CoreFunds,Inc.
--------------
GLOBAL BOND FUND
ANNUAL REPORT TO SHAREHOLDERS
June 30, 1998
<PAGE>
LETTER TO SHAREHOLDERS
COREFUND GLOBAL BOND FUND
JUNE 30, 1998
Dear Shareholders:
Welcome to the Evergreen Select Funds. As you are probably aware by now,
CoreFund Global Bond Fund became Evergreen Select International Bond Fund,
effective August 28, 1998, as a result of the vote at the August 18th
shareholder meeting. The Fund's manager remains the same, George McNeill of
Analytic TSA International, Inc., and the Fund's advisor is now the Capital
Management Group of First Union National Bank. The Select Funds are offered
through First Capital Group, an extension of the Capital Management Group.
The Evergreen Select Funds are an institutional family of 24 funds with over $15
billion in assets and are part of the Evergreen Funds with more than $52 billion
in assets under management.
This report will be the last one you receive from CoreFunds, and it represents
the Fund's financial statements as of and for the fiscal year ending June 30,
1998. The Evergreen Select International Bond Fund's fiscal year end has been
changed to September 30th, so the next report you receive for the Fund will be
an annual report as of September 30, 1998, which will be mailed at the end of
November 1998.
Thank you for your continued investment, and welcome to the Evergreen Select
Funds.
Sincerely,
/S/ SIGNATURE
William M. Ennis
Managing Director
Evergreen Funds
/S/ SIGNATURE
David C. Francis, CFA
Chief Investment Officer
Managing Director
First Capital Group
1
<PAGE>
PORTFOLIO MANAGER: GEORGE MCNEILL
COREFUND GLOBAL BOND FUND
JUNE 30, 1998
PERFORMANCE
The CoreFund Global Bond Fund Class A shares returned 4.16%, unadjusted for any
sales charges, for the one-year period ended June 30, 1998, while its benchmark
index, the J.P. Morgan Global Government Bond Index, returned 3.27% for the
same period. Assets in the Fund grew nearly 6% from $34,722,000 on June 30, 1997
to $36,921,000 on June 30, 1998.
COMMENTARY
The Far East crisis struck almost exactly half way through the period under
review. While higher-risk, emerging-market debt performed extremely well in the
first half, the true risk became apparent half way through the year and this led
to a flight to quality in the latter part of the Fund's fiscal year. This flight
to quality resulted in an even greater over-valuation of developed market bonds
as yields fell, particularly in U.S. Treasuries, U.K. gilts and then in European
bonds. Before the seriousness of events in the Far East was recognized, there
were concerns that tight labor markets and accelerating wage increases would
lead inevitably to higher inflation, particularly in the United States and the
United Kingdom. Because the U.S. bond market sets the overall trend in developed
market behavior, there were natural fears that lack of Fed action would result
in an even greater reaction later. Your Fund continued to take a cautious stance
in this background both in terms of the markets it invested in and in its
maturity profile.
Once it became clear that the Far Eastern crisis was disinflationary or even
deflationary for not only the Far East but for the world economy as a whole, the
outlook for developed market bonds was enhanced. The short term risk, however,
was increased since United States domestic policy would have to be subordinated
to international policy to help avoid further pressure on the yen with its
potential domino effect on the rest of the Far East.
At the end of the period, the debate is whether the slowdown effect of the Far
East will affect Western economies before Western interest rates have to be
increased to control the pace of growth. In this background, it seems right to
remain cautious.
