years ended June 30, 1995, 1996 and 1997, the CoreStates
Advisers paid the following investment sub-advisory fees to Martin Currie,
Aberdeen, and Analytic:
<TABLE>
<CAPTION>
Fund Sub-Advisory Fees Paid Sub-Advisory Fees Waived
---------------------------------- ---------------------------------
1995 1996 1997 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
International Growth Fund $493,328 $509,474 $362,901 $0 $0 $0
(to Martin Currie)
International Growth Fund 0* 15,115 79,385 0 0 0
(to Aberdeen)
Global Bond Fund 77,727 95,377 103,658 0 0 0
(to Analytic)
</TABLE>
- -------------
* Aberdeen became a sub-adviser to the International Growth Fund on April 14,
1996.
B-36
<PAGE>
PORTFOLIO TRANSACTIONS
- All Funds -
In General
Pursuant to the Funds' respective advisory agreements, CoreStates
Advisers and/or the sub-advisers with regard to the International Growth and
Global Bond Funds (collectively, the "Advisers") determine which securities are
to be sold and purchased by each Fund and which brokers are to be eligible to
execute the portfolio transactions. Fund securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of certain portfolio securities include
a commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. While the Advisers generally seeks competitive spreads or
commissions, each Fund may not necessarily pay the lowest spread or commission
available on each transaction for reasons discussed below.
Allocation of security transactions, including their frequency, to
various dealers is determined by the Advisers in their best judgment and in a
manner deemed fair and reasonable to shareholders. The primary consideration is
the prompt execution of orders in an effective manner at the most favorable
price. Subject to this consideration, broker/dealers who provide supplemental
investment research to the Advisers may receive orders for transactions by a
Fund, although consideration of such supplemental investment research is not
applicable with respect to Equity Index Fund. Information so received is in
addition to and not in lieu of services required to be performed by the
Advisers, nor would the receipt of such information reduce the Advisers' fees.
Such information may be useful to the Advisers in serving the Funds as well as
their other clients, and conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Advisers in carrying
out their respective obligations to the Funds. In addition, the Funds may direct
commission business to one or more designated broker/dealers, including the
Distributor or an affiliate of the Adviser, in connection with such
broker/dealer's payment of certain of the Fund's expenses.
A Fund will not acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase or reverse repurchase agreements with the
Advisers, the Administrator, the Distributor, or their affiliates, and will not
give preference to any correspondents of the Advisers with respect to such
transactions, securities, savings deposits, repurchase agreements, and reverse
repurchase agreements. However, a Fund may, on a non-preferential basis, enter
into such transactions with institutional investors who purchase Shares of a
Fund on behalf of their customers.
Investment decisions for each Fund are made independently from those
for any other investment portfolios or accounts ("accounts") managed by the
Advisers. Such accounts may also invest in the same securities as a Fund. When a
purchase or sale of the same security is made at substantially the same time on
behalf of a Fund and another account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
Advisers believe to be equitable to the Fund and such other account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or sold by the Fund. To
the extent permitted by law, the Advisers may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for other
accounts in order to obtain the best execution.
As provided by their respective Agreements, in making investment
recommendations for a Fund, the Advisers will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale by
a Fund is another commercial customer of any of the Advisers and, in dealing
with their other commercial customers, the Advisers will not inquire or take
into consideration whether securities of those customers are held by a Fund.
It is expected that the Funds may execute brokerage or other agency
transactions through the Distributor, a registered broker-dealer, or an
affiliate of the Adviser for a commission in conformity with the Investment
B-37
<PAGE>
Company Act, the Securities Exchange Act of 1934 and rules promulgated by the
Securities and Exchange Commission. Under these provisions, the Distributor is
permitted to receive and retain compensation for effecting portfolio
transactions for the Funds on an exchange if a written contract is in effect
between the Distributor and the Company expressly permitting the Distributor to
receive and retain such compensation. These rules further require that
commissions paid to the Distributor by the Company for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Company may direct commission business to one
or more designated broker/dealers in connection with such broker/dealer's
provision of services to the Company or payment of certain Company expenses
(i.e., custody, pricing and professional fees). The Directors, including those
who are not "interested persons" of the Company, have adopted procedures for
evaluating the reasonableness of commissions paid to the Distributor and will
review these procedures periodically.
In addition, the Tax-Exempt Funds and Intermediate Municipal Bond Fund
may participate, if and when practicable, in bidding for the purchase of
municipal securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Funds will
engage in this practice, however, only when CoreStates Advisers, in its sole
discretion, believes such practice to be in the best interests of these Funds.