2
<PAGE>
COREFUND GLOBAL BOND FUND
JUNE 30, 1998
BOND DISTRIBUTION
Germany 21.7%
France 20.1%
Canada 12.1%
Sweden 10.0%
United States 9.5%
United Kingdom 8.8%
Demand Deposit 5.7%
New Zealand 3.7%
Australia 3.4%
Netherlands 2.4%
Denmark 2.4%
Options 0.2%
-------
100.0%
=======
MATURITY DISTRIBUTION
Cash 6.2%
- 2 years 16.2%
2-5 years 17.3%
6-10 years 33.5%
+ 10 years 26.8%
TOP 10 HOLDINGS
Bundesrepublic 6.25% 2024 16.7%
Canadian Gov't. 4.75% 1999 7.4%
French OAT 6% 2025 5.2%
Credite Locale 5.375% 2004 5.1%
DSL Finance 5% 2004 5.0%
DEPFA 6.375% 2008 5.0%
Eksportsfinans 6.875% 2004 5.0%
Gov't of Sweden 8% 2007 4.9%
Diageo 6.25% 2002 4.9%
J.P. Morgan 6.875% 2004 4.8%
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
One Annualized Annualized Cumulative
Year 3 Year Inception Inception
Return Return to Date to Date
- --------------------------------------------------------------------------------
Class Y 4.42% 6.23% 4.03% 19.66%
Class A w/o Load 4.16% 5.93% 3.76% 18.25%
Class A w/Load -0.74% 4.23% 2.65% 12.62%
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE COREFUNDS
GLOBAL BOND FUND, CLASS Y OR CLASS A, VERSUS THE J.P. MORGAN GLOBAL BOND
INDEX, HEDGED AND UNHEDGED
[LINE GRAPH OMITTED]
PLOT POINTS TO FOLLOW:
Global Bond Fund (Class Y)
Global Bond Fund (Class A)
J.P. Morgan Global Bond Index
J.P. Morgan Global Bond Index, Hedged
Global Bond Fund Global Bond Fund J.P. Morgan J.P. Morgan Global
(Class Y) (Class A) Global Bond Index Bond Index, Hedged
12/31/93 $10,000 $ 9,525 $10,000 $10,000
6/30/94 9,045 8,595 9,964 9,489
6/30/95 9,923 9,418 11,704 10,537
6/30/96 10,729 10,147 11,942 11,498
6/30/97 11,392 10,748 12,477 12,565
6/30/98 11,895 11,195 13,210 14,069
PAST PERFORMANCE OF THE PORTFOLIO IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
3
<PAGE>
STATEMENT OF NET ASSETS COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
<TABLE>
<CAPTION>
PAR VALUE
(000)(1) (000)
- ---------------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS - 91.2%
<S> <C> <C>
AUSTRALIA - 3.2%
New South Wales Treasury
12.000%, 12/01/01 .................................................... 1,600 $ 1,193
---------
CANADA - 11.8%
Canada Government
4.750%, 09/15/99 .................................................... 3,900 2,642
J.P. Morgan
6.875%, 03/17/04 .................................................... 2,400 1,703
---------
4,345
---------
DENMARK - 2.4%
City of Copenhagen
6.250%, 03/15/01 .................................................... 5,800 877
---------
FRANCE - 19.5%
Credit Locale
5.375%, 01/13/04 .................................................... 10,600 1,815
Depfa Finance
6.375%, 11/18/08 .................................................... 9,800 1,776
Diageo
6.250%, 11/25/02 .................................................... 10,000 1,761
French OAT Bond
6.000%, 10/25/25 .................................................... 10,250 1,850
---------
7,202
---------
GERMANY - 21.0%
Bundesrepublic
6.250%, 01/04/24 .................................................... 9,590 5,981
DSL Finance
5.000%, 07/23/04 .................................................... 3,150 1,775
---------
7,756
---------
LITHUANIA - 1.4%
(2) Republic of Lithuania
7.125%, 07/22/02 .................................................... 525 510
---------
NETHERLANDS - 2.4%
Bank Voor Ned Gem
6.250%, 03/15/00 .................................................... 1,700 869
---------
See accompanying notes to financial statements.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND GLOBAL BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------
June 30, 1998
PAR VALUE
(000)(1) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW ZEALAND - 3.6%
Government of New Zealand
8.000%, 11/15/06 .................................................... 2,320 $ 1,328
---------
SWEDEN - 9.6%
Eksportfinans
6.875%, 02/09/04 .................................................... 13,000 1,784
Government of Sweden
8.000%, 08/15/07 .................................................... 11,500 1,761
--------
3,545
--------
UNITED KINGDOM - 12.9%
(2) British Tele
7.000%, 05/23/07 .................................................... 500 535
Chubu Elecectric Power
6.750%, 08/10/99 .................................................... 950 1,565
Halifax Building
8.375%, 12/15/99 .................................................... 950 1,597
(2) ICI Investments
6.750%, 08/07/02 .................................................... 500 508
(2) Rolls Royce
7.125%, 07/29/03 .................................................... 545 564
--------
4,769
--------
UNITED STATES - 3.4%
Abbey National
6.690%, 10/17/05 .................................................... 500 513
Hutchison Whamp
6.950%, 08/01/98 .................................................... 300 260
Rothmans Holdings
6.500%, 05/06/03 .................................................... 500 497
--------
Total United States 1,270
--------
TOTAL FOREIGN BONDS
(Cost $33,355) .......................................................................... 33,664
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND GLOBAL BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------
June 30, 1998
PAR VALUE
(000)(1) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DEBT OPTIONS - 0.2%
FRANCE - 0.0%
Government of France OAT Put 6.0%, Strike @ 108.05* ....................... 10,000 $ 8
-----------
GERMANY - 0.2%
Bund Put 6.25%, Strike @ 111.59* .......................................... 9,000 13
Demcall/Us$put Strike @ 1.78349* .......................................... 10,000 39
-----------
52
-----------
TOTAL DEBT OPTIONS
(Cost $319) ............................................................ 60
-----------
DEMAND DEPOSIT - 5.7%
Morgan Stanley 4.15%, 07/01/98 ............................................ 2,124 2,124
-----------
TOTAL DEMAND DEPOSITS
(Cost $2,124) ........................................................................... 2,124
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.1%
(Cost $35,798) ......................................................................... 35,848
- ------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 2.9% ...................................................... 1,073
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class Y ($.001 par value -- 25 million authorized
shares) based on 3,940,654 outstanding shares of beneficial interest ....................... 38,959
Portfolio Shares of Class A ($.001 par value -- 25 million authorized
shares) based on 21,308 outstanding shares of beneficial interest .......................... 211
Undistributed Net Investment Income ........................................................... 394
Accumulated Net Realized Loss on Investments .................................................. (2,656)
Net Unrealized Depreciation on Forward Foreign Currency
Contracts, Foreign Currency and Translation of Other Assets
and Liabilities in Foreign Currency ........................................................ (37)
Net Unrealized Appreciation on Investments .................................................... 50
- -----------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ..................................................................... $36,921
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE-- CLASS Y ............................ $9.32
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE-- CLASS A ...................................... $9.30
- -----------------------------------------------------------------------------------------------------------------------
*NON-INCOME PRODUCING SECURITY
(1) IN LOCAL CURRENCY UNLESS OTHERWISE INDICATED
(2) DENOMINATED IN U.S. $.
See accompanying notes to financial statements.
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (000) COREFUND GLOBAL BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------
For the year ended June 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest .................................................................. $ 2,066
-------
Total investment income ................................................. 2,066
-------
EXPENSES:
Investment advisory fees .................................................. 221
Less: waiver of investment advisory fees .................................. (36)
Administrative fees ....................................................... 90
Less:waiver of administrative fees ........................................ (33)
Transfer agent fees & expenses ............................................ 11
Custodian fees ............................................................ 12
Professional fees ......................................................... 3
Registration & filing fees ................................................ 4
12b-1 fees-- individual shares ............................................ 1
Trustee fees .............................................................. 1
Printing fees ............................................................. 11
Organizational costs ...................................................... 2
Miscellaneous ............................................................. 8
-------
Total expenses .......................................................... 295
-------
NET INVESTMENT INCOME .......................................................... 1,771
-------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions ................................................... 230
Option transactions ..................................................... (1,313)
Net realized gain on forward foreign currency contracts and
foreign currency transactions ........................................... 840
Net unrealized depreciation on forward foreign currency contracts and translation of
other assets and liabilities in foreign currencies ...................... (248)
Net change in unrealized appreciation on investments ...................... 287
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,567
=======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1998:
CLASS Y
1Net asset value, offer and redemption price .............................. $ 9.32
=======
CLASS A
1Net asset value, redemption price ........................................ $ 9.30
Maximum sales charge of 4.75% ............................................ 0.46
-------
2Offering price ........................................................... $ 9.76
<FN>
=======
1 NET ASSET VALUE PER SHARE, AS ILLUSTRATED, IS THE AMOUNT WHICH WOULD BE PAID
UPON THE REDEMPTION OR EXCHANGE OF SHARES.