The Company is required to identify any securities of its "regular
brokers or dealers" (as that term is defined in the Investment Company Act)
which the Company has acquired during its most recent fiscal year. As of June
30, 1997, the Equity Index Fund held equity securities issued by Merrill Lynch
worth $668,000 and Morgan Stanley worth $832,000; the Cash Reserve Fund held
debt securities issued by Goldman Sachs worth $24,825, Merrill Lynch worth
$29,500, Morgan Stanley worth $34,375, and Sumitome Bank worth $40,000; and the
Elite Cash Reserve Fund held debt securities issued by Merrill Lynch worth
$10,000, Morgan Stanley worth $10,000, Goldman Sachs worth $5,000, Sumitome Bank
worth $5,000, and SBCI Swiss Bank worth $5,000.
Brokerage Commissions
For the fiscal year ended June 30, 1997, the Funds paid the following brokerage
commissions:
Fund Brokerage Commissions
---- ---------------------
Growth Equity Fund $202,703
Core Equity Fund 1,026,435
Special Equity Fund 138,761
Equity Index Fund 89,787
International Growth Fund 502,826
Balanced Fund 82,805
Short-Intermediate Fund 12,388
Bond Fund 14,615
B-38
<PAGE>
Portfolio Turnover
It is not a policy of the Funds to purchase or sell securities for
trading purposes. However, the Advisers manage the Funds without regard
generally to restrictions on portfolio turnover, except those imposed by
provisions of the federal tax laws regarding short-term trading. Generally, the
Funds will not trade for short-term profits, but when circumstances warrant,
investments may be sold without regard to the length of time held. It is
expected that the Equity Funds' annual portfolio turnover rates will not exceed
100%. A 100% turnover rate would occur, for example, if all of a portfolio's
securities are replaced within a one year period. With respect to the Fixed
Income Funds, the annual portfolio turnover rate may exceed 100% due to changes
in portfolio duration, yield curve strategy or commitments to forward delivery
mortgage-backed securities. The portfolio turnover rate for the Global Bond Fund
during its first year of operation could be as high as 400%. With the exception
of Global Bond, however, it is expected that the annual turnover rate for the
Fixed Income Funds will not exceed 250%.
High rates of portfolio turnover necessarily result in correspondingly
heavier brokerage and portfolio trading costs which are paid by a Fund. Trading
in fixed income securities does not generally involve the payment of brokerage
commissions, but does involve indirect transaction costs. In addition to
portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains.
The portfolio turnover rates for each of the Funds for the fiscal years
ending June 30, 1996 and 1997 were as follows:
Fund Turnover Rate
-------------------
1996 1997
---- ----
Growth Equity Fund 81% 74%
Core Equity Fund 114 79
Special Equity Fund 72 74
Equity Index Fund 13 11
International Growth 41 59
Balanced Fund 74 54
Short-Intermediate Bond Fund 257 158
Bond Fund 190 210
Short Term Income Fund 102 99
Intermediate Municipal Bond Fund 10 22
Government Income Fund 131 120
Pennsylvania Municipal Bond Fund 92 39
New Jersey Municipal Bond Fund 21 19
Global Bond Fund 67 90
ADMINISTRATOR
- All Funds -
SEI Fund Resources ("SFR" or "Administrator") generally assists in
supervising the operation of the Funds pursuant to an Administration Agreement.
The respective fees payable to the Administrator are described in the Funds'
Prospectuses.
B-39
<PAGE>
The Administration Agreement
Under the terms of the Administration Agreement, the Administrator
provides the Company with administrative services (other than investment
advisory services) including all regulatory reporting, necessary office space,
equipment, personnel, and facilities.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Company in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Administrator in the performance of its
duties or from reckless disregard by it of its duties and obligations
thereunder.
The Administrator, a Delaware business trust, has its principal
business offices at Oaks, Pennsylvania 19456. SEI Investments Management
Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments Company
("SEI"), is the owner of all beneficial interest in the Administrator. SEI and
its subsidiaries and affiliates, including the Administrator, are leading
providers of funds evaluation services, trust accounting systems, and brokerage
and information services to financial institutions, institutional investors and
money managers. The Administrator and its affiliates also serve as administrator
to the following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, Boston 1784
Funds(R), CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds,
Inc., First American Investment Funds, Inc., First American Strategy Funds,
Inc., FMB Funds, Inc., HighMark Funds, Marquis Funds(R), Monitor Funds, Morgan
Grenfell Investment Trust, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, Profit Funds Investment Trust, Rembrandt Funds(R), Santa
Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, and TIP
Funds.
Administration Fees
<TABLE>
<CAPTION>
Fund Administrative Fees Paid Administrative Fees Waived
---- ---------------------------------- ----------------------------------
1995 1996 1997 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund $123,731 $173,479 $225,396 $ 69,600 $97,589 $115,794
Core Equity Fund 53,535 424,851 909,068 30,067 100,744 259,547
Special Equity Fund * 70,780 118,416 * 7,265 49,294
Equity Index Fund 137,868 219,368 333,148 77,861 123,395 166,809
International Growth
Fund 183,805 196,933 227,442 103,392 110,774 127,898
Balanced Fund 85,636 130,685 184,781 48,169 64,801 96,912
Short-Intermediate
Bond Fund 92,840 128,526 283,761 52,211 73,722 137,610
Bond Fund * 217,319 312,028 * 34,028 174,767
Short Term Income
Fund * 36,257 52,310 * 5,897 29,391
Government Income
Fund 18,024 23,175 33,748 10,139 13,035 16,805
Intermediate Municipal
Bond Fund 2,937 2,058 2,806 1,652 1,158 1,579
</TABLE>
B-40
<PAGE>
<TABLE>
<CAPTION>
Fund Administrative Fees Paid Administrative Fees Waived
---- ---------------------------------- ----------------------------------
1995 1996 1997 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania
Municipal Bond Fund 0 0 0 5,478 11,150 27,981
New Jersey Municipal
Bond Fund 0 0 0 4,023 3,944 4,036
Global Bond Fund 41,460 51,101 55,309 23,318 28,488 31,077
Treasury Reserve 755,724 966,980 1,471,701 425,121 536,353 783,035
Cash Reserve 869,998 1,035,263 1,445,391 489,371 582,385 768,169
Tax Free Reserve 125,548 110,075 201,784 70,639 76,537 107,032
Elite Treasury Reserve 24,029 22,923 25,838 30,578 28,626 38,795
Elite Cash Reserve 442,499 457,125 366,755 563,185 532,139 521,130
Elite Tax-Free Reserve 93,316 100,007 109,090 118,767 118,626 168,849
</TABLE>
- --------------
* Not in operation during period.
** The Elite Government Reserve was not in operation during this period.
DISTRIBUTOR
- All Funds -
SEI Investments Distribution Co. (the "Distributor") acts as
Distributor of the Company's Shares pursuant to a Distribution Agreement. Shares
of each Fund are sold on a continuous basis by the Distributor as agent,
although the Distributor is not obliged to sell any particular amount of Shares.
The Distributor is a broker-dealer registered with the SEC, and is a member of
the National Association of Securities Dealers, Inc. As Distributor, the
Distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of a Fund (excluding preparation and printing expenses
necessary for the continued registration of the Funds' Shares) and of preparing,
printing, and distributing all sales literature. No compensation is payable by
the Company to the Distributor for its distribution services pursuant to the
Distribution Agreement.
For the fiscal years ended June 30, 1995, 1996, and 1997, the aggregate
sales charges payable to the Distributor with respect to Individual Shares of
the Funds were as follows:
<TABLE>
<CAPTION>
Aggregate Sales Charge Payable to
Distributor Amount Retained by Distributor
--------------------------------- ---------------------------------
Fund 1995 1996 1997 1995 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund $1,620 $5,569 $47,416 $182 $700 $1,860
Core Equity Fund 616 12,612 96,837 68 1,710 4,819
Special Equity Fund 0 1,933 39,047 0 286 1,529
Equity Index Fund 0 0 188,470 0 0 6,846
International Growth Fund 4,538 3,413 9,718 505 397 598
Balanced Fund 3,181 11,168 49,158 354 1,454 2,725
Short-Intermediate Bond Fund 85 4,334 2,684 9 526 167
Bond Fund 0 1,199 17,371 0 180 1,620
Short Term Income Fund 0 1 1,330 0 0 15
</TABLE>
B-41
<PAGE>
<TABLE>
<CAPTION>
Aggregate Sales Charge Payable to
Distributor Amount Retained by Distributor
--------------------------------- --------------------------------
Fund 1995 1996 1997 1995 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Government Income Fund 1,995 3,581 14,989 222 420 603
Intermediate Municipal Bond
Fund 576 7,398 1,528 65 822 257
Pennsylvania Municipal Bond
Fund 0 96 46,474 0 11 1,852
New Jersey Municipal Bond
Fund 990 9,916 4,101 110 1,081 350
Global Bond Fund 0 0 48 0 0 0
</TABLE>
The Company has adopted a Distribution Plan (the "Plan") for those
Funds offering Class A and Class C Shares. The Plan provides for the payment by
the Company to the Distributor of up to .25% of the average daily net assets of
each Class A and Class C Shares to which the Plan is applicable. The Company
also has a Distribution Plan (the "Class B Plan") for those Funds offering Class
B Shares. The Class B Plan provides for the payment by the Company to the
Distributor of up to 1.00% of the average daily net assets of each of the Class
B Shares to which the Class B Plan is applicable. The Distributor is authorized
to use up to .75% of these fees as compensation for its distribution-related
services and up to .25% of these fees as service payments to certain securities
broker/dealers and financial institutions which enter into shareholder servicing
agreements or broker agreements (collectively, the "Service Agreements") with
the Distributor. Pursuant to the Service Agreements, the securities
broker/dealers and financial institutions will provide shareholder servicing
administrative services, including such services as: (i) establishing and
maintaining customer accounts and records; (ii) aggregating and processing
purchase and redemption requests from customers and placing net purchase and
redemption orders with the Distributor; (iii) automatically investing customer
account cash balances; (iv) providing periodic statements to their customers;
(v) arranging for bank wires; (vi) answering routine customer inquiries
concerning their investments in the Shares offered in connection with this 12b-1
Plan and related distribution agreement; (vii) assisting customers in changing
dividend options, account designations and addresses; (viii) performing
sub-accounting functions; (ix) processing dividend payments from the Funds on
behalf of customers; (x) forwarding certain shareholder communications from the
Funds (such as proxies, Shareholder reports and dividend, distribution and tax
notices) to customers; and (xi) providing such other similar services as may be
reasonably requested to the extent they are permitted to do so under applicable
statutes, rules or regulations. The actual fee paid to a securities
broker/dealer or financial institution will be based upon the extent and quality
of the services provided.