2 THE OFFER PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE OF CLASS A BY
1 MINUS THE MAXIMUM SALES CHARGE OF 4.75%.
</FN>
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND GLOBAL BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------
For the years ended June 30
1998 1997
--------- ---------
OPERATIONS:
<S> <C> <C>
Net investment income ................................................... $ 1,771 $ 1,774
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency .............................. (243) 423
Net unrealized appreciation (depreciation) on investments, forward
foreign currency contracts and translation of assets and
liabilities in foreign currencies .................................... 39 (149)
-------- --------
Net increase in net assets resulting from operations .................... 1,567 2,048
-------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income
Class Y .............................................................. (2,380) (2,621)
Class A .............................................................. (15) (13)
-------- --------
Total dividends distributed ...................................... (2,395) (2,634)
-------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued .......................................... 1,499 107
Reinvestment of cash distributions ................................... 2,033 2,670
Cost of shares redeemed .............................................. (577) (602)
-------- --------
Increase in net assets from Class Y transactions ..................... 2,955 2,175
-------- --------
Class A:
Proceeds from shares issued .......................................... 70 31
Reinvestment of cash distributions ................................... 15 15
Cost of shares redeemed .............................................. (63) (13)
-------- --------
Increase in net assets from Class A transactions ..................... 22 33
-------- --------
Increase in net assets derived from capital
share transactions ................................................... 2,977 2,208
-------- --------
Net increase in net assets ........................................... 2,149 1,622
-------- --------
NET ASSETS:
Beginning of year ....................................................... 34,772 33,150
-------- --------
End of year ............................................................. $36,921 $34,772
======== ========
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 7 IN THE NOTES TO THE
FINANCIAL STATEMENTS.
See accompanying notes to financial statements.
</TABLE>
8
<PAGE>
FINANCIAL HIGHLIGHTS COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
RATIO OF
NET REALIZED AND NET EXPENSES
ASSET UNREALIZED DISTRIBUTIONS DISTRIBUTIONS NET ASSETS TO
VALUE NET GAINS FROM NET FROM ASSET VALUE END AVERAGE
BEGINNING INVESTMENT OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD NET
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN2 (000) ASSETS
---------- ----------- -------------- ---------- ---------- ---------- -------- -------- --------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $ 9.54 $0.47 $(0.06) $(0.63) $-- $ 9.32 4.42% $36,723 0.81%
1997 9.70 0.49 0.09 (0.74) -- 9.54 6.18 34,590 0.85
1996 9.62 0.47 0.30 (0.69) -- 9.70 8.00 32,998 0.71
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898 0.64
19941 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73
CLASS A*
1998 $ 9.52 $0.40 $(0.01) $(0.61) $-- $ 9.30 4.16% $198 1.06%
1997 9.68 0.42 0.14 (0.72) -- 9.52 5.92 182 1.10
1996 9.61 0.61 0.12 (0.66) -- 9.68 7.74 152 0.96
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170 0.89
19941 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98
RATIO OF RATIO OF
RATIO OF EXPENSES NET INCOME
NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE
----------- -------- -------- --------
CLASS Y*
<S> <C> <C> <C> <C>
1998 4.90% 1.00% 4.71% 46%
1997 5.14 1.03 4.96 90
1996 5.81 0.95 5.57 67
1995 6.84 1.03 6.45 133
19941 5.04 1.12 4.65 161
CLASS A*
1998 4.65% 1.25% 4.46% 46%
1997 4.89 1.28 4.71 90
1996 5.56 1.20 5.32 67
1995 6.59 1.28 6.20 133
19941 4.79 1.37 4.40 161
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON APRIL 22, 1996 THE SERIES A SHARES OF THE FUND WERE REDESIGNATED CLASS Y
AND THE SERIES B SHARES OF THE FUND WERE REDESIGNATED CLASS A.
+ 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 THE SALES LOAD CHARGED ON THE CLASS A SHARES.
</FN>
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
1. ORGANIZATION
The CoreFund Global Bond Fund (the "Portfolio") is a portfolio offered by
CoreFunds, Inc. (the "Company"), an open-end investment company registered under
the Investment Company Act of 1940, as amended. The Company is comprised of 20
separate portfolios (the "Portfolios"):
EQUITY PORTFOLIOS: MONEY MARKET PORTFOLIOS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Cash Reserve
International Growth Fund Elite Treasury Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME PORTFOLIOS:
Short Term Income Fund
Short-Intermediate Bond Fund
Government Income Fund
Bond Fund
Global Bond Fund
Intermediate Municipal Bond Fund
Pennsylvania Municipal Bond Fund
New Jersey Municipal Bond Fund
Only the financial statements of the Global Bond Fund are presented herein.