Continuance of the Plan must be approved annually by shareholders or by
a majority of the Directors of the Company and by a majority of the Directors
who are not interested persons (as defined in the Investment Company Act) and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreement relating to the Plan (the "Qualified Directors"). The Plan
requires that quarterly reports of such expenditures be furnished to and
reviewed by the Directors. The Plan may not be amended to materially increase
the amount which may be spent thereunder without approval by a majority of the
outstanding Shares of the affected Fund series. All material amendments of the
Plan require approval by a majority of the Directors of the Company and the
Qualified Directors. The Company has entered into a shareholder servicing
agreement with CoreStates Bank, N.A.
B-42
<PAGE>
The following chart lists the distribution fees that the Distributor
received for the following Funds for the fiscal year ended June 30, 1997. As of
June 30, 1997, Class B Shares of the Funds, Class C Shares of the Elite Funds,
and the Elite Government Reserve had not commenced operations.
<TABLE>
<CAPTION>
Amount Paid to
Amount 3rd Parties by Sales Printing
Fund Received Fee the Distributor Expenses Costs Other
---- -------- ----- --------------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Growth Equity Fund Class A $9,677 0.25% $9,677 $0 $0 $0
Core Equity Fund Class A 32,372 0.25 32,372 0 0 0
Special Equity Fund Class A 3,986 0.25 3,986 0 0 0
International Growth Fund Class A 5,307 0.25 5,307 0 0 0
Balanced Fund Class A 8,822 0.25 8,822 0 0 0
Short-Intermediate Bond Fund
Class A 7,481 0.25 7,481 0 0 0
Bond Fund Class A 3,492 0.25 3,492 0 0 0
Short Term Income Fund Class A 423 0.25 423 0 0 0
Government Income Fund Class A 3,639 0.25 3,639 0 0 0
Intermediate Municipal Bond
Fund Class A 2,374 0.25 2,374 0 0 0
Pennsylvania Municipal Bond
Fund Class A 3,126 0.25 3,126 0 0 0
New Jersey Municipal Bond
Fund Class A 809 0.25 809 0 0 0
Global Bond Fund Class A 421 0.25 421 0 0 0
Cash Reserve Class C 57,215 0.25 57,215 0 0 0
Treasury Reserve Class C 37,217 0.25 37,217 0 0 0
Tax-Free Reserve Class C 7,656 0.25 7,656 0 0 0
</TABLE>
EXPENSES
- All Funds -
Except as noted herein and in the Funds' Prospectuses, each Fund's
service contractors bear all expenses incurred in connection with the
performance of their services. Similarly, the Funds bear the expenses incurred
in their own operations. Expenses borne by the Funds include taxes (including
preparation of returns), interest, brokerage fees and commissions, if any, fees
of the Company's Board of Directors, SEC fees, state securities qualification
fees (including preparation of filings), costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current Fund
shareholders, charges of the Custodian and the Transfer Agent, outside auditing
and legal expenses, investment advisory and administrative fees, certain
insurance premiums, costs of maintenance of the Funds' existence, costs of
shareholder reports and shareholder meetings, and any extraordinary expenses
incurred in the Funds' operations.
The aggregate rates of the investment advisory, sub-advisory, and
administrative fees payable to the Advisers and the Distributor are not subject
to reduction as the Funds' net assets increase. However, if total expenses borne
by a Fund in any fiscal year exceed expense limitations imposed by applicable
state securities
B-43
<PAGE>
regulations, the Adviser(s) and the Distributor will reimburse the Fund by the
amount of such excess in proportion to their respective fees. Any future expense
reimbursements required to be paid by the Advisers and the Distributor would be
estimated daily and reconciled and paid on a monthly basis.
LEGAL COUNSEL
- All Funds -
Morgan, Lewis & Bockius LLP (of which Mr. Jennings, Secretary of the
Company, is a partner), 2000 One Logan Square, Philadelphia, Pennsylvania 19103,
is counsel to the Company and has passed upon certain matters in connection with
these offerings. From time to time, Morgan, Lewis & Bockius LLP has rendered
legal services to the Administrator, Distributor and CoreStates Corp.
MISCELLANEOUS
- All Funds -
The Company is registered with the SEC as a management investment
company. Such registration does not involve supervision by the Commission of the
management or policies of any Fund.
The Funds' Prospectuses and this Statement of Additional Information
omit certain of the information contained in the Company's Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Commission upon payment of the prescribed
fee.
The Funds' Prospectuses and this Statement of Additional Information do
not constitute an offering of the securities herein described in any state in
which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses and this Statement of Additional
Information.
PRINCIPAL HOLDERS OF SECURITIES
As of October 3, 1997, the following persons were the only persons who
were record owners (or to the knowledge of the Company, beneficial owners) or 5%
and 25% or more of the Shares of the Funds. Persons who owned of record or
beneficially more than 25% of a Fund's outstanding Shares may be deemed to
control the Fund within the meaning of the Investment Company Act. The Company
believes that most of the Class Y Shares of the Funds were held for the record
owner's fiduciary, agency, or custodial customers.
B-44
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
Growth Equity Fund - Patterson & Co. 504,832.565 5.32%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Growth Equity Fund - Patterson & Co. 8,044,860.946 84.82%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Growth Equity Fund - Patterson & Co. 758,373.077 8.00%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Growth Equity Fund - National Financial Services Corp. 28,449.337 8.98%
Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Growth Equity Fund - Patterson & Co. 29,034.792 9.17%
Class A PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - Patterson & Co. 9,227,968.739 38.11%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - Patterson & Co. 11,866,191.454 49.01%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - Patterson & Co. 1,399,492.820 5.78%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Core Equity Fund - National Financial Services Corp. 193,650.684 23.73%
Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Special Equity Fund - Patterson & Co. 3,644,134.831 59.95%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
B-45
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
Special Equity Fund - Patterson & Co. 1,664,612.908 27.39%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Special Equity Fund - Patterson & Co. 354,964.393 5.84%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Special Equity Fund - National Financial Services Corp 40,972.156 18.26%
Class A For the Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church St. Station
New York, NY 10008-3908
Equity Index Fund - Patterson & Co. 2,496,923.628 38.73%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Equity Index Fund - Patterson & Co. 2,705,782.195 41.96%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Equity Index Fund - Patterson & Co. 444,034.750 6.89%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
International Growth Patterson & Co. 1,076,811.542 9.33%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
International Growth Patterson & Co. 5,630,987.620 48.77%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
International Growth Patterson & Co. 4,422,554.468 38.31%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
B-46
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
International Growth National Financial Services Corp. 13,969.813 8.14%
Fund - Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
International Growth Mark E. Stalnecker & 15,251.000 8.88%
Fund - Class A Susan M. Stalnecker JTTEN
9 Briarcrest Dr.
Wallingford, PA 19086-6710
Balanced Fund - Class Y Patterson & Co. 6,497,090.091 76.26%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Balanced Fund - Class Y Patterson & Co. 1,710,443.358 20.08%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short-Intermediate Bond Patterson & Co. 3,655,691.381 21.94%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short-Intermediate Bond Patterson & Co. 10,637,468.138 63.83%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short-Intermediate Bond National Financial Services Corp. 25,644.790 9.29%
Fund - Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Bond Fund - Class Y Patterson & Co. 7,397,727.601 42.77%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Bond Fund - Class Y Patterson & Co. 1,177,970.772 6.81%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
B-47
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
Bond Fund - Class Y Patterson & Co. 7,892,308.742 45.63%
PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Bond Fund - Class A National Financial Services Corp 21,798.984 12.35%