The financial statements of the remaining funds are presented separately.
The assets of each Portfolio are segregated, and a Shareholder's interest
is limited to the Portfolio in which shares are held. The Portfolios'
prospectuses provide a description of the Portfolios' investment objectives,
policies and strategies.
Refer to Footnote 8, regarding the reorganization of the Portfolio after
June 30, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio.
SECURITY VALUATION--Investment securities that are listed on a securities
exchange for which market quotations are available are valued by an independent
pricing service at the last quoted sales price for such securities on each
business day. If there is no such reported sale, these securities and unlisted
securities for which market quotations are readily available are valued at the
most recent quoted bid price using procedures determined in good faith by the
Board of Trustees. Debt obligations with sixty days or less remaining until
maturity may be valued at their amortized cost. Under this valuation method,
purchase discounts and premiums are accreted and amortized ratably to maturity
and are included in interest income.
The books and records of the Portfolio are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
bases:
[bullet] market value of investment securities, assets and liabilities at
the current rate of exchange; and
[bullet] purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The Portfolio does isolate the effect of fluctuations in foreign currency
rates when determining the gain or loss upon sale or maturity of foreign
currency denominated debt obligations for Federal income tax purposes.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
The Portfolio reports certain foreign currency-related transactions as
components of unrealized and realized gains for financial reporting purposes,
whereas such components are treated as ordinary income for Federal income tax
purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--The Portfolio enters into forward
foreign currency contracts as hedges against either specific transactions or
portfolio positions. The aggregate principal amounts of the contracts are not
recorded since the Portfolio intends to settle the contracts prior to delivery.
All commitments are "marked-to-market" daily at the applicable foreign exchange
rate and any resulting unrealized gains or losses are recorded currently. The
Portfolio realizes gains or losses at the time forward contracts are settled.
Financial future contracts are valued at the settlement price established each
day by the board of trade on an exchange on which they are traded.
SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period, which is calculated using the effective interest method. Interest income
is recorded on the accrual basis.
EXPENSES--Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Company are
pro-rated to the Portfolios on the basis of relative net assets. Class specific
expenses, such as the 12b-1 fees, are borne by that class. Income, other
expenses and accumulated realized and unrealized gains and losses of a Fund are
allocated to the respective class on the basis of the relative net asset value
each day.
DISTRIBUTION TO SHAREHOLDERS--The Portfolio declares and pays dividends on
a quarterly basis. Such dividends are reinvested in additional shares unless
otherwise requested. Any net realized capital gains on sales of securities for
the Portfolio are distributed to its shareholders at least annually.
Distributions from net investment income and net realized capital gains are
determined in accordance with U.S. Federal income tax regulations, which may
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid in capital in the period that the difference arises.
Accordingly, for the Portfolio as of June 30, 1998, $840,000 was
reclassified from accumulated net realized gain on investments to accumulated
net investment income.
FEDERAL INCOME TAXES--It is the Portfolio's intention to continue to
qualify as a regulated investment company and distribute all of its taxable
income. Accordingly, no provision for Federal income tax is required.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
The Company has entered into an investment advisory agreement with
CoreStates Investment Advisers, Inc. ("CSIA") to provide investment advisory
services to the Portfolio. For its services CSIA receives a fee of 0.60% based
on the annual average daily net assets of the Portfolio.
Advisory fees are computed daily and paid monthly. Additionally, for the
year ended June 30, 1998, CSIA has voluntarily waived a portion of their fees in
order to assist the Portfolio in maintaining a competitive expense ratio.
CoreStates Bank (now First Union Bank) serves as Custodian to the Company.
Under the Custodian Agreement, CoreStates Bank holds each Portfolio's securities
and cash items, makes receipts and disbursements of money on behalf of the
Portfolio, collects and receives all income and other payments and distributions
on account of the Portfolios' securities and performs other related services.