For the Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church St. Station
New York, NY 10008-3908
Bond Fund - Class A Meridian Trust Company Cust 9,697.315 5.49%
For the IRA Rollover of
Shiras E. Holmes
8761 W. Barkhurst Dr.
Pittsburgh, PA 15237-4183
Intermediate Municipal Patterson & Co. 32,570.529 33.64%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Intermediate Municipal Patterson & Co. 62,578.030 64.63%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Intermediate Municipal National Financial Services Corp. 5,115.519 5.31%
Bond Fund - Class A For Exclusive Use of Our
Customers
200 Liberty Street, 4th Floor
1 World Financial Center
New York, NY 10281-1003
Intermediate Municipal Joseph T. Oprocha & 5,227.908 5.43%
Bond Fund - Class A Theresa E. Oprocha JTTEN
107 Snyder Avenue
Philadelphia, PA 19148-2617
Intermediate Municipal Irene Sungaila 5,352.438 5.56%
Bond Fund - Class A 5214 Burton Street
Philadelphia, PA 19124-1502
Intermediate Municipal Thomas Glenn 5,838.185 6.06%
Bond Fund - Class A 827 North 63rd Street
Philadelphia, PA 19151-3411
</TABLE>
B-48
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
Intermediate Municipal Frank B. Holst & 6,141.450 6.37%
Bond Fund - Class A E. Joan Holst JTTEN
2218 Oak Terrace
Lansdale, PA 19446-6005
Intermediate Municipal Lowell S. Hunter 4,917.838 5.10%
Bond Fund - Class A 25 Hunter Road
Lambertville, NJ 08530-2704
Short Term Income Patterson & Co. 1,694,373.697 46.14%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short Term Income Patterson & Co. 1,491,849.754 40.62%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short Term Income Patterson & Co. 453,111.342 12.34%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Short Term Income CoreStates Bank, N.A. 10,256.108 20.25%
Fund - Class A Custodian for the Rollover IRA of
John M. Ennis
206 Emerald Ave.
Reading, PA 19606-1450
Short Term Income CoreStates Bank, N.A. 33,556.911 66.25%
Fund - Class A Custodian for the Rollover IRA of
Frank L. Caiola
321 Evergreen Dr.
North Wales, PA 19454-2701
Short Term Income Philip W. Schwehm, Trustee 3,055.261 6.03%
Fund - Class A Philip W. Schwehm Living Trust
23 Joyner St.
Lawrenceville, NJ 08648-2612
Government Income Patterson & Co. 1,106,712.096 55.11%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Government Income Patterson & Co. 772,508.480 38.47%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
B-49
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
Government Income Patterson & Co. 110,734.490 5.51%
Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Government Income Jean Taxin 8,976.415 5.43%
Fund - Class A 5005 Woodbine Ave.
Philadelphia, PA 19131-2403
Government Income Margaret Murray 11,494.218 6.95%
Fund - Class A P.O. Box 5566
Philadelphia, PA 19143-0566
Pennsylvania Municipal Patterson & Co. 558,836.041 51.75%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Pennsylvania Municipal Patterson & Co. 277,670.385 25.71%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Pennsylvania Municipal Dr. Vernon F. Alibert & 191,108.701 17.70%
Bond Fund - Class Y Dolores V. Alibert JTWROS
1420 Conchester Highway
Boothwyn, PA 19061-2103
Pennsylvania Municipal National Financial Services Corp 25,533.476 9.82%
Bond Fund - Class A For the Benefit of Our Customers
One World Financial Center
P.O. Box 3908
Church St. Station
New York, NY 10008-3908
Pennsylvania Municipal Charles Genuardi & 18,604.330 7.15%
Bond Fund - Class A Anne S. Genuardi JTTEN
1687 Christopher Lane
Norristown, PA 19403-3301
New Jersey Municipal Patterson & Co. 99,676.762 64.37%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
New Jersey Municipal Patterson & Co. 54,003.874 34.88%
Bond Fund - Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
B-50
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
New Jersey Municipal Deborah L. Brett & 2,218.534 5.21%
Bond Fund - Class A Randall P. Brett JTTEN
7 Sherman Ct.
Plainsboro, NJ 08536-2332
New Jersey Municipal Almira E. Brinser & 2,381.563 5.59%
Bond Fund - Class A Everett L. Brinser JTTEN
802 Chestnut Ave.
Laurel Springs, NJ 08021-2019
New Jersey Municipal Nathan J. Bershanoff 8,561.478 20.09%
Bond Fund - Class A 5251 Garden Ave.
Pennsauken, NJ 08109-1013
New Jersey Municipal Mary Manchur & 2,550.249 5.98%
Bond Fund - Class A Jean Kent JTTEN
19 Thatchers Rd.
Frenchtown, NJ 08825-3603
New Jersey Municipal Charles K. Cunard 5,397.142 12.66%
Bond Fund - Class A 714 N. Evergreen Ave.
Woodbury, NJ 08096-3552
New Jersey Municipal Josephine Grimshaw 2,424.836 5.69%
Bond Fund - Class A 409 Pointsett Ave.
Pitman, NJ 08071-1800
New Jersey Municipal Dalila V. McCrink & 3,085.016 7.24%
Bond Fund - Class A William J. McCrink JTTEN
3 Brookview Dr.
Atco, NJ 08004-2931
New Jersey Municipal Joseph Gizelbach & 2,921.422 6.85%
Bond Fund - Class A Adelaide C. Gizelbach JTTEN
14 Winding Way Rd.
Stratford, NJ 08084-1914
New Jersey Municipal Michael Appignani & 2,459.002 5.77%
Bond Fund - Class A Michellna Appignani JTTEN
147 Bernard St.
Highland Park, NJ 08904-3554
Global Bond Fund - Patterson & Co. 551,075.694 14.68%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
</TABLE>
B-51
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
Global Bond Fund - Patterson & Co. 3,030,770.264 80.74%
Class Y PNB Personal Trust Accounting
P.O. Box 7829
Philadelphia, PA 19101-7829
Global Bond Fund - James W. Jennings 5,029.720 21.48%
Class A 2000 One Logan Square
Philadelphia, PA 19103-6993
Global Bond Fund - CoreStates Bank, N.A. C/F IRA of 6,762.412 28.88%
Class A Allen Luke
17 Bennett Court
East Brunswick, NJ 08816-3686
Global Bond Fund - CoreStates Bank, N.A. C/F IRA of 6,373.815 27.22%
Class A A. Gilbert Heebner
2 Etienne Arbordeau
Berwyn Baptist Road
Devon, PA 19333-1067
Cash Reserve - Class Y Patterson & Co. 779,941,462.520 92.50%
Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Treasury Reserve - The Bank of New York 65,656,208.720 7.19%
Class Y One Wall Street
5th Floor/STIF
New York, NY 10005-2501
Treasury Reserve - Patterson & Co. 733,087,643.010 80.26%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Treasury Reserve - First Union National Bank 54,758,542.340 6.00%
Class Y 401 S. Tryon St.
Floor 3
Charlotte, NC 28202-1911
Treasury Reserve - Patterson & Co. 6,762,380.960 37.52%
Class C Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Treasury Reserve - Philadelphia Health Management 941,983.280 5.23%
Class C Corp.
260 S. Broad Street
20th Floor
Philadelphia, PA 19102-5021
</TABLE>
B-52
<PAGE>
<TABLE>
<CAPTION>
Amount of Record Percent of Total
Fund Owner Ownership Shares Outstanding
---- ----- --------- ------------------
<S> <C> <C> <C>
Treasury Reserve - Frank E. Acierno 1,504,827.130 8.35%
Class C 4001 Springfield Lane
Greenville, DE 19807-2251
Tax-Free Reserve - Patterson & Co. 123,360,101.270 95.46%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Tax-Free Reserve - Dennis J. Fiore 667,639.870 6.95%
Class C 38 Zachary Dr.
Chalfont, PA 18914-4014
Elite Cash Reserve - Patterson & Co. 230,547,479.170 99.99%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Elite Treasury Reserve - Patterson & Co. 28,453,714.660 100.00%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
Elite Tax-Free Reserve - Patterson & Co. 178,979,169.830 100.00%
Class Y Attn: Jim Quinlan
P.O. Box 7618 FC9-1-17
Philadelphia, PA 19101-7618
</TABLE>
FINANCIAL STATEMENTS
- All Funds -
The Company's Financial Statements for the fiscal year ended June 30,
1997, including notes thereto and the report of Ernst & Young LLP thereon, are
herein incorporated by reference. Copies of the 1997 Annual Report must
accompany the delivery of this Statement of Additional Information.
B-53
<PAGE>
APPENDIX
Rated Investments
Bonds
DESCRIPTION OF MOODY'S LONG-TERM RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa: Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's bond ratings, where specified, are applied to senior bank
obligations and insurance company senior policyholder and claims obligations
with an original maturity in excess of one year. Obligations relying upon
support mechanisms such as letters-of-credit and bonds of indemnity are excluded
unless explicitly rated.
B-54
<PAGE>
Obligations of a branch of a bank are considered to be domiciled in the
country in which the branch is located. Unless noted as an exception, Moody's
rating on a bank's ability to repay senior obligations extends only to branches
located in countries which carry a Moody's sovereign rating. Such branch
obligations are rated at the lower of the bank's rating or Moody's sovereign
rating for the bank deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same
as the currency of the country in which the obligation is domiciled, Moody's
ratings do not incorporate an opinion as to whether payment of the obligation
will be affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or
insurance company obligations are exempt from registration under the U.S.
Securities Act of 1933 or issued in conformity with any other applicable law or
regulation. Nor does Moody's represent that any specific bank or insurance
company obligation is legally enforceable or is a valid senior obligation of a
rated issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and
their accuracy is not guaranteed. A rating should be weighed solely as one
factor in an investment decision and you should make your own study and
evaluation of any issuer whose securities or debt obligations you consider
buying or selling.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S LONG-TERM RATINGS
Investment Grade
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small
degree.