CoreStates Bank may, at its discretion and at its own expense, open and maintain
a sub-custody account or employ a sub-custodian on behalf of the Portfolios
investing exclusively in the United States and may, with the Portfolios' Board
approval and at the expense of the Portfolios, employ sub-custodians on behalf
of the Portfolios who invest in foreign countries provided that CoreStates Bank
shall remain liable for the performance of all of its duties under the Custodian
Agreement.
Sub-Advisory services are provided for the Portfolio by Analytic TSA
(formerly Alpha Global). CoreStates Advisers is responsible for the supervision,
and payment of fees to the Sub-Advisers in connection with their services.
4. ADMINISTRATIVE, TRANSFER AGENT AND DISTRIBUTION SERVICES
Pursuant to an Administration agreement dated October 30, 1992, as amended
June 1, 1995, SEI Fund Resources ("SFR") acts as the Portfolio's Administrator.
Under the terms of such agreement, SFR is entitled to receive an annual fee of
0.25% on the average net assets of the Portfolio. SFR voluntarily waives a
portion of their fees in order to assist the Portfolio in maintaining a
competitive expense ratio.
Pursuant to a Transfer Agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS"), a wholly owned subsidiary of State Street Bank
and Trust Company acts as the Portfolio's Transfer Agent. As such, BFDS provides
transfer agency, dividend disbursing and shareholder servicing for the
Portfolio.
On November 2, 1992, SEI Financial Services ("SFS"), a wholly owned
subsidiary of SEI, became the Portfolio's exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the "Plan") for the Portfolio.
The Plan provides for the payment by the Company to the Distributor of up to
0.25% of the daily net assets of the Class A shares and 1.00% of the daily net
assets for the Class B shares. The Distributor is authorized to use these fees
as compensation for its distribution-related services and as payment to certain
securities broker/dealers and financial institutions that enter into shareholder
servicing agreements or broker agreements with the Distributor. The Portfolios
paid approximately $219,874 to affiliated brokers for commissions earned on the
sales of the shares of the Portfolios for the year ended June 30, 1998.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Portfolio.
The Portfolios have paid legal fees in the amount of $150,615 to a law firm
in which the Secretary of the Company is a partner.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
5. INVESTMENT TRANSACTIONS
During the year ended June 30, 1998, purchases of securities and proceeds
from sales of securities, other than temporary investments in short-term
securities, were $20,192,000 and 11,888,000, respectively.
Certain net capital losses incurred subsequent to October 31, 1997 have
been deferred for tax purposes and will be recognized during the fiscal year
ended June 30, 1999. The Portfolio had capital loss carryforwards at June 30,
1998, as follows:
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES
6/30/98 2003 2004 2005 2006
------------ ------------ ------------ ------------ -----------
$1,975,140 $844,493 $-- $729,058 $401,589
For tax purposes, the losses in the Portfolio can be carried forward for a
maximum of eight years to offset any net realized capital gains.
At June 30, 1998 the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial purposes. The aggregate gross
unrealized gain or loss on securities at June 30, 1998 is as follows:
------------ ------------ ------------
AGGREGATE AGGREGATE
GROSS GROSS NET
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
AGGREGATE GROSS UNREALIZED $1,071 $1,021 $50
GAIN (LOSS)(000)
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
6. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts as hedges
against portfolio positions. Such contracts, which protect the value of a
Portfolio's investment securities against a decline in the value of currency, do
not eliminate fluctuations in the underlying prices of the securities. They
simply establish an exchange rate at a future date. Also, although such
contracts tend to minimize the risk of loss due to a decline in the value of a
hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of such foreign currency increase. The
following forward foreign currency contracts were outstanding at June 30, 1998:
- --------------------------------------------------------------------------------
Foreign Currency Sales:
Unrealized
Contracts to In Exchange Appreciation/
Deliver For (Depreciation)
--------------- ----------- -----------
7/23/98 CD 6,480,000 $4,416,200 $ (244)
10/14/98 DM 3,300,000 1,811,196 (30,490)
7/23/98 DM 11,100,000 6,201,117 36,425
9/9/98 DK 6,126,000 913,374 18,245
10/14/98 FF 22,120,000 3,621,777 (59,469)
8/12/98 FF 11,600,000 1,946,309 22,765
7/24/98 FF 11,000,000 1,833,639 11,712
8/12/98 GP 2,000,000 3,260,000 (57,869)
12/9/98 NG 1,850,000 937,896 19,028
10/14/98 SK 14,260,000 1,792,133 (4,734)
7/23/98 SK 14,800,000 1,866,330 7,951
----------
Net Unrealized Depreciation $(36,680)
==========
- --------------------------------------------------------------------------------
CURRENCY LEGEND
- ---------------
CD Canadian Dollar
DM German Marks
DK Danish Kroner
FF French Francs
GP British Pounds
NG Netherlands Guilder
SK Swedish Krona
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
7. SHARE TRANSACTIONS (000):
The following are the share transactions for the year ended June 30, 1998.
CLASS Y
Shares issued 158
Shares issued in lieu of cash distributions 217
Shares repurchased (61)
-----
Net increase 314
=====
CLASS A
Shares issued 7
Shares issued in lieu of cash distributions 2
Shares repurchased (7)
-----
Net increase 2
=====
TOTAL SHARE ACTIVITY
FOR PERIOD 316
=====
8. FUND REORGANIZATIONS
On April 30, 1998, CoreStates Financial Corp (of which CoreStates
Investments Advisers, Inc., investment adviser to the Portfolios, is a
wholly-owned subsidiary) merged with and into a wholly-owned subsidiary of First
Union Corporation. In anticipation of the merger transaction, on February 6,
1998, the Board of Directors of CoreFunds, Inc. approved an Agreement and Plan
of Reorganization (the "Plan"), providing for the transfer of all assets and
liabilities of the CoreFunds in exchange for the issuance of shares of the
Evergreen Funds in a tax-free reorganization. At a special meeting of
shareholders held on August 18, 1998, the shareholders of the Global Bond Fund
voted to approve the Plan.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) COREFUND GLOBAL BOND FUND
- --------------------------------------------------------------------------------
June 30, 1998
(UNAUDITED)
A special meeting of the Global Bond Fund was scheduled for August
18, 1998 at which the shareholders of the Portfolios voted to:
(1) approve an Agreement and Plan of Reorganization (the "Plan"), providing
for the transfer of all assets and liabilities of the Global Bond Fund in
exchange for the issuance of shares of Evergreen Select International Bond Fund
in a tax-free reorganization.
(2) approve the Interim Investment Advisory Agreement between the Portfolio
and CoreStates Investment Advisers, Inc. (CSIA) from April 30, 1998 to the date
the reorganization is consummated, and
(3) approve the Interim Sub-Advisory Agreement between CSIA and Analytic
TSA International, Inc. from April 30, 1998 to the date the reorganization is
consummated.
The results are as follows:
SHARES VOTED % OF VOTED % OF TOTAL
------------ ---------- ----------
Item #1 FOR 3,902,506.000 99.78% 98.50%
AGAINST -- 0.00% 0.00%
ABSTAIN -- 0.00% 0.00%
BROKER NON-VOTE 8,698.000 0.22% 0.22%
Item #2 FOR 3,911,204.000 100.00% 98.72%
AGAINST -- 0.00% 0.00%
ABSTAIN -- 0.00% 0.00%
BROKER NON-VOTE -- 0.00% 0.00%
Item #3 FOR 3,911,204.000 100.00% 98.72%
AGAINST -- 0.00% 0.00%
ABSTAIN -- 0.00% 0.00%
BROKER NON-VOTE -- 0.00% 0.00%
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statement of net assets of the Global Bond Fund
of CoreFunds, Inc. (the "Fund") as of June 30, 1998, and the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented herein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification by examination of securities
held by the custodian as of June 30, 1998, and confirmation of securities not
held by the custodian by correspondence with brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund at June 30, 1998, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods presented
herein, in conformity with generally accepted accounting principles.
/S/SIGNATURE
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
August 25, 1998
17
<PAGE>
This report and the financial statements contained herein are submitted for
the general information of the shareholders of the Corporation. The report is
not authorized for distribution to prospective investors in the Corporation
unless preceded or accompanied by an effective prospectus. Shares in the Fund
are not deposits or obligations of, or guaranteed or endorsed by, CoreStates
Bank, N.A., the parent corporation of the Fund's investment adviser. Such shares
are also not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency.
COR-F-063-01