A Debt rated 'A' has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to adverse
effects of changes in circumstances and economic conditions than debt
in higher- rated categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'C' the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
B-55
<PAGE>
BB Debt rated 'BB' has less near-term vulnerability to default than
other speculative grade debt. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions that could lead to inadequate capacity to meet timely
interest and principal payments. The 'BB' rating category is also
used for debt subordinated to senior debt that is assigned an actual
or implied 'BBB-' rating.
B Debt rate 'B' has greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions would likely
impair capacity or willingness to pay interest and repay principal.
The 'B' rating category also is used for debt subordinated to senior
debt that is assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a current identifiable vulnerability to default,
and is dependent on favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The 'CCC' rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied 'B'
or 'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The
'C' rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
CI Debt rated 'CI' is reserved for income bonds on which no interest is
being paid.
D Debt is rated 'D' when the issue is in payment default, or the
obligor has filed for bankruptcy. The 'D' rating is used when
interest or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF DUFF & PHELPS' LONG-TERM DEBT RATINGS
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
AA- but may vary slightly from AA- time to time because of economic
conditions.
A+ Protection factors are average but adequate. However, risk factors
A- are more variable and A- greater in periods of economic stress.
BBB+ Below average protection factors but still considered sufficient for
BBB- prudent investment. Considerable variability in risk during economic
cycles.
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
according to industry conditions or company
B-56
<PAGE>
BB- fortunes. Overall quality may move up or down frequently within this
category.
B+ Below investment grade and possessing risk that obligations will not
B be met when due. Financial protection factors will fluctuate widely
B- according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
DESCRIPTION OF FITCH'S LONG-TERM RATINGS
Investment Grade Bond
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'.
Because bonds rated in the 'AAA' and 'AA' categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated 'F-1+'.
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds, and therefore impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
Speculative grade bond
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
B-57
<PAGE>
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, Bonds are in default on interest and/or principal payments. Such
DD, bonds are extremely speculative and DD, should be valued on the basis
& D of their ultimate recovery value in liquidation or reorganization of
the & D obligor. 'DDD' represents the highest potential for recovery
on these bonds, and 'D' represents the lowest potential for recovery.
(+) & Plus and minus signs are used with a rating symbol to indicate the
(-) relative position of a credit within the (-) rating category. Plus
and minus signs, however, are not used in the 'AAA', 'DDD', 'DD', or
'D' categories.
DESCRIPTION OF IBCA'S LONG-TERM RATINGS
AAA Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
substantially.
AA Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very
significantly.
A Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic
or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.
BB Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest
exists, but is susceptible over time to adverse changes in business,
economic or financial conditions.
B Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse
changes in business, economic or financial conditions.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic or financial conditions.
CC Obligations which are highly speculative or which have a high risk of
default.
C Obligations which are currently in default.
Notes: "+" or "-" may be appended to a rating to denote relative status within
major rating categories. Ratings of BB and below are assigned where it is
considered that speculative characteristics are present.
B-58
<PAGE>
DESCRIPTION OF THOMSON BANKWATCH'S LONG-TERM DEBT RATINGS
Investment Grade
AAA The highest category; indicates that the ability to repay principal
and interest on a timely basis is very high.
AA The second-highest category; indicates a superior ability to repay
principal and interest on a timely basis, with limited incremental
risk compared to issues rated in the highest category.
A The third-highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations
with higher ratings.
BBB The lowest investment-grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are,
however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
Non-Investment Grade
(Issues regarded as having speculative characteristics in the likelihood of
timely repayment of principal and interest.)
BB While not investment grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated
issues. However, there are significant uncertainties that could
affect the ability to adequately service debt obligations.
B Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse
developments could well negatively affect the payment of interest and
principal on a timely basis.
CCC Issues rated "CCC" clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial
circumstances.
CC "CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of
bankruptcy or reorganization.
D Default
Ratings in the Long-Term Debt categories may include a plus (+) or minus (-)
designation, which indicates where within the respective category the issue is
placed.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by Standard & Poor's Corporation ("S&P") is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1, 1 +, and 2 to indicate the relative
degree of safety. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1, the highest rating category, reflect a "very
strong" degree of safety regarding timely payment. Those rated A-2, the second
highest rating category, reflect a satisfactory degree of safety regarding
timely payment but not as high as A-1.
B-59
<PAGE>
Commercial paper issues rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") are judged by Moody's to be of "superior" quality and "strong"
quality respectively on the basis of relative repayment capacity.
F-1+ (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1+ is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues rated
F-1+ or F-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by good fundamental protection
factors. Risk factors are minor. Duff has incorporated gradations of 1+ and 1-
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1+ has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1, the highest rating by IBCA, indicates that the obligation is
supported by a strong capacity for timely repayment. Those obligations rated A1+
are supported by the highest capacity for timely repayment. Obligations rated
A2, the second highest rating, are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
B-60
